Exhibit 10.28
The portion of this Exhibit 10.28 marked "************" has been
omitted and confidentially filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 promulgated under the Securities
Exchange Act of 1934, as amended.
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
MCMORAN OIL & GAS LLC
AS SELLER
AND
EL PASO PRODUCTION COMPANY
AS BUYER
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Purchase Agreement")
is made and entered into this 9th day of May, 2002, but effective
as of the hereinafter defined Effective Date, by and between
McMoRan Oil & Gas LLC, ("McMoRan"), a Delaware limited liability
company, whose address is 0000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxx 00000 and El Paso Production Company ("El Paso"), a
Delaware corporation, whose address is Nine Xxxxxxxx Xxxxx,
Xxxxxxx, XX 00000. El Paso and McMoRan are sometimes collectively
referred to herein as the "Parties," and each is sometimes
referred to herein as a "Party."
W I T N E S S E T H:
WHEREAS, McMoRan is willing to sell to El Paso, and El Paso
is willing to purchase from McMoRan, the Assets (as hereinafter
defined), all upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual benefits
derived and to be derived from this Purchase Agreement by each
Party, McMoRan and El Paso do hereby agree as follows:
ARTICLE I
ASSETS
Section 1.01. Agreement to Sell and Purchase. Subject to and in
accordance with the terms and conditions of this Purchase
Agreement, El Paso agrees to purchase the hereinafter-defined
Assets from McMoRan, and McMoRan agrees to sell, transfer,
convey, assign and deliver, or cause the sale, transfer,
conveyance assignment and delivery of, the Assets to El Paso.
Section 1.02. Assets. As used in this Purchase Agreement, the
term "Assets" shall mean all of the right, title and interest of
McMoRan in and to the following:
(a) those certain leases, subleases, farmout agreements and
other contracts, documents and agreements through which McMoRan
holds or has the right to acquire or maintain rights to oil and
gas (collectively, the "Leases") described on Exhibit "A",
attached hereto and made a part hereof comprising the following
prospects identified by the Parties: Xxxxxxx Prospect (the
"Xxxxxxx Prospect"), Lighthouse Point Deep Prospect (the
"Lighthouse Point Deep Prospect"), OCS 310 including Option Areas
I, II, III and IV (the "OCS 310 Prospect") and Mound Point
Prospect (the "Mound Point Prospect") (each, a "Prospect" or
collectively, the "Prospects"), as well as participation
agreements, exploration agreements, subleases, assignments,
farmout and farmin agreements, letter agreements, leases, mineral
leases, unit orders and agreements, options, purchase and sale
agreements, assignments, operating agreements, participation
agreements, pooling and communitization orders and agreements,
and all other written contracts, documents, agreements or
writings relating to the Prospects and Leases, or any of them,
but only to the extent same are described or listed on Exhibit
"A" now or in the future, and all rights pertaining to any of the
foregoing, (collectively, the "Agreements"), and insofar and only
insofar as the Agreements pertain to the Leases and Prospects,
which Agreements, Leases and Prospects are sometimes collectively
referred to in this Purchase Agreement as the "Properties", less
and except for those items set forth on Exhibit "B" attached
hereto and made a part hereof (the "Excluded Assets"); and
(b) originals of all contract and accounting files, books,
records, files, well files, muniments of title, reports and
similar documents and materials of McMoRan that relate to the
Assets, and originals of all contract and accounting files,
books, records, files, muniments of title, reports and similar
documents and materials of McMoRan that relate to the Assets
(collectively, the "Prospect Records"). To the extent that any
accounting files are included in the Prospect Records, McMoRan
shall deliver copies of such files to El Paso.
ARTICLE II
PURCHASE PRICE
Section 2.01. Purchase Price. The consideration and purchase
price for the purchase, sale, transfer, assignment and conveyance
of the Assets to Buyer is the obligations undertaken by El Paso
under or in connection with this Purchase Agreement, including
but not limited to all costs, liabilities, expenses and
obligations incurred or to be incurred by El Paso hereinafter,
and, as set forth in this Article II in connection with the
following test xxxxx, and any substitutes or shallower earning
xxxxx, therefor (as set out hereinafter), on the Prospects (each,
a "Well" or, collectively, the "Xxxxx") and the Reversionary
Rights of McMoRan (as defined hereinafter) (collectively, the
"Purchase Price"), which Xxxxx, subject to the terms and
conditions hereof, El Paso hereby undertakes to drill, all as set
forth in this Purchase Agreement and subject to the terms and
conditions hereinafter set out, to-wit:
(a) Lighthouse Point Deep Prospect: El Paso will drill a
test well to a depth of 17,750 feet subsurface True
Vertical Depth ("SSTVD") or such depth sufficient to
evaluate the Marg "A" formation, whichever is the
lesser/shallower depth as required in that Farmout
Agreement identified as LHP-7 in Exhibit "A" attached
hereto, which depth will also satisfy the depth
requirement in that State Lease Exploration Agreement
identified as LHP-2 in Exhibit "A" attached hereto, and
exploration agreements in the proposed Marginulina
Ascensionensis-I Zone Reservoir A Unit in the
Lighthouse Point Prospect area (the "Lighthouse Point
Initial Prospect Well"). El Paso shall have the right,
but not the obligation, to drill the Lighthouse Point
Initial Prospect Well to a deeper depth. El Paso shall
assume and own all of the Working Interest (as
hereinafter defined) and Net Revenue Interest (as
hereinafter defined) of McMoRan, as reflected on
Exhibit "A", including any non-consent interest made
available with respect to the Properties comprising the
Lighthouse Point Deep Prospect. El Paso will bear its
share of the cost and expense of drilling, completing,
and equipping the Lighthouse Point Initial Prospect
Well for first production. The Lighthouse Point
Initial Prospect Well must be proposed to
ChevronTexaco, Inc. not later than May 15, 2002 and the
commencement date for the Lighthouse Point Initial
Prospect Well will be no later than July 1, 2002.
(b) Xxxxxxx Prospect. El Paso will participate in the
drilling of a test well to an approximate depth of
21,800 feet MD/TVD at a location specified in Ocean
Energy Inc's AFE No. 230008 and the applicable
agreements for the Xxxxxxx Prospect (the "Xxxxxxx
Initial Prospect Well"). El Paso shall assume and own
all of the Working Interest and Net Revenue Interest of
McMoRan, as reflected on Exhibit "A", including any non-
consent interest made available with respect to the
Properties comprising the Xxxxxxx Prospect. El Paso
will bear its share of the cost and expense of
drilling, completing, and equipping the Xxxxxxx Initial
Prospect Well for first production. The AFE for the
Xxxxxxx Initial Prospect Well has been executed by all
working interest owners and drilling operations
therefor were commenced on or about April 30, 2002.
Notwithstanding anything in this Purchase Agreement to
the contrary, El Paso shall acquire no interest in or
assume any liability for the xxxxx, platforms,
pipelines or equipment presently existing on Xxxxxx
Island Block 108, and in the event production from the
Xxxxxxx Prospect is to be processed at the Xxxxxx
Island 108 "A" Platform, El Paso shall enter into a
production handling agreement with the owners of the
Xxxxxx Island 108 "A" Platform in accordance with the
Co-Development Agreement listed on Exhibit "A". Subject
to the terms and conditions of this Purchase Agreement,
including without limitation Section 5.17 hereof, El
Paso further agrees to be bound by the terms and
conditions of the Co-Development Agreement and the
pending Unit Agreement for the Xxxxxxx Prospect.
(c) OCS 310 Prospect. El Paso will drill a test well on
the OCS 310 Prospect to depth which shall be the
shallowest of (i) 18,000 feet measured electric log
TVD, (ii) the depth where the paleontologic
biostratigraphic benthic foraminifera zone older than
Robulus Mayeri (Operc) is encountered (this older
zonation would include Xxxxxxxx 0, Xxxxxxxxxxxx A and
Marginulina asensionenis or older biostratigraphic
zonations), (iii) the depth where the well encounters
sediments that were deposited in paleoecologic zonation
six (6) as classified by X. X. Xxxxxx (1955) or (iv)
such other depth as mutually agreed between the Parties
(the "Objective Depth"), as set forth in that Farmout
Agreement dated October 1, 2001 identified as JBM-1 in
Exhibit "A" hereto, for Option Area I at a location of
its choice in Option Area I (the "OCS 310 Initial Test
Well"). El Paso shall have the right, but not the
obligation, to drill the OCS 310 Initial Test Well to a
deeper depth. El Paso shall assume and own all of the
Working Interest and Net Revenue Interest of McMoRan,
as reflected on Exhibit "A", including any non-consent
interest made available with respect to the Properties
comprising the OCS 310 Prospect. El Paso will bear the
cost and expense of drilling, completing and equipping
the OCS 310 Initial Test Well for first production.
The commencement date for the OCS 310 Initial Test will
be no later than June 15, 2002, unless El Paso obtains
an extension of the commencement date provided for in
the Farmout Agreement.
(d) Mound Point Prospect. El Paso will drill a test well
on the Mound Point Prospect to a depth sufficient to
test the shallower of: (i) 18,500 feet measured depth,
(ii) the depth where the paleontologic biostratigraphic
benthic foraminifera zone older than Robulus Mayeri
(Operc) is encountered (this older zonation would
include Xxxxxxxx 0, Xxxxxxxxxxxx A, and Marginulina
asensionenis or older biostratigraphic zonations),
(iii) the depth where the well encounters sediments
that were deposited in paleoecologic zonation 6 (six)
as classified by X. X. Xxxxxx (1955) or (iv) such other
depth as mutually agreed between the Parties, as
required in the State Lease Exploration Agreement
identified as MP-2 in Exhibit "A" attached hereto, at a
location of its choice (the "Mound Point Prospect
Offset Well"). El Paso shall have the right, but not
the obligation, to drill the Mound Point Prospect
Offset Well to a deeper depth. El Paso shall assume
and own all of the Working Interest and Net Revenue
Interest of McMoRan, reflected in Exhibit "A",
including any non-consent interest made available with
respect to the Properties comprising the Mound Point
Prospect. El Paso will bear its share of the cost and
expense of drilling, completing and equipping the Mound
Point Prospect Offset Well for first production. The
commencement date for the Mound Point Prospect Offset
Well will be the date set out on Exhibit "C" hereto.
In connection with the above-described Xxxxx, El Paso will
comply with the terms of the Leases and Agreements for all
operations pursuant hereto, including but not limited to logging,
evaluation and plugging and abandoning.
Section 2.02. Substitute Well and Other Liabilities.
Notwithstanding the foregoing, the Parties agree that:
(a) If (i) any Well is drilled to the proposed depth as set
forth above, in accordance with the terms hereof and is abandoned
as a dry hole, or (ii) prior to reaching the depth as stated
above, El Paso encounters mechanical difficulties, heaving shale,
rock salt, excessive saltwater flow, practicably impenetrable
formations or other conditions in the hole that would cause a
reasonably prudent operator under the same or similar
circumstances to discontinue drilling and to plug and abandon
such Well, El Paso shall have the right, but not the obligation,
to commence, within the earlier of the time periods set forth in
the applicable earning agreement for any of the Xxxxx set out on
Exhibit "A", or ninety (90) days after the date the rig was
released from the last operation on the Well, subject to El
Paso's receipt of all regulatory approvals and rig availability
(i) sidetrack operations on such Well, or (ii) actual drilling
operations on another well at a location of El Paso's choice on
the Prospect in an attempt to reach the proposed depth. Such
sidetracked or new well is hereinafter referred to as a
"Substitute Well". In order to have the right to drill a
Substitute Well, El Paso must make a written commitment to
McMoRan to commence operations on such Substitute Well within
thirty (30) days of rig release from the Well for which it is a
substitute. In the event the applicable Substitute Well
provision in the applicable agreement requires an election to
commit to such Substitute Well within thirty (30) days, the
thirty (30) day notice provision above shall be reduced to
fifteen (15) days. If El Paso fails to notify McMoRan of its
commitment within such thirty (30) day period, or fifteen (15)
day period as applicable, McMoRan will have the option to receive
promptly a reassignment of the interest previously assigned to El
Paso in the Prospect to which the interest pertains, free and
clear of any burdens created or caused by El Paso. If a
Substitute Well is timely and properly commenced, drilled and
completed in compliance with all terms and conditions provided
herein for the Well(s), then such Substitute Well shall in all
respects be considered as if it were the Well. El Paso shall
have a continuing option to drill additional Substitute Xxxxx on
the same basis as set forth herein.
(b) Except as is otherwise set forth in this Purchase Agreement,
from and after the Effective Date and until Payout (as
hereinafter defined), El Paso agrees to bear all costs and risk
of plugging and abandoning all xxxxx drilled hereunder and all
costs associated with surface restoration and settlement of
oyster claims and further agrees to indemnify (as set out in this
Purchase Agreement), save and hold harmless McMoRan from all such
claims as to the interest assigned hereunder. McMoRan agrees to
assume and pay its proportionate share of the plugging,
abandonment, enforce restoration and all other costs of any of
the Assets made subject to the Reversionary Rights up to the
Effective Date and after Payout, and agrees to indemnify (as set
out in this Purchase Agreement), save and hold harmless El Paso
from all claims, suits, damages, and liabilities relating
thereto. El Paso will acquire no interest in and incur no
liability with regard to any xxxxx, platforms, pipelines, or
equipment currently existing on the Properties, or any of them.
Section 2.03. Shallow Earning. In the event a Well or a
Substitute Well is not drilled to its proposed depth as set forth
above, and evaluated to its proposed depth in accordance with the
terms and conditions of this Purchase Agreement, but is completed
at a shallower depth (a "Shallow Earning Well"), production from
such Shallow Earning Well will be credited toward Payout. In the
event El Paso does not timely drill a Substitute Well for any
Prospect, including one in which a Shallow Earning Well has been
drilled, El Paso will reassign all its interest in the Prospect
in accordance with Section 2.06 hereof; provided, however, the
reassignment will reserve to El Paso its rights as to any unit
established for such Shallow Earning Well as to 100' below the
stratigraphic equivalent of the deepest interval capable of
producing in such Shallow Earning Well, and such rights shall be
subject to the Reversionary Rights of McMoRan upon Payout.
Section 2.04. Determination of Payout. "Payout" shall occur at
such time as El Paso has produced and sold a cumulative total of
100 Bcfe of gas from all xxxxx drilled on the Properties in which
El Paso participates, or such lesser amount of hydrocarbons as
may be allowed under the provisions of this Purchase Agreement,
insofar as is attributable to El Paso's Net Revenue Interest from
the Properties. El Paso's "Net Revenue Interest" means, with
respect to each Property, McMoRan's undivided ownership interest
therein acquired by El Paso at Closing together with any
nonconsent interest assumed by El Paso, less: (i) lessor's
royalty interest, (ii) any overriding royalty interests and/or
net profits that burden McMoRan's ownership interest, and (iii)
any other burdens upon, measured by, or payable out of production
from the Properties, including but not limited to any production
attributable to third party interests or burdens, and which
burden McMoRan's ownership interest and are not caused or created
by El Paso. When calculating Payout, each barrel of oil or liquid
hydrocarbons shall equal six thousand cubic feet of gas (6 Mcf).
Section 2.05. Reversionary Rights. As such time as Payout is
reached, McMoRan shall have the option to be assigned, effective
as of the date of Payout, an undivided fifty (50%) percent of the
working interest and net revenue interest in the Assets at such
time (the "Reversionary Rights"), free of any burdens created or
caused by El Paso. If McMoRan elects to receive an assignment of
its Reversionary Rights, El Paso and McMoRan shall thereafter
share equally in all revenues and costs from the Assets subject
to the applicable Operating Agreement therefor; provided however
that El Paso shall remain solely responsible for all costs,
expenses and liabilities with respect to the Reversionary Rights
properly incurred by El Paso prior to Payout. El Paso shall
notify McMoRan in writing of its option to elect within thirty
(30) days after it has determined that Payout has occurred.
McMoRan shall have thirty (30) days after receipt of such notice
to elect in writing to exercise its option to be assigned the
Reversionary Rights or not to be assigned its Reversionary
Rights. McMoRan's election shall be made for the entirety of the
Assets and not on a Prospect-by-Prospect basis. Failure to
respond by McMoRan shall be deemed to be an election not to be
assigned the Reversionary Rights.
Section 2.06. Liquidated Damages. If, subsequent to Closing, El
Paso fails to spud and make a good faith effort to reach the
depths provided for in Section 2.01 and evaluate the Lighthouse
Point Initial Prospect Well, the Xxxxxxx Initial Prospect Well,
the OCS 310 Initial Test Well, or the Mound Point Prospect Offset
Well (each an "Obligation Well" or, collectively, the "Obligation
Xxxxx"), El Paso shall: (1) pay McMoRan $************ as
liquidated damages (a "Payment") for each Obligation Well El Paso
fails to spud and drill as set forth above, and (2) if requested
by McMoRan, promptly reassign, free of any burdens created or
caused by El Paso, the interest conveyed by McMoRan to El Paso in
any Prospect or portion thereof to McMoRan, excepting any rights
to a Shallow Earning Well. The Payment and reassignment of the
interest shall be the only penalty and liability incurred by El
Paso for failure to spud, drill, and/or evaluate any of the
Obligation Xxxxx. Notwithstanding the foregoing in connection
with any reassignment, except as is otherwise agreed to in this
Purchase Agreement, El Paso shall remain obligated for and hold
harmless McMoRan against any cost, risk or expenses associated
with operations conducted by El Paso which are related to the
Obligation Xxxxx drilled hereunder including but not limited to
plugging and abandonment of such Obligations Xxxxx. Subject to
the indemnity, payment and reassignment provisions herein,
McMoRan shall release, indemnify (as set forth in this Purchase
Agreement) and hold harmless El Paso, from and against all
losses, expenses, damages, attorneys' fees and all other costs
and expenses arising out of El Paso's failure to drill and
evaluate any of the Obligation Xxxxx. In the event of any such
reassignment, McMoRan agrees to assume the responsibility for the
administration and reassignment obligations related to the
reassigned Prospect. Additionally, if any of the Obligation
Xxxxx are not drilled and evaluated in accordance with the
applicable contracts and as provided above, whether or not there
is a Shallow Earning Well, there shall be a reduction in the
Payout amount of 25 Bcfe of gas for each such Obligation Well
which is not so drilled and evaluated.
ARTICLE III
EFFECTIVE DATE
Section 3.01. Ownership of Assets. If the transactions
contemplated in this Purchase Agreement are consummated in
accordance with the terms and provisions hereof, the ownership of
the Assets shall be transferred from McMoRan to El Paso at the
Closing Date (as hereinafter defined), but effective as of 7:00
a.m. local time on April 15, 2002 (the "Effective Date").
ARTICLE IV
TITLE AND OTHER MATTERS
Section 4.01. Due Diligence. El Paso shall be entitled to
conduct all due diligence investigations and reviews it deems
necessary and appropriate until Closing, including but not
limited to those relating to title, geologic evaluations and
environmental status of the Assets. McMoRan shall fully cooperate
with and facilitate such investigations and reviews. El Paso
shall be entitled to review and investigate, among other things,
McMoRan's title, and those contracts, obligations and liabilities
attributable to the Prospects which would relate to the title to
the interests being delivered hereunder. McMoRan shall provide
El Paso, and its agents, employees, attorneys and
representatives, with access, during reasonable business hours,
to McMoRan's offices and to all files, reports, books, records,
documents, materials and other information relating to the
Prospects including access to the records of ChevronTexaco, Inc.
to the extent allowed by ChevronTexaco, Inc. (collectively, the
"Records").
"Defensible Title" means, as of the Closing Date,
(i) Such ownership by McMoRan, subject to any required
earning of interest, in each Prospect that:
(A) will entitle El Paso to receive not less than
the percentages set forth in Exhibit "A" as "Net
Revenue Interest" (herein defined as the "Net Revenue
Interest") of all oil and gas produced, saved and
marketed from each Prospect or Lease as set forth in
Exhibit "A", all without reduction, suspension or
termination of such interest throughout the productive
life of such Prospect, except as affected by the
Agreements referenced in Exhibit "A", and except for
changes or adjustments that result from the
establishment of units, co-development areas, changes
in existing units (or the participating areas therein),
or the entry into of pooling or unitization agreements
after the herein-defined Closing Date;
(B) will obligate El Paso to bear not greater
than the percentages set forth in Exhibit "A" as
"Working Interest" (herein defined as the "Working
Interest") of the costs and expenses relating to the
maintenance, development and operation of each Prospect
or Lease as set forth in Exhibit "A", all without
increase throughout the productive life of such
Prospect, except as affected by the Agreements
referenced in Exhibit "A" and except for changes or
adjustments that result from the establishment of
units, co-development areas, changes in existing units
(or the participating areas therein), or the entry into
of pooling or unitization agreements after the Closing
Date; and
(C) is free and clear of all defects in title,
liens, and encumbrances (other than those for Rights-of-
Way or other similar agreements);
(D) is in compliance with all obligations,
requirements or duties affecting the Prospects to any
federal, state, local municipal or public authority
with respect to any franchise, grant, license, permit
or aspect thereby, and all applicable laws, rules,
regulations and orders of the United States and the
state, parish, city and political subdivisions in which
the Prospects are located and that exercises
jurisdiction over such Prospects, and any agency,
department, board, official or instrumentality thereof
that exercises jurisdiction over the Assets including
but not limited to the State Mineral Board of the State
of Louisiana, the Governor of the State of Louisiana
and the United States Department of the Interior,
Minerals Management Service, (collectively,
"Governmental Authority or Authorities");
(E) except as set out as pending on Exhibit "A",
has the requisite approvals, permits and licenses
relating to the Assets from all Governmental
Authorities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MCMORAN
McMoRan represents and warrants to El Paso that, as of the
Effective Date and the Closing Date:
Section 5.01. Existence. McMoRan is a limited liability company
duly formed, validly existing and in good standing under the laws
of the state of its formation, with full legal power, right and
authority to carry on its business as such is now being conducted
and as contemplated to be conducted.
Section 5.02. Legal Power. McMoRan has the legal power and
right to enter into and perform this Purchase Agreement and the
transactions contemplated hereby. The consummation of the
transactions contemplated by this Purchase Agreement will not
violate, nor be in conflict with:
(a) any provision of McMoRan's organizational documents;
(b) any material agreement or instrument to which McMoRan is a
party or by which McMoRan is bound;
(c) any judgment, order, ruling or decree applicable to
McMoRan as a party in interest or any law, rule or regulation applicable
to McMoRan, or
(d) any covenant or agreement relating to any financing
arrangement of any type or nature.
Section 5.03. Execution. The execution, delivery and
performance of this Purchase Agreement and the transactions
contemplated hereby are duly and validly authorized by all
requisite action on the part of McMoRan. This Purchase Agreement
constitutes the legal, valid and binding obligation of McMoRan
enforceable in accordance with its terms.
Section 5.04. Brokers. No broker or finder has acted for or on
behalf of McMoRan in connection with this Purchase Agreement or
the transactions contemplated by this Purchase Agreement. No
broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements
or understandings made by or on behalf of McMoRan for which El
Paso has or will have any liabilities or obligations (contingent
or otherwise). As used in this Purchase Agreement, the term
"Affiliate" means an "affiliate" or "associate" as those terms
are defined in Rule 12b-2 promulgated by the Securities and
Exchange Commission under the Securities and Exchange Act of
1934, as amended.
Section 5.05. Bankruptcy. There are no bankruptcy,
reorganization or arrangement proceedings pending, being
contemplated by or threatened against McMoRan or any Affiliate of
McMoRan.
Section 5.06. Suits. Except as set forth in Schedule 5.06,
there is no suit, action, claim, investigation or inquiry by any
person, entity, administrative agency or Governmental Authority
(a "Person") and no legal, administrative or arbitration
proceeding pending or threatened against McMoRan or any
Affiliates or the Assets that has materially affected or could
reasonably be expected to materially affect McMoRan's ability to
consummate the transactions contemplated herein or materially
affect the title to or value of any of the Assets.
Section 5.07. Taxes. All ad valorem, property, production,
severance, excise and similar taxes and assessments based on or
measured by the ownership of the Assets or the production of oil
and gas or the receipt of proceeds therefrom on the Assets that
have become due and payable have been paid in all material
respects.
Section 5.08. Title. McMoRan owns Defensible Title to the
Assets, and each of them.
Section 5.09. Compliance with Laws. The ownership and operation
of the Assets have been, and the Assets are in conformity, in all
material respects, with all applicable laws, and all applicable
rules, regulations and orders of all Governmental Authorities
having jurisdiction, including without limitation any laws,
rules, regulations or orders pertaining to health, the
environment, wastes or Hazardous Materials, as hereinafter
defined.
Section 5.10. Prospect Records. The Prospect Records were
gathered from the business books and records of McMoRan and were
true, correct and complete in all material respects for the
purposes for which such Prospect Records were prepared at the
time so prepared.
Section 5.11. Basic Documents. The Properties, and all Leases,
Agreements and Prospect Records comprising any part of or
otherwise relating to any of the Properties (being herein
collectively defined as the "Basic Documents"), are in full force
and effect and constitute valid and binding obligations of the
parties thereto. McMoRan is not in breach or default (and no
situation exists which with the passing of time or giving of
notice would create a breach or default) of their obligations
under the Basic Documents, and no breach or default by any party
thereto or third party (or situation which with the passage of
time or giving of notice would create a breach or default)
exists, to the extent such breach or default (whether by McMoRan
or such a third party) could reasonably be expected to materially
adversely affect the ownership, operation, value or use of any of
the Assets after the Effective Date. By 5:00 pm on May 13, 2002,
El Paso will have been provided or given access to full and
accurate copies of all Agreements by McMoRan.
Section 5.12. Production Sales Contracts; Calls on Production.
There are no agreements for the sale of production from the
Assets other than (a) production sales contracts (the "Scheduled
Production Sales Contracts") disclosed on Schedule 5.12 or (b)
agreements or arrangements which are cancelable on 90 days notice
or less without penalty or detriment. Except as disclosed on
Schedule 5.12, there are no calls to purchase production or other
similar rights or options to purchase production from the
Properties.
Section 5.13. Area of Mutual Interest Agreements. None of the
Properties is subject to (or has related to it) any area of
mutual interest agreement obligating McMoRan, except as set out
on Schedule 5.13.
Section 5.14. No Oral Contracts. Except as set forth in
Schedule 5.14, no oral contracts for drilling or completion
operations, leasing, sales of Assets or individual expenditures
currently in force and effect that relate to any of the Assets.
Section 5.15. Plugging Obligations. Except for xxxxx listed on
Schedule 5.15, there are no dry holes or xxxxx that are located
on the Assets or on lands pooled or unitized therewith
(including, without limitation any xxxxx which would, if located
in Louisiana, require compliance with the Louisiana laws and
regulations), except for xxxxx that have been properly plugged
and abandoned, and except for xxxxx drilled to depths not
included within the Assets or within units in which the
Properties participate.
Section 5.16. Operations after Effective Date. McMoRan has
conducted its business with respect to the Assets in the ordinary
course, consistent, in all material respects, with past practices
and good oilfield practice.
Section 5.17. Agreements. Without the prior written consent of
El Paso, from and after the date of the execution of this
Purchase Agreement, McMoRan shall not:
(i) take any actions or make any agreement (written or
oral), or give or withhold any consent or approval, relating
to the Assets, or any of them;
(ii) encumber, sell, transfer, assign, convey, or
otherwise dispose of any of the Assets;
(iii) modify in any respect or terminate any of the
Properties, or enter into any new contracts or agreements
relating to any of the Assets; and
With respect to 5.17 (i) and (iii) above, El Paso shall, from and
after the date of execution of this Purchase Agreement and until
Closing, respond to any written notification from McMoRan that it
proposes to take any such action within three (3) business days
after receipt of such notice. Failure to respond shall be deemed
an approval of such action by El Paso.
Section 5.18. Cooperation. At all times prior to the date at
which Payout occurs, McMoRan shall cooperate fully with and
perform all reasonable written requests of El Paso which pertain
to the Assets. At all times prior to the date at which Payout
occurs, McMoRan shall deal with any and all Governmental
Authorities and all third parties on matters which relate to the
Assets and which affect the rights acquired by El Paso under this
Purchase Agreement under and subject to El Paso's written
approval.
Section 5.19. Exhibit "A". Exhibit "A" references all of the
relevant documents, contracts and obligations relating to the
Assets. All information concerning Exhibit "A" contained in
Section 2.01 of this Purchase Agreement is true and correct, and
there have been no changes to the Agreements. There are no other
agreements or contracts relating to the Assets other than those
set forth in Exhibit "A" which may impact El Paso's ownership of
any of the Assets.
Section 5.20. Title Opinions. All title opinions relating to
the Assets, or any of them, are set out on Schedule 5.20 (the
"Title Opinions"), and there have been no changes to such Title
Opinions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF EL PASO
El Paso represents and warrants to McMoRan that, as of the
Effective Date and the Closing Date:
Section 6.01. Existence. El Paso is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. El Paso has full legal power, right
and authority to carry on its business as such is now being
conducted and as contemplated to be conducted.
Section 6.02. Legal Power. El Paso has the legal power and
right to enter into and perform this Purchase Agreement and the
transactions contemplated hereby. The consummation of the
transactions contemplated by this Purchase Agreement will not
violate, nor be in conflict with:
(a) any material agreement or instrument to which El Paso
is a party or by which El Paso is bound; or
(b) any judgment, order, ruling or decree applicable to El
Paso as a party in interest or any law, rule or regulation
applicable to El Paso.
Section 6.03. Execution. The execution, delivery and
performance of this Purchase Agreement and the transactions
contemplated hereby are duly and validly authorized by all
requisite action on the part of El Paso. This Purchase Agreement
constitutes the legal, valid and binding obligation of El Paso
enforceable in accordance with its terms.
Section 6.04. Brokers. No broker or finder has acted for or on
behalf of El Paso or any Affiliate of El Paso in connection with
this Purchase Agreement or the transactions contemplated by this
Purchase Agreement. No broker or finder is entitled to any
brokerage or finder's fee, or to any commission, based in any way
on agreements, arrangements or understandings made by or on
behalf of El Paso or any Affiliate of El Paso for which McMoRan
has or will have any liabilities or obligations (contingent or
otherwise).
Section 6.05. Bankruptcy. There are no bankruptcy,
reorganization or arrangement proceedings pending, being
contemplated by or threatened against El Paso or any Affiliate of
El Paso.
Section 6.06. Suits. There is no suit, action, claim,
investigation or inquiry by any Person and no legal,
administrative or arbitration proceeding pending or, threatened
against El Paso or any Affiliate of El Paso that has materially
affected or could reasonably be expected to materially affect El
Paso's ability to consummate the transactions contemplated
herein.
ARTICLE VII
OPERATION OF THE ASSETS
Section 7.01. Operation of the Assets Prior to Closing. From
and after the date of the execution of this Purchase Agreement
and until Closing, and subject to the provisions of applicable
operating and other agreements, McMoRan shall use its
commercially reasonable efforts to cause other operators to,
operate and administer the Assets in a good and workmanlike
manner consistent with its past practices, and shall carry on its
business with respect to the Assets in substantially the same
manner as before execution of this Purchase Agreement. McMoRan
shall use its commercially reasonable efforts to preserve in full
force and effect all the Assets.
Section 7.02. Correction of Exhibits. It is the intent of
McMoRan to convey, sell, grant and assign, and El Paso to
purchase and receive all of the Assets. If El Paso or McMoRan
discovers at any time prior to Closing that any Assets are not
described on Exhibits "A" or "B," or is not sufficiently
described on any such Exhibits in order to transfer title to El
Paso as set forth in this Purchase Agreement, the Parties shall
amend such Exhibit to include a sufficient description to assign
title to such Assets to El Paso and such Exhibit, as so amended,
shall be the Exhibit used to describe the Assets to be assigned
to El Paso; provided, however, that no such amendment shall
become effective unless and until El Paso shall have agreed
thereto, which agreement of El Paso shall be made in its sole
discretion.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF MCMORAN
The obligations of McMoRan to consummate the transactions
provided for herein are subject to the fulfillment on or prior to
the Closing Date of each of the following conditions:
Section 8.01. Representations. The representations and
warranties of El Paso herein contained shall be true and correct
in all material respects on the Closing Date as though made on
and as of such date.
Section 8.02. Performance. El Paso shall have performed all
material obligations, covenants and agreements contained in this
Purchase Agreement to be performed or complied with by it at or
prior to the Closing.
Section 8.03. Pending Matters. No suit, action or other
proceeding shall be pending or threatened that seeks to restrain,
enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Purchase Agreement.
Section 8.04. Execution and Delivery of Closing Documents. El
Paso shall have executed, acknowledged and delivered, as
appropriate, to McMoRan all closing documents described in
Section 10.04.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF EL PASO
The obligations of El Paso to consummate the transactions
provided for herein are subject to the fulfillment on or prior to
the Closing Date of each of the following conditions:
Section 9.01. Performance. McMoRan shall have performed in all
respects all obligations, covenants, and agreements contained in
this Purchase Agreement to be performed or complied with by it at
or prior to the Closing.
Section 9.02. Pending Matters. No suit, action or other
proceeding shall be pending or threatened that seeks to restrain,
enjoin, or otherwise prohibit the consummation of the
transactions contemplated by this Purchase Agreement, or any of
the obligations of any of the Parties.
Section 9.03. Execution and Delivery of Closing Documents.
McMoRan shall have executed, acknowledged and delivered, as
appropriate, to El Paso all documents described in
Section 10.4(g), conveying Defensible Title to the Assets to El
Paso.
Section 9.04. No Violation. There shall be no violation or
breach of any of McMoRan's representations, warranties or
agreements set out in this Purchase Agreement.
Section 9.05. CLK Interest. The interest to be assigned to El
Paso as to the Mound Point, Lighthouse Point and OCS 310
Prospects shall be burdened with an overriding royalty to CLK
Company, L.L.C. equal to 3% which shall be proportionately
reduced to the Working Interest acquired from McMoRan at the
Closing. That certain letter dated April 9, 2002 from CLK
Company, L.L.C. to El Paso with respect to the overriding royalty
to be assigned to CLK Company, L.L.C. shall remain in effect and
no assignments shall be made by McMoRan prior to Closing that are
inconsistent with such letter.
Section 9.06. Consents and Approvals. McMoRan shall use its
best efforts in good faith to obtain all requisite consents and
approvals for the conveyance of the Assets and the obligations to
be undertaken by El Paso in connection therewith, including but
not limited to the receipt of all necessary governmental or third
party consents and approvals, Governmental Authority approvals
and permits and any other governmental or third party consents,
or waivers, including but not limited to the granting of all
consents to assignment and the waiving of all preferential rights
to purchase, as applicable, except those customarily obtained
after Closing.
Section 9.07. Other Conditions. El Paso's agreement to purchase
the Assets is further subject to El Paso determining to its sole
satisfaction as of Closing, as follows:
a. That there is no material adverse change in the
condition of any of the Assets.
b. That there are no material violations of any
Environmental Laws (as defined hereafter) pertaining to
any of the Assets.
c. That there are no gas imbalances affecting the Assets;
d. That the Assets are not subject to any long term
production purchase contracts or commitments which are
not terminable upon thirty (30) days' notice, or any
preferential rights, or third party approvals, except
as provided in Exhibit "A";
e. That the representations and warranties of title by
McMoRan are accurately reflected in this Purchase
Agreement;
f. For any Prospect that does not have an operating
agreement or other necessary agreement in place,
El Paso and McMoRan shall proceed diligently and in
good faith to negotiate definitive agreement(s) with
terms and conditions mutually satisfactory to both
El Paso and McMoRan by Closing;
g. That the Prospect Records and Records are acceptable to
it and that its due diligence review has uncovered no
liabilities it does not wish to incur;
h. That McMoRan has Defensible Title to the Assets;
k. That all Governmental Authority approvals for El Paso
to own and operate, where applicable, the Assets will
be, or have been, obtained;
l. With respect to the Lighthouse Point Deep Prospect, the
OCS 310 Prospect, and the Mound Point Prospect, the
execution, at or before Closing, of a letter agreement
or agreements among, and satisfactory to, McMoRan,
Texaco Exploration and Production Inc. and El Paso,
covering the substance of the matters contained in the
draft of letter attached hereto as Exhibit "C", and
such other matters as may be reasonably requested by El
Paso.
m. The signature of the Governor of the State of Louisiana
and all other legally required signatures of all
representatives or officials of all Governmental
Authorities have been actually affixed to all
Agreements requiring such signatures;
n. The Title Opinions (or any title curative undertaken in
connection therewith) do not disclose title defects or
liabilities unacceptable to El Paso;
o. That such other reasonable conditions that may arise or
occur as a result of the due diligence review conducted
by El Paso under Section 4.01 of this Purchase
Agreement have been, or will be, satisfied; and
p. The satisfaction of the conditions set forth in Section
10.07 of this Purchase Agreement and the satisfaction
of any other condition to the obligations of El Paso
under this Purchase Agreement not otherwise set forth
in this Article IX.
ARTICLE X
CLOSING
Section 10.01. Time and Place of Closing. If the conditions
referred to in Articles VIII and IX of this Purchase Agreement
have been satisfied or waived in writing, and subject to any
extensions pursuant to Section 10.02, the transactions
contemplated by this Purchase Agreement (the "Closing") shall
take place at the offices of El Paso, located at Nine Greenway
Plaza, Houston, Texas, on (i) May 23, 2002 or (ii) at such
earlier date as the Parties may mutually agree upon or (iii) at
such date as may be extended pursuant to Section 10.02 (the
"Closing Date").
Section 10.02. Extension. The Closing Date may be extended by
mutual written agreement of the Parties and shall be
automatically extended until May 31, 2002 in the event that on
the Closing Date specified in Section 10.01 all conditions
specified in Section 10.07 have not been met.
Section 10.03. Ad Valorem and Similar Taxes. Ad valorem,
property and similar taxes and assessments based upon or measured
by the value of the Assets shall be divided or prorated between
McMoRan and El Paso as of the Effective Date. McMoRan shall
assume responsibility for such taxes attributable to the period
of time prior to the Effective Date and El Paso shall assume
responsibility for the periods of time from and after the
Effective Date.
Section 10.04. Actions of McMoRan at Closing. Subject to Section
10.07, at the Closing, McMoRan shall:
(a) Convey to El Paso by way of documents acceptable to El Paso,
except to the extent excluded herein, and El Paso shall accept,
Defensible Title to (i) all of McMoRan's right, title and
interests in and to the Assets, including but not limited to the
Working Interest and Net Revenue Interests in the Prospects and
Lease, and (ii) rights, obligations and liabilities insofar as
they pertain to the Properties, except to the extent set forth in
this Purchase Agreement or as is limited pursuant to the terms
and conditions hereof. Such conveyance shall be made without any
warranty, express or implied, except a special warranty of title,
by, through and under McMoRan. McMoRan's special warranty shall
further warrant that the Working Interests are not greater and
the Net Revenue Interests are not less than those reflected on
Exhibit "A". Such interests may be proportionately reduced
pursuant to the terms of the Agreements. For the purpose of
clarity, the Working Interests and Net Revenue Interest for Mound
Point, Lighthouse Point and OCS 310 have been footnoted to
reflect agreements applicable thereto.
(b) If El Paso determines between the Effective Date and the
Closing that any of the said Working Interests in a Prospect are
greater or Net Revenue Interests are less than those reflected in
Exhibit "A" as to any Prospect, then it may terminate this
Purchase Agreement as to such Prospect and all of its obligations
and liabilities hereunder, with respect thereto, express and
implied, by delivery to McMoRan written notice of its intent to
so terminate, which notice shall be sent to McMoRan on or before
the Closing, and the provisions of Section 10.07 shall apply. If
El Paso determines between the Effective Date and the Closing
that any of the said Working Interests in a Prospect are greater
or Net Revenue Interests are less than those reflected in Exhibit
"A" as to any Prospect and notwithstanding such determination
elects to Close on such Prospect, then Exhibit "A" shall be
amended to set forth the correct Working Interest or Net Revenue
Interest.
(c) deliver to El Paso possession of the Assets;
(d) execute and deliver to El Paso an affidavit attesting to its
non-foreign status; and
(e) subject to applicable agreements execute and deliver any
documents necessary to effect a change of operator in any state
or any offshore area over which the United States of America or
any state asserts jurisdiction where McMoRan is the operator as
of the Closing;
(f) execute, acknowledge and deliver any other agreements or
writings provided for herein or necessary or desirable to
effectuate the transactions contemplated hereby; and
(g) deliver to El Paso possession of the original documents
constituting the "Prospect Records".
Section 10.05. Actions of El Paso at Closing. At the Closing, El
Paso shall:
(a) take possession and ownership of the Assets;
(b) execute, acknowledge and deliver the documents and any other
agreements provided for herein or necessary or desirable to
effectuate the transactions contemplated hereby; and
Section 10.06. Confidentiality Agreement. If the Closing occurs,
the confidentiality agreement entered into on November 7, 2001
executed by the Parties (the "Confidentiality Agreement") shall
remain in full force and effect in accordance with its terms and
conditions. Additionally, for a period of two years from the
Effective Date an AMI will be established which will apply as to
the Prospect Area of each Prospect as reflected in the Exhibit to
the Confidentiality Agreement. Should El Paso or McMoRan acquire
any interest within a Prospect within such two year period, other
than that provided herein, such interest shall automatically
become subject to the terms of this Purchase Agreement.
Section 10.07. Preferential Rights, Consents and Exhibit
"C". In the event all conditions to Closing specified in this
Agreement with respect to a Prospect(s) have occurred, Closing as
to that Prospect(s) shall occur. In the event that prior to
Closing, for any Prospect(s), (i) a preferential right is
exercised, (ii) the provisions of Section 10.04(b) of this
Purchase Agreement apply, (iii) the condition set out in Section
9.07(l) of this Purchase Agreement is not satisfied, or (iv) any
other condition to Closing specified in Article IX applicable to
such Prospect is not satisfied, then, and in any such event, the
Prospect (s) and the Assets applicable to such Prospect(s) to
which any of the foregoing applies shall be eliminated from the
Closing; provided, however, that in the event that (i) a
preferential right has not been exercised but the time period for
exercise has not expired and no waiver has been obtained with
respect thereto or (ii) a required consent to assign normally
acquired prior to Closing is not obtained, Closing shall be
deferred for the remainder of the Prospects for the time
necessary to allow (x) for the expiration of the applicable
exercise period for such preferential rights and (y) an
additional reasonable period, but in no event later than June 15,
2002, for McMoRan to secure the required consents to assign
normally acquired prior to Closing. In the event that Closing
does not occur for any such Prospect by any such extended Closing
date, this Purchase Agreement (except Section 10.06) shall
terminate, and the provisions of Section 11.02 of this Purchase
Agreement shall apply, as to those Assets as to which Closing
does not occur and the Payout amount shall be reduced by 25 Bcfe
for each Prospect(s) so eliminated.
ARTICLE XI
TERMINATION
Section 11.01. Right of Termination. This Purchase Agreement may
be terminated at any time at or prior to Closing:
(a) by mutual written consent of the Parties;
(b) by McMoRan on the Closing Date if any of the conditions set
forth in Article XIII have not been satisfied in all material
respects by El Paso or waived by McMoRan in writing by the
Closing Date;
(c) by El Paso on the Closing Date if the conditions set forth
in Article IX have not been satisfied in all material respects by
McMoRan or waived by El Paso in writing by the Closing Date;
(d) by either Party if the Closing shall not have occurred on or
before the applicable date set forth in Section 10.01;
(e) by either Party if any Governmental Authority shall have
issued an order, judgment or decree or taken any other action
challenging, restraining, enjoining, prohibiting or invalidating
the consummation of any of the transactions contemplated herein;
or
(f) as otherwise provided herein;
provided, however, that no Party shall have the right to
terminate this Purchase Agreement pursuant to clause (b), (c) or
(d) above if such Party is at such time in material breach of any
provision of this Purchase Agreement.
Section 11.02. Effect of Termination. In the event that Closing
does not occur as a result of any Party exercising its right to
terminate pursuant to Section 11.01, this Purchase Agreement
shall be null and void and no Party shall have any further rights
or obligations under this Purchase Agreement, except that nothing
herein shall relieve any Party from any liability for any breach
hereof or any liability that has accrued prior to the date of
such termination.
Section 11.03. Attorney Fees, Etc. If either Party to this
Purchase Agreement resorts to legal proceedings to enforce this
Purchase Agreement, the prevailing Party in such proceedings
shall be entitled to recover all costs incurred by such Party
including reasonable attorney's fees, in addition to any other
relief to which such Party may be entitled.
ARTICLE XII
ASSUMPTION, INDEMNIFICATION AND SURVIVAL
Section 12.01. Retained Obligations. Provided that the Closing
occurs, McMoRan hereby agrees to retain all obligations and
liabilities for any suit, or action against McMoRan pending by or
before any Governmental Authority, on or before the Effective
Date, including without limitation those described in Schedule
5.06, and all obligations, liabilities, costs and expenses
relating to the Assets prior to the Effective Date, as well as
those obligations and liabilities specifically assumed by McMoRan
elsewhere under the Purchase Agreement (collectively, the
"Retained Obligations").
Section 12.02. El Paso's Indemnification. Provided that the
Closing occurs, El Paso shall release, defend, indemnify and hold
harmless McMoRan and its shareholders, officers, directors,
employees, agents, representatives, Affiliates, subsidiaries,
successors and assigns (collectively, the "Seller Indemnitees")
from and against any and all claims, liabilities, losses,
damages, causes of actions, penalties, judgments, settlements,
costs and expenses (including, without limitation, involving
theories of negligence or strict liability and including court
costs and attorneys' fees) ("Losses") as a result of, arising out
of, or related to the breach of any of the representations,
warranties, covenants or agreements of El Paso contained in this
Purchase Agreement, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED
TO BY THE JOINT OR CONCURRENT NEGLIGENCE (IN ANY DEGREE, ACTIVE
OR PASSIVE) OR STRICT LIABILITY OF ANY OF THE SELLER INDEMNITEES.
Section 12.03. McMoRan's Indemnification. Provided that the
Closing occurs, McMoRan shall release, defend, indemnify and hold
harmless El Paso and its shareholders, officers, directors,
employees, agents, representatives, Affiliates, subsidiaries,
successors and assigns (collectively, the "El Paso Indemnitees")
from and against any and all Losses as a result of, arising out
of, or related to the following:
(a) the Retained Obligations,
(b) Environmental Defects (as hereinafter defined) relating to
any of the Assets prior to the Effective Date, and
(c) the breach of any of the representations, warranties,
covenants or agreements of McMoRan contained this Purchase
Agreement.
IN EACH CASE REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY
THE JOINT OR CONCURRENT NEGLIGENCE (IN ANY DEGREE, ACTIVE OR
PASSIVE) OR STRICT LIABILITY OF ANY OF THE EL PASO INDEMNITEES.
For purposes of this Purchase Agreement: (i) the term
"Environmental Defect" shall mean and be limited to, with respect
to any given Asset: (A) a material violation of Environmental
Laws in effect as of the Effective Date in the jurisdiction in
which such Asset is located; provided, however, that the term
Environmental Defect shall not include violations related solely
to the presence or existence of encapsulated asbestos containing
materials or lead-based paints being used for their intended
purpose and in a manner consistent with typical industry
operations; (B) any investigation, remediation, or monitoring
required by applicable Environmental Law in effect as of the
Effective Date in the jurisdiction in which such asset is located
in response to finding any Hazardous Materials in, on, under or
migrating from any such Asset, and (C) any final, non-appealable
legal judgment issued by an applicable court of law with proper
jurisdiction over the Asset that is the subject matter of the
dispute and pertaining specifically to a release of Hazardous
Materials in, on, under or migrating from any such Asset; (ii)
the term "Environmental Laws" shall mean all applicable federal,
state, and local laws, statutes, ordinances, court decisions,
rules, regulations or orders pertaining to health or the
environment as may be interpreted by applicable court decisions
or administrative orders; and (iii) the term "Hazardous
Materials" shall mean all hazardous substances or solid wastes
that are regulated under or pursuant to any applicable
Environmental Laws.
Section 12.04. Indemnification Procedure. All claims for
indemnification arising under this Agreement shall be governed by
the procedures set out on Exhibit "D" hereto.
Section 12.05. Survival. This Purchase Agreement and the
agreements and obligations of the Parties hereunder shall survive
the Closing and remain in effect and shall be enforceable from
and after the Closing Date, and shall not terminate or be merged
as a result of Closing.
Section 12.06. Limitations on Liabilities. Notwithstanding
anything to the contrary this Purchase Agreement, the liability
of McMoRan under this Purchase Agreement and any documents
delivered in connection herewith or contemplated hereby shall be
limited as follows:
Section 12.07. Exclusive Remedy. EACH OF THE PARTIES
ACKNOWLEDGES AND AGREES THAT ITS SOLE AND EXCLUSIVE REMEDY WITH
RESPECT TO (a) ANY AND ALL LOSSES, (b) ANY OTHER CLAIMS PURSUANT
TO OR IN CONNECTION WITH THIS PURCHASE AGREEMENT, OR (c) ANY
OTHER CLAIMS RELATING TO THE ASSETS AND THE PURCHASE AND SALE OF
SAME BY EL PASO AND MCMORAN SHALL BE LIMITED TO THE
INDEMNIFICATION PROVISIONS SET FORTH IN THIS PURCHASE AGREEMENT.
Section 12.08. No Punitives. Notwithstanding anything to the
contrary this Purchase Agreement, in no event shall either Party
be entitled to receive any consequential, incidental, special,
treble, exemplary or punitive damages unless such damages are a
part of a third party claim for which a Party is seeking
indemnification hereunder, REGARDLESS OF WHETHER CAUSED OR
CONTRIBUTED TO BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE (IN
ANY DEGREE) OR STRICT LIABILITY OF THE OTHER PARTY.
ARTICLE XIII
DISPUTE RESOLUTION
Section 13.01. General. Any and all claims, counterclaims,
demands, causes of action, disputes, controversies or other
matters in question arising out of or relating to this Purchase
Agreement, any provision hereof, the alleged breach of any such
provision, or in any way relating to the subject matter of this
Purchase Agreement or the relationship among the Parties created
by this Purchase Agreement, involving the Parties, their
Affiliates and/or their respective representatives (referred to
herein as a "Dispute" or, collectively, as "Disputes"), even
though some or all of such Disputes allegedly are extra-
contractual in nature, whether such Disputes sound in contract,
tort, or otherwise, at law or in equity, under state or federal
law, whether provided by statute or the common law, for damages
or any other relief, shall be resolved solely in accordance with
Exhibit "E" to this Purchase Agreement.
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Taxes and Expenses. Each Party shall be solely
responsible for all expenses and taxes, including but not limited
to federal, state and local income taxes and due diligence
expenses, incurred by it in connection with this transaction, and
neither Party shall be entitled to any reimbursement for such
expenses from the other Party.
Section 14.02. Entire Agreement. This Purchase Agreement, and
the Confidentiality Agreement dated November 7, 2001 by and
between the Parties, the documents to be executed hereunder, and
the Exhibits attached hereto constitute the entire agreement
between the Parties hereto pertaining to the subject matter
hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the
Parties pertaining to the subject matter hereof. No supplement,
amendment, alteration, modification, waiver or termination of
this Purchase Agreement shall be binding unless executed in
writing by the Parties hereto and specifically referencing the
Purchase Agreement.
Section 14.03. Waiver. No waiver of any of the provisions of
this Purchase Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar),
nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 14.04. Publicity. During the period commencing on the
date of this Purchase Agreement and ending at such time as El
Paso has turned over operatorship of the xxxxx referenced in the
letter attached hereto as Exhibit "C" to Texaco Exploration and
Production, Inc., McMoRan and El Paso shall consult with each
other with regard to all publicity and other releases concerning
this Purchase Agreement and the transactions contemplated hereby
and, except as required by applicable law or the applicable rules
or regulations of any Governmental Authority or by obligations
pursuant to any listing or other agreement with any national
securities exchange, neither Party shall issue any such publicity
or other release without the prior written consent of the other
Party hereto, which consents shall not be unreasonably withheld.
Any press release required by law or by any such listing or other
agreement shall only be made after reasonable notice to the other
Party. El Paso and McMoRan may attach this Purchase Agreement to
any necessary Governmental Authorities filing.
Section 14.05. Construction. The captions in this Purchase
Agreement are for convenience only and shall not be considered a
part of or affect the construction or interpretation of any
provision of this Purchase Agreement. The Parties acknowledge
that they have participated jointly in the negotiation and
drafting of this Purchase Agreement and as such the Parties agree
that if an ambiguity or question of intent or interpretation
arises hereunder, this Purchase Agreement shall not be construed
more strictly against one Party than another on the grounds of
authorship.
Section 14.06. No Third Party Beneficiaries. Except as otherwise
provided in this Purchase Agreement, nothing in this Purchase
Agreement shall provide any benefit to any third party or entitle
any thirty party to any claim, cause of action, remedy or right
of any kind, it being the intent of the Parties that this
Purchase Agreement shall otherwise not be construed as a third
party beneficiary contract.
Section 14.07. Assignment. No Party may assign or delegate any
of its rights or duties under this Purchase Agreement, without
the prior written consent of the other Party and any such
assignment made without such consent shall be void; provided,
however, that nothing in this Purchase Agreement shall limit or
impede El Paso's right to sell, assign, encumber or otherwise
transfer or deal with any of the Assets after Closing so long as
such transaction is in conformity with Sections 14.18 and 14.25
of this Purchase Agreement. Except as otherwise provided herein,
this Purchase Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective permitted
successors, assigns and legal representatives.
Section 14.08. Governing Law. This Purchase Agreement, and all
of the other documents delivered pursuant hereto and the legal
relations between the Parties shall be governed and construed in
accordance with the laws of the State of Louisiana, without
giving effect to principles of conflicts of laws that would
result in the application of the laws of another jurisdiction.
Section 14.09. Severability. If any term or other provision of
this Purchase Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other
conditions and provisions of this Purchase Agreement shall
nevertheless remain in full force and effect and the Parties
shall negotiate in good faith to modify this Purchase Agreement
so as to effect their original intent as closely as possible in
an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 14.10. Time of the Essence. Time is of the essence with
respect to all time periods and notice periods set forth in this
Purchase Agreement.
Section 14.11. Counterpart Execution. This Purchase Agreement
may be executed in any number of counterparts, and each
counterpart hereof shall be effective as to each Party that
executes the same whether or not all of such Parties execute the
same counterpart. If counterparts of this Purchase Agreement are
executed, the signature pages from various counterparts may be
combined into one composite instrument for all purposes. All
counterparts together shall constitute only one Purchase
Agreement, but each counterpart shall be considered an original.
Section 14.12. Mound Point SL 340 No. 2 Well. McMoRan shall be
solely liable and indemnify and defend, El Paso, as set forth in
this Purchase Agreement, from all drilling, completion, workover,
plugging and abandoning costs related to the McMoRan-Mound Point
SL 340 No. 2 Well and any other xxxxx drilled by McMoRan prior to
the Effective Date and shall retain such xxxxx and such
production as may be obtained therefrom and interests as set
forth in Exhibit "B", and all rights, liabilities and obligations
thereto and will plug and abandon all such xxxxx in accordance
with the applicable laws and regulations, and perform all other
obligations, express and implied relating thereto, defend and
hold harmless El Paso for any cost, suits or liability in
connection therewith, as set forth in this Purchase Agreement.
Section 14.13. Third Party Interests. To the extent obligations
pertaining to the Properties which may exist now or in the future
relating to, without limitation, (i) Xxxxxx X. Xxxx, (ii) Samedan
Oil Corporation and (iii) Halliburton Energy Services, Inc.
("Halliburton"), affect the interests set out on Exhibit "A",
McMoRan agrees to reserve said obligations and all liabilities
related thereto and will hold harmless, defend, release, and
indemnify El Paso from and against any aspects thereof pursuant
to the indemnification procedures set out in this Purchase
Agreement, including any Losses in connection therewith, and any
diminishment of the rights of El Paso in and to the Assets as a
result of any such matters not reflected on Exhibit "A". McMoRan
further agrees to deliver the Assets, at Closing, free and clear
of all claims, preferential rights and any other rights,
obligations, burdens or encumbrances in favor of the said Xxxxxx
X. Xxxx or Xxxxxxxxxxx.
Section 14.14. Maintenance of Leases. At all times prior to
Payout, El Paso will give notice to McMoRan of all Leases or
portions of Leases which it elects to allow to expire by failure
to drill a requisite well or pay rentals. El Paso will make a
good faith effort to give notice to McMoRan at least ninety (90)
days prior to the termination or expiration of any such Lease or
portion of a Lease, but shall not incur any liability for failure
to do so. El Paso will reassign to McMoRan any such Leases or
portions of Leases for which McMoRan requests a reassignment. El
Paso will reassign to McMoRan any such Leases or portions of
Leases for which McMoRan requests a reassignment for such reason.
Additionally, El Paso acknowledges that McMoRan is entering into
an agreement with the State of Louisiana regarding State Lease
340 (the "State Agreement"), which is listed on Exhibit "A" under
LHP-11 and MP-10, and which provides for the maintenance of that
portion of State Lease 340 which has been reassigned to the
successors of Xxxxxxx X. Xxxxxx and subleased to McMoRan.
Subject to Section 5.17 hereof, El Paso agrees to work with
McMoRan in complying with the terms and conditions of the State
Agreement, and will allow McMoRan to have input in all
discussions with the State.
Section 14.15. Access and Audit Rights. Prior to Payout and for
one (1) calendar year thereafter, McMoRan shall have the right to
audit El Paso's books and records relating to the operations
conducted by El Paso on the Prospects subject to the terms of
this Purchase Agreement and shall make such records available to
McMoRan at reasonable times during its normal business hours,
upon reasonable prior notice.
Section 14.16. Well Information/Quarterly Meetings. McMoRan will
be entitled to all information regarding operations on and the
drilling of xxxxx on the Prospects to which a participating
working interest owner under the applicable Operating Agreement
would be entitled. Additionally, El Paso will, if requested by
McMoRan, schedule quarterly meetings to review its development
plans for the Prospects and other matters related to the
Properties.
Section 14.17. Insurance. El Paso shall maintain and provide
McMoRan evidence that it is maintaining Workmen's Compensation
Insurance in accordance with laws of governmental bodies having
jurisdiction including, if applicable, United States Xxxxxxxxx
and Harbor Workers' Compensation Act with Outer Continental Shelf
Extension and Employers' Liability Insurance. Employers'
Liability Insurance shall provide coverage of $1 million per
accident. El Paso shall also maintain Commercial General
Liability Insurance with a combined single limit bodily injury or
death of not less than $1,000,000.00 per occurrence, Excess
Liability Insurance in Umbrella Form with limits of not less than
$10,000,000.00 per occurrence, all risk property insurance
covering existing or to be constructed platforms, facilities, and
pipelines for full replacement cost and Control of Well Insurance
in the minimum amount of $10,000,000.00 (All such required
insurance shall be endorsed to provide for a Waiver of
Subrogation in favor of McMoRan). In accordance with 30 CFR,
Section 256.58, El Paso shall satisfy all applicable bonding
requirements, in accordance with CFR Parts 250 and 253 El Paso
shall furnish evidence of financial responsibility in the amount
currently specified by applicable regulations. Such evidence of
financial responsibility may be in any form permitted by such
regulations. El Paso's insurance, as required this section,
shall apply to all operations of El Paso pursuant hereto.
Section 14.18. Successor and Assigns. This Purchase Agreement
shall extend to and be binding upon and inure to the benefit of
the parties and their respective legal representatives,
successors and assigns and shall constitute a covenant running
with the Leases and the interest covered by this Purchase
Agreement.
Section 14.19. Reports to Be Provided. For each well, El Paso
will forward to McMoRan at the notice address set forth below,
during each quarter from the date of initial production until
Payout the following:
(a) Production Reports. A statement of the quantity of oil
and/or gas produced from each well and the total cumulative
production credited to Payout.
(b) Evidence of Royalty Payment: Copies of State and Mineral
Management Service royalty checks for each month's production.
(c) Regulatory Reports. Copies of any and all reports required
by the regulatory body or bodies having jurisdiction, including,
but not limited to the following:
a) Oil and Gas Operators Report (OGOR)
b) Sundry Notices (MMS 331)
c) Well Completions (MMS 330)
d) Quarterly Oil Well Test (MMS 1870)
e) Semi-Annual Gas Well Test (MMS 1870)
Section 14.20. Payout Statement. On a quarterly basis, El Paso
shall provide McMoRan with a detailed statement of production
from all xxxxx drilled hereunder which is attributable to the
interest conveyed by McMoRan to El Paso as well as the cumulative
status of the amount of production credited to Payout.
Section 14.21. Limitation of Warranty. THE EXPRESS
REPRESENTATIONS OF MCMORAN CONTAINED IN THIS PURCHASE AGREEMENT
ARE EXCLUSIVE AND ARE IN LIEU OF ANY OTHER REPRESENTATIONS OR
WARRANTIES. MCMORAN EXPRESSLY DISCLAIMS AND NEGATES AND EL PASO
HEREBY WAIVES, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE
QUALITY, QUANTITY OR VOLUME OF RESERVES, OIL, GAS OR OTHER
HYDROCARBONS, IF ANY, IN OR UNDER THE PROPERTIES; THE
ENVIRONMENTAL CONDITION, EITHER SURFACE OR SUBSURFACE, OR OTHER
CONDITION OF THE PROPERTIES; OR THE OWNERSHIP OR OPERATION OF THE
PROPERTIES OR ANY PART THEREOF (EXCEPT FOR A LIMITED WARRANTY AS
TO MCMORAN'S TITLE AS SET FORTH HEREIN). MCMORAN DOES NOT MAKE
OR PROVIDE, AND EL PASO HEREBY WAIVES, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE QUALITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO
SAMPLES, OR CONDITION OF THE PROPERTIES OR ANY PART THEREOF.
MCMORAN DISCLAIMS AND NEGATES, AND EL PASO HEREBY WAIVES, ALL
OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY.
Section 14.22. Further Assurances. After Closing, McMoRan shall
execute, acknowledge and deliver to El Paso all such further
conveyances, notices, assumptions and releases and such other
instruments, and shall take such further actions, as may be
deemed necessary or appropriate by El Paso to assure fully the
acquisition by El Paso and its successors or assigns of the
Assets.
Section 14.23. Notices. All notices, consents, requests,
instructions, approvals and other communications provided for
herein shall be deemed to be validly given, made or served, if in
writing and delivered personally or sent by courier service,
telefax, or certified mail to the address listed below:
El Paso: McMoRan Oil & Gas LLC:
Offshore Land 0000 Xxxxxxx Xxxxxx
Nine Xxxxxxxx Xxxxx Xxx Xxxxxxx, XX00000
Xxxxxxx, XX 00000 Attention: Xxxxx X. Xxxxxxxx
Attention: Vice President
Section 14.24. Marketing and Production. Prior to Payout, El
Paso shall have the right, but not the obligation, to sell or
otherwise dispose of all production from or attributable to the
Prospects. Provided any such sales or disposition contracts
shall not apply to the interest of McMoRan after Payout.
Section 14.25. El Paso Assignment Rights. Notwithstanding
anything to the contrary in this Purchase Agreement, El Paso
shall have the right at all times to sell, encumber, assign all
of its rights in the Assets and/or this Purchase Agreement,
provided it makes any such sale, transfer, encumbrance or other
transaction subject to McMoRan's rights under this Purchase
Agreement.
Section 14.26. Operations. Prior to Closing, and subject to
Section 5.17 of this Purchase Agreement, McMoRan agrees to
continue to develop, maintain and operate the Properties and the
Prospects in a good and workmanlike manner and consistent with
past practices, and shall advise and consult with El Paso on all
matters and decisions relating to the Assets. McMoRan will be
reimbursed upon presentation of proper invoices, all costs
relative to such operations from the Effective Date of this
Purchase Agreement including but not limited to costs for
permitting, location preparation, oyster assessments and
settlements, title opinions, unitization costs and engineering
studies required to be conducted to maintain the properties and
timely commence the Xxxxx.
Section 14.27. Conflict with Exhibit "C". In the event of any
conflict or inconsistency between the terms and conditions of the
body of this Purchase Agreement and the terms and conditions of
any of the Agreements on Exhibit "C" hereof, including but not
limited to any of same relating to a Substitute Well, the terms
and conditions of the body of this Purchase Agreement shall
govern the obligations of El Paso.
Section 14.28. Force Majeure. All of El Paso's agreements,
obligations and covenants in this Purchase Agreement, whether
express or implied, shall be suspended at the time or from time
to time as compliance with any thereof is prevented or hindered
by or is in conflict with Federal, State, Parish, or municipal
laws, rules, regulations or Executive Orders asserted as official
by or under public authority claiming jurisdiction, or any Act of
God, adverse field, weather, or market conditions, inability or
difficulty to obtain (or delays in obtaining) equipment, rigs or
facilities, or any permits, licenses or approvals, or
transportation of oil or gas (or delays in same), war, strikes,
lockouts, riots, or other conditions or circumstances not wholly
controlled by El Paso, whether similar or not to those listed,
and this Purchase Agreement shall not be terminated in whole or
in part, nor shall El Paso be held liable in damages for failure
to comply with any such obligations or covenants if compliance
therewith is prevented or hindered by, or is in conflict with,
any of the foregoing eventualities, and El Paso shall not be
considered to be in breach of this Agreement or otherwise liable
to McMoRan as a result thereof; provided, however, that El Paso
shall not be entitled to any of the benefits of this Section
14.28 unless and until El Paso shall, within ten (10) days of the
commencement of El Paso's knowledge of any event claimed
hereunder to allow suspension of El Paso's obligations under this
Purchase Agreement, provide written notice and full particulars
thereof to McMoRan. El Paso shall also provide similar notice to
McMoRan when any such event shall cease.
Section 14.29. Defined Terms of Exhibits and Schedules. All
capitalized terms employed in all Exhibits and Schedules to this
Purchase Agreement shall be defined as set forth therein or in
the body of this Purchase Agreement if not so set forth.
Section 14.30. Copies of Prospect Records. McMoRan shall be
entitled to retain copies of the Prospect Records after the
Closing occurs.
Section 14.31. Document Retention. El Paso shall retain copies
of the Prospect Records and all material records generated by it
in connection with its development of the hydrocarbons in and
under the Prospects for a period of seven (7) years for and after
the Closing. El Paso shall allow McMoRan reasonable access to the
Prospect Records during normal business hours. In the event El
Paso reassigns any portion of the Assets to McMoRan pursuant to
the terms of this Purchase Agreement, El Paso shall return the
applicable Prospect Records to McMoRan within five (5) business
days following such reassignment.
IN WITNESS WHEREOF, McMoRan and El Paso have executed and
delivered Purchase Agreement as of the date first set forth
above.
WITNESSES: MCMORAN OIL & GAS LLC:
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: President
EL PASO PRODUCTION COMPANY:
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxx
Title: Sr. Vice President
