EX-10.2 19 h06397exv10w2.txt SERVICES AGREEMENT - EL PASO ENERGY SERVICES CO. Exhibit 10.2 -------------------------------------------------------------------------------- SERVICES AGREEMENT AMONG EL PASO ENERGY SERVICE COMPANY AND EL PASO PRODUCTION HOLDING COMPANY -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I DEFINITIONS........................................................1 1.01 Definitions..........................................................1 1.02 Construction.........................................................2 ARTICLE II RETENTION OF EL PASO; SCOPE OF SERVICES...........................2 2.01 Retention of El Paso.................................................2 2.02 Scope of Services....................................................2 2.03 Exclusion or Addition of Services....................................3 2.04 Performance of Services by Affiliates................................3 2.05 Intellectual Property................................................3 ARTICLE III BOOKS, RECORDS AND REPORTING.....................................3 3.01 Books and Records....................................................3 3.02 Audits...............................................................3 3.03 Reports..............................................................4 ARTICLE IV REIMBURSEMENT AMOUNT..............................................4 4.01 Reimbursement Amount.................................................4 4.02 Disputed Charges.....................................................4 4.03 Set Off..............................................................4 ARTICLE V FORCE MAJEURE......................................................4 5.01 Force Majeure........................................................4 ARTICLE VI ASSIGNMENTS, SUBCONTRACTS AND PERFORMANCE OF SERVICES.............5 6.01 Assignments..........................................................5 6.02 El Paso's Employees..................................................5 6.03 Performance of Services..............................................5 ARTICLE VII LIMITATION ON LIABILITY..........................................5 7.01 Limitation of Liability..............................................5 7.02 Subrogation of Rights................................................5 ARTICLE VIII DISPUTE RESOLUTION..............................................6 8.01 Disputes.............................................................6 8.02 Negotiation to Resolve Disputes......................................6 8.03 Selection of Arbitrator..............................................6 8.04 Conduct of Arbitration...............................................7 ARTICLE IX TERMINATION.......................................................7 9.01 Termination..........................................................7 9.02 Effect of Termination................................................7 ARTICLE X GENERAL PROVISIONS.................................................8 10.01 Notices............................................................8 10.02 Entire Agreement; Superseding Effect...............................8 10.03 Effect of Waiver or Consent........................................8 10.04 Amendment or Restatement...........................................9 10.05 Restriction on Assignment; Binding Effect..........................9 10.06 Governing Law; Severability........................................9
i 10.07 Further Assurances.................................................9 10.08 Directly or Indirectly.............................................9 10.09 Counterparts.......................................................9
ii Conformed Copy SERVICES AGREEMENT This Services Agreement (this "Agreement") is entered into as of the 23rd day of May, 2003 (the "Effective Date"), by El Paso Energy Service Company, a Delaware corporation ("El Paso") and El Paso Production Holding Company, a Delaware corporation ("EPPHC", and collectively with El Paso, the "Parties"). RECITALS A. EPPHC desires to engage El Paso to provide certain services incidental to the conduct of EPPHC's businesses; and B. El Paso is willing to undertake such engagement, subject to the terms and conditions of this Agreement; NOW, THEREFORE, EPPHC and El Paso agree as follows: ARTICLE I DEFINITIONS 1.01 DEFINITIONS. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below: "AFFILIATE" shall mean with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, through the ownership of voting securities, by contract or otherwise. "AGREEMENT" is defined in the introductory paragraph. "ARBITRATION NOTICE" is defined in Section 8.02 (c). "ARBITRATOR" is defined in Section 8.03(a). "DEFAULT RATE" shall mean an interest rate (which shall in no event be higher than the rate permitted by applicable law) equal to 300 basis points over LIBOR. "DISPUTE" is defined in Section 8.01. "EFFECTIVE DATE" is defined in the introductory paragraph. "EL PASO" is defined in the recitals hereof. "EPPHC" is defined in the introductory paragraph. "FORCE MAJEURE" shall mean any cause beyond the reasonable control of a Party, including the following causes (unless they are within such Party's reasonable control): including, without limitation, acts of God, strikes, lockouts, acts of the public enemy, wars or warlike action (whether actual or impending), arrests and other restraints of government (civil or military), blockades, embargoes, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes, named tropical storms and hurricanes, and floods, civil disturbances, terrorism, mechanical breakdown of machinery or equipment, explosions, confiscation or seizure by any government or other public authority, any order of any court of competent jurisdiction, regulatory agency or governmental body having jurisdiction. "PARTICIPANTS" is defined in Section 8.01. "PARTIES" is defined in the introductory paragraph. "PERSON" means any individual, corporation, partnership, joint venture, trust, limited liability company, association, unincorporated organization or other entity. "REIMBURSEMENT AMOUNT" is defined in Section 4.01. "SERVICES" is defined in Section 2.02. "SETTLEMENT DATE" shall mean the 30th day of each calendar month for the preceding month. In the event the 30th day falls on a Saturday or a bank holiday other than a Monday, the "Settlement Date" shall be the immediately preceding bank day. In the event the 30th day falls on a Sunday or Monday bank holiday, the "Settlement Date" shall be the following bank day. Other terms defined herein have the meanings so given them. 1.02 CONSTRUCTION. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; and (d) references to money refer to legal currency of the United States of America. ARTICLE II RETENTION OF EL PASO; SCOPE OF SERVICES 2.01 RETENTION OF EL PASO. (a) EPPHC hereby engages El Paso to perform the Services (as defined below) and to provide all employees and any facilities and equipment not otherwise provided by EPPHC necessary to perform the Services. El Paso hereby accepts such engagement and agrees to perform the Services and to provide any facilities and equipment not otherwise provided by EPPHC, and to provide all employees necessary to perform the Services. 2.02 SCOPE OF SERVICES. The "Services" shall consist of the services described on Exhibit 1 hereto as related to EPPHC's business. The Services shall be provided by El Paso as directed by the officers of EPPHC. 2 2.03 EXCLUSION OR ADDITION OF SERVICES. Upon mutual agreement of the Parties, any particular service may be temporarily or permanently excluded from or added to the scope of the Services. 2.04 PERFORMANCE OF SERVICES BY AFFILIATES. The Parties hereby agree that in discharging its obligations hereunder, El Paso may engage any of its Affiliates to perform the Services (or any part of the Services) on its behalf and that the performance of the Services (or any part of the Services) by any such Affiliate shall be treated as if El Paso performed such Services itself. Notwithstanding the foregoing and with the exception of Services excluded pursuant to Section 2.03 above, nothing contained herein shall relieve El Paso of its obligations hereunder. 2.05 INTELLECTUAL PROPERTY. (a) Any (i) inventions, whether patentable or not, developed or invented, or (ii) copyrightable material (and the intangible rights of copyright therein) developed by El Paso, its Affiliates or its or their employees in connection with the performance of the Services shall be the property of El Paso; provided, however, that EPPHC shall be granted an irrevocable, royalty-free, non-exclusive and non-transferable right and license to use such inventions or material; and further provided, however, that EPPHC shall only be granted such a right and license to the extent such grant does not conflict with, or result in a breach, default, or violation of a right or license to use such inventions or material granted to El Paso by any Person other than an Affiliate of El Paso. Notwithstanding the foregoing, El Paso will use all commercially reasonable efforts to grant such right and license to EPPHC. (b) EPPHC hereby grants to El Paso and its Affiliates an irrevocable, royalty-free, non-exclusive and non-transferable right and license to use, during the term of this Agreement, any intellectual property provided by EPPHC to El Paso, but only to the extent such use is necessary for the performance of the Services. El Paso agrees that it and its Affiliates will utilize such intellectual property solely in connection with the performance of the Services. ARTICLE III BOOKS, RECORDS AND REPORTING 3.01 BOOKS AND RECORDS. El Paso shall maintain accurate books and records regarding the performance of the Services and its calculation of the Reimbursement Amount (as defined below), and shall maintain such books and records for the period required by applicable accounting practices or law. 3.02 AUDITS. EPPHC shall have the right, upon reasonable notice, and at all reasonable times during usual business hours, to audit, examine and make copies of the books and records referred to in Section 3.01. Such right may be exercised through any agent or employee of EPPHC designated in writing by it or by an independent public accountant, engineer or attorney so designated by EPPHC. EPPHC shall bear all costs and expenses incurred in any inspection, examination or audit. El Paso shall review and respond in a timely manner to any claims or inquiries made by EPPHC regarding matters revealed by any such inspection, examination or audit. 3 3.03 REPORTS. El Paso shall prepare and deliver to EPPHC any reports provided for in this Agreement and such other reports as EPPHC may request from time to time regarding the performance of the Services. ARTICLE IV REIMBURSEMENT AMOUNT 4.01 REIMBURSEMENT AMOUNT. Within five (5) days after the end of each calendar month, El Paso shall charge EPPHC an amount equal to the estimated fees associated with the Services performed by El Paso on behalf of EPPHC (the "Reimbursement Amount"). The Reimbursement Amount shall be calculated on a reasonable basis consistent with El Paso's internal cost systems and shall include direct and indirect expenses and general and administrative overhead expenses related to the Services. The Reimbursement Amount shall be revised periodically to the extent the actual costs incurred are greater or less than the estimated fees by 10% or more. On or before the Settlement Date, EPPHC shall pay to El Paso in immediately available funds the full Reimbursement Amount due by transfer of funds via the cash management accounts. 4.02 DISPUTED CHARGES. EPPHC MAY, WITHIN ONE (1) YEAR AFTER RECEIPT OF THE INTERCOMPANY ACCOUNT CHARGE WITH RESPECT TO A REIMBURSEMENT AMOUNT FROM EL PASO, TAKE WRITTEN EXCEPTION TO SUCH CHARGE, ON THE GROUND THAT THE SAME WAS NOT A REASONABLE COST INCURRED BY EL PASO IN CONNECTION WITH THE SERVICES. EPPHC SHALL NEVERTHELESS PAY IN FULL WHEN DUE THE FULL REIMBURSEMENT AMOUNT CHARGED TO EPPHC BY EL PASO. SUCH PAYMENT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF EPPHC TO RECOUP ANY CONTESTED PORTION OF ANY AMOUNT SO CHARGED. HOWEVER, IF THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS ULTIMATELY DETERMINED IN ACCORDANCE WITH ARTICLE VIII NOT TO BE A REASONABLE COST INCURRED BY EL PASO IN CONNECTION WITH ITS PROVIDING THE SERVICES HEREUNDER, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE REFUNDED BY EL PASO TO EPPHC TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE DURING THE PERIOD FROM THE DATE OF PAYMENT BY EPPHC TO THE DATE OF REFUND BY EL PASO. 4.03 SET OFF. In the event that El Paso owes EPPHC an amount under any other agreement between the Parties, then any such amounts shall be aggregated and EPPHC and El Paso shall discharge their obligations by netting those amounts against any amounts owed by EPPHC to El Paso under this Agreement. If EPPHC or El Paso owes the other Party a greater aggregate amount, that Party shall pay to the other Party the difference between the amounts owed. ARTICLE V FORCE MAJEURE 5.01 FORCE MAJEURE. A Party's obligation under this Agreement shall be excused when and to the extent its performance of that obligation is prevented due to Force 4 Majeure; provided, however, that a Party shall not be excused by Force Majeure from any obligation to pay money. The Party that is prevented from performing its obligation by reason of Force Majeure shall promptly notify the other Parties of that fact and shall exercise due diligence to end its inability to perform as promptly as practicable. Notwithstanding the foregoing, a Party is not required to settle any strike, lockout or other labor dispute in which it may be involved; provided, however, that, in the event of a strike, lockout or other labor dispute affecting El Paso, El Paso shall use reasonable efforts to continue to perform all obligations hereunder by utilizing its management personnel and that of its Affiliates. ARTICLE VI ASSIGNMENTS, SUBCONTRACTS AND PERFORMANCE OF SERVICES 6.01 ASSIGNMENTS. (a) Without the prior consent of El Paso, EPPHC may not sell, assign, transfer or convey any of its rights, or delegate any of its obligations, under this Agreement to any Person. (b) Without the prior consent of EPPHC, El Paso may not sell, assign, transfer or convey of any of its rights, or delegate any of its obligations, under this Agreement to any Person, other than the delegation of performance of Services to an Affiliate of El Paso as permitted by Section 2.04. 6.02 EL PASO'S EMPLOYEES. EPPHC shall not be obligated to pay to El Paso's employees directly any compensation, salaries, wages, bonuses, benefits, social security taxes, workers' compensation insurance, retirement and insurance benefits, training and other such expenses. 6.03 PERFORMANCE OF SERVICES. Subject to the other provisions hereof, El Paso agrees to use its reasonable efforts to perform all services in a reasonable, prudent and timely manner. ARTICLE VII LIMITATION ON LIABILITY 7.01 LIMITATION OF LIABILITY. In no event shall either El Paso or EPPHC have any liability to the other for any incidental, indirect, special or consequential damages, whether or not caused by or resulting from negligence or breach of obligations hereunder and whether or not informed of the possibility of the existence of such damages. 7.02 SUBROGATION OF RIGHTS. In the event any liability arises from the performance of Services hereunder by a third party contractor, EPPHC shall be subrogated to such rights, if any, as El Paso may have against such third party contractor with respect to the Services provided by such third party contractor to or for the benefit of EPPHC. 5 ARTICLE VIII DISPUTE RESOLUTION 8.01 DISPUTES. This Article VIII shall apply to any dispute arising under or related to this Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in equity), including (a) any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Person is in compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this Article VIII to a particular dispute (collectively, a "Dispute"). The provisions of this Article VIII shall be the exclusive method of resolving Disputes. For purposes of this Article VIII, each of El Paso and EPPHC shall be a "Participant". 8.02 NEGOTIATION TO RESOLVE DISPUTES. If a Dispute arises which is not resolved in thirty (30) days, the Participants shall attempt to resolve such Dispute through the following procedure: (a) first, an executive officer of El Paso and an executive officer of EPPHC shall promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute; (b) second, if the Dispute is still unresolved after twenty (20) days following the commencement of the negotiations described in Section 8.02(a), then the chief executive officers of El Paso and EPPHC will promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute; and (c) third, if the Dispute is still unresolved after ten (10) days following the commencement of the negotiations described in Section 8.02(b), then any Participant may submit such Dispute to binding arbitration under this Article VII by notifying the other Participant (an "Arbitration Notice"). 8.03 SELECTION OF ARBITRATOR. (a) Any arbitration conducted under this Article VIII shall be heard by a sole arbitrator (the "Arbitrator") selected in accordance with this Section 8.03. Each Participant and each proposed Arbitrator shall disclose to the other Participants any business, personal or other relationship or affiliation that may exist between such Participant and such proposed Arbitrator, and any Participant may disapprove of such proposed Arbitrator on the basis of such relationship or affiliation. (b) The Participant that submits a Dispute to arbitration shall designate a proposed Arbitrator in its Arbitration Notice. If any other Participant objects to such proposed Arbitrator, it may, on or before the tenth (10th) day following delivery of the Arbitration Notice, notify the other Participants of such objection. The Participants shall attempt to agree upon a mutually-acceptable Arbitrator. If they are unable to do so within twenty (20) days following delivery of the notice described in the immediately-preceding sentence, any Participant may request the American Arbitration Association ("AAA") to designate the Arbitrator. If the Arbitrator so chosen shall die, resign or otherwise fail or becomes unable to serve as Arbitrator, a replacement Arbitrator shall be chosen in accordance with this Section 8.03. 6 8.04 CONDUCT OF ARBITRATION. The Arbitrator shall expeditiously (and, if possible, within ninety (90) days after the Arbitrator's selection) hear and decide all matters concerning the Dispute. Except as the Participants agree otherwise, arbitration hearing shall be held in the City of Houston, Texas. Except as the Participants agree otherwise, the arbitration shall be conducted in accordance with the then-current Commercial Arbitration Rules of the AAA (excluding rules governing the payment of arbitration, administrative or other fees or expenses to the Arbitrator or the AAA), to the extent that such rules do not conflict with the terms of this Agreement. Except as expressly provided to the contrary in this Agreement, the Arbitrator shall have the power (a) to gather such materials, information, testimony and evidence in the manner as it deems appropriate relevant to the dispute before it (and each Participant will provide such materials, information, testimony and evidence requested by the Arbitrator, except to the extent any information so requested is proprietary, subject to a third-party confidentiality restriction or to an attorney-client or other privilege) and (b) to grant injunctive relief and enforce specific performance. If it deems necessary, the Arbitrator may propose to the Participants that one or more other experts be retained to assist it in resolving the Dispute. The retention of such other experts shall require the unanimous consent of the Participants, which shall not be unreasonably withheld. Each Participant, the Arbitrator and any proposed expert shall disclose to each other any business, personal or other relationship or affiliation that may exist between such Participant (or the Arbitrator) and such proposed expert; and any Participant may disapprove of such proposed expert on the basis of such relationship or affiliation. The decision of the Arbitrator (which shall be rendered in writing) shall be final, nonappealable and binding upon the Participants and may be enforced in any court of competent jurisdiction; provided that the Participants agree that the Arbitrator and any court enforcing the award of the Arbitrator shall not have the right or authority to award punitive or exemplary damages to any Participant. The responsibility for paying the costs and expenses of the arbitration, including compensation to the Arbitrator and any experts retained by the Arbitrator, shall be allocated between the Participants in a manner determined by the Arbitrator to be fair and reasonable under the circumstances. Each Participant shall be responsible for the fees and expenses of its respective counsel, consultants and witnesses, unless the Arbitrator determines that compelling reasons exist for allocating all or a portion of such costs and expenses in another manner. Any costs or expenses incurred by a Participant(s) in enforcing any award of the Arbitrator shall be borne by the Participant challenging the enforcement. ARTICLE IX TERMINATION 9.01 TERMINATION. (a) Either El Paso or EPPHC may terminate this Agreement at any time by giving notice of such termination to the other party. Any such termination shall become effective thirty (30) days after delivery of such notice, or such later time (not to exceed the first anniversary of the delivery of such notice) as may be mutually agreed upon by El Paso and EPPHC. 9.02 EFFECT OF TERMINATION. If this Agreement is terminated in accordance with Section 9.01, all rights and obligations under this Agreement shall cease except for (a) obligations that expressly survive termination of this Agreement; (b) liabilities and 7 obligations that have accrued prior to such termination, including the obligation to pay any amounts that have become due and payable prior to such termination, and (c) the obligation to pay any portion of the Reimbursement Amount that has accrued prior to such termination, even if such portion has not become due and payable at that time. ARTICLE X GENERAL PROVISIONS 10.01 NOTICES. Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing and must be delivered to the recipient in person, by courier or mail or by facsimile, telegram, telex, cablegram or similar transmission; and a notice, request or consent given under this Agreement is effective on receipt by the Party to receive it; provided, however, that a facsimile or other electronic transmission that is transmitted after the normal business hours of the recipient shall be deemed effective on the next Business Day. All notices, requests and consents to be sent to El Paso must be sent to or made at the address given below for El Paso, or such other address as El Paso may specify by notice to EPPHC. All notices, requests and consents (including copies thereof) to be sent to EPPHC must be sent to or made at the address given below for EPPHC. Address for Notices: If to EPPHC, to: El Paso Production Holding Company Nine Greenway Plaza Houston, Texas 77046 Attention: Corporate Secretary Facsimile: (713) 420-4099 If to El Paso, to: El Paso Energy Service Company 1001 Louisiana Street Houston, Texas 77002 Attention: Corporate Secretary Facsimile: (713) 420-4099 10.02 ENTIRE AGREEMENT; SUPERSEDING EFFECT. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein. 10.03 EFFECT OF WAIVER OR CONSENT. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Party in the performance by that Party of its obligations under this Agreement is not a consent or waiver to or of any other breach or default in the performance by that Party of the same or any other obligations of that Party under this Agreement. Except as otherwise provided in this 8 Agreement, failure on the part of a Party to complain of any act of another Party or to declare another Party in default under this Agreement, irrespective of how long that failure continues, does not constitute a waiver by that Party of its rights with respect to that default until the applicable statute-of-limitations period has run. 10.04 AMENDMENT OR RESTATEMENT. This Agreement may be amended or restated only by a written instrument executed by each of the Parties. 10.05 RESTRICTION ON ASSIGNMENT; BINDING EFFECT. Subject to Article VI, this Agreement is binding on and shall inure to the benefit of the Parties and their respective successors and permitted assigns. 10.06 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE CONSTRUCTION OR THE INTERPRETATION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. If any provision of this Agreement or the application thereof to any Person or any circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 10.07 FURTHER ASSURANCES. In connection with this Agreement and the transactions contemplated hereby, each Party shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions. 10.08 DIRECTLY OR INDIRECTLY. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party. 10.09 COUNTERPARTS. This Agreement may be executed in counterparts with the same effect as if each signing party had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. [Signature Pages to Follow] 9 IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first set forth above. EL PASO ENERGY SERVICE COMPANY By: /s/ David Siddall Name: David Siddall Title: Vice President EL PASO PRODUCTION HOLDING COMPANY By: /s/ Gene T. Waguespack Name: Gene T. Waguespack Title: Senior Vice President and Chief Financial Officer 10 EXHIBIT 1 The Services shall include any services necessary for the operation of the Assets and shall include, without limitation, services related to: 1. Accounting and Audit 2. Accounts Payable 3. Aviation 4. Benefits and Human Resources Administration 5. Bonds (performance, appeal, environmental, surety) 6. Building Services 7. Cash Management 8. Corporate Finance 9. Debt Administration 10. Employee Health and Safety 11. Equity Plans 12. Government and Public Relations 13. Information Technology 14. Insurance 15. Legal Services 16. Material Management 17. Security Services 18. Tax and Treasury 19. Trade Finance Exhibit 1 - Page 1