Exhibit 10.3
TRANSITION SERVICES
AGREEMENT
THIS TRANSITION SERVICES AGREEMENT,
dated as of September 9, 2005, is between Forest Oil
Corporation, a New York corporation (“Forest”), and SML
Wellhead Corporation, a Delaware corporation and a wholly owned
subsidiary of Forest (“Spinco”).
WHEREAS, Forest, Spinco, Mariner
Energy, Inc., a Delaware corporation (the
“Company”), and MEI Sub, Inc., a Delaware
corporation and wholly owned subsidiary of the Company
(“Merger Sub”), have entered into an Agreement and Plan
of Merger, dated as of September 9, 2005 (the “Merger
Agreement”), pursuant to which, at the Effective Time (as
such term and other capitalized terms not defined herein are
defined in the Merger Agreement), Merger Sub will merge with and
into Spinco, with Spinco being the surviving corporation, and
Spinco becoming a wholly owned subsidiary of the Company (the
“Merger”);
WHEREAS, this Agreement and the
other Transaction Agreements set forth certain transactions that
are conditions to consummation of the Merger;
WHEREAS, Spinco and the Company have
requested that Forest and one or more of Forest’s Affiliates
continue to provide certain services to Spinco and Spinco’s
Affiliates in order to assist it in the transition of the Spinco
Business for a period described herein following the Effective
Time, and Forest has agreed to provide the services described in
this Agreement according to its terms and conditions;
NOW, THEREFORE, in consideration of
the representations, warranties, covenants and agreements set forth
in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as
follows:
SECTION 1. SERVICES
PROVIDED BY FOREST TO SPINCO
In order to continue the operation
of the Spinco Business and to facilitate the orderly and effective
transition of the Spinco Business from Forest to Spinco, Forest and
its Affiliates shall use commercially reasonable efforts to provide
Spinco and its Affiliates with certain services (collectively, the
“Services”) to the extent such Services may be
requested by Spinco from time to time for the term of this
Agreement.
The Services are set forth in
Exhibit A , a copy of which is attached to and made a
part of this Agreement. The applicable rates, fees and
charges associated with each Service are also set forth in
Exhibit A . The provision by Forest of services
not specifically detailed in Exhibit A shall be
mutually agreed upon by the parties.
SECTION 2.
PERFORMANCE OF SERVICES
2.1
Manner of
Performance . Forest agrees that it shall use
commercially reasonable efforts to cause its personnel who
previously provided the services being requested herein to the
Spinco Business prior to the Effective Time to perform the Services
with the same degree of care,
skill, confidentiality and diligence with which
such personnel perform similar services for Forest and its
Affiliates, but in no event less than in conformance with industry
standards. Forest shall insure that Forest’s personnel
occupying positions related to the support of the Spinco Business
shall devote sufficient time and effort as reasonably required to
perform the Services. If a dispute arises over the nature or
quality of the Services, the prior practice of Forest with respect
to the Services, as determined from the books and records of Forest
relating to the Spinco Business, shall be conclusive as to the
nature and quality of the Services.
2.2
Provision of
Information . Any data, information, equipment or
general directions necessary for Forest or any of its Affiliates to
perform the Services shall be submitted by Spinco or its Affiliates
in a timely manner.
2.3
Termination of Any
Service .
The termination of any one or more of the specific Services shall
have no impact on Forest’s obligation to continue to provide
any other Services.
2.4
Laws and
Regulations . Spinco represents and agrees that it and
its Affiliates will use the Services provided hereunder only in
accordance with all applicable federal, state and local laws and
regulations, and in accordance with the conditions, rules,
regulations and specifications which may be set forth in any
manuals, materials, documents or instructions provided to Spinco
and the Company on or prior to the date of this
Agreement.
2.5
Modification of Service
Levels .
Prior to the end of the first calendar month following the
Effective Time and prior to the end of every other calendar month
thereafter, the parties will review the Services provided to
discuss whether the Services will remain at the same level or
decrease during the next immediately succeeding month. Spinco
will notify Forest in writing of any Service reduction or
termination of Services pursuant to Section 8.
SECTION 3. CHARGES
FOR SERVICES
From and after the date of this
Agreement and throughout the term of this Agreement, Spinco agrees
to pay to Forest on a monthly basis the service fees set forth on
Exhibit A . The parties agree that the amounts to
be paid for Services rendered hereunder are intended to both
reasonably cover Forest’s and its Affiliates’ costs in
providing the Services and be competitive with the amount charged
by third parties for similar services. Monthly charges for a
month that includes the Effective Time or the termination date for
this Agreement or any individual Service shall be prorated, based
on the number of days such Services are provided in such partial
month.
SECTION 4. PAYMENT
OF CHARGES AND REIMBURSEMENTS
On or before the 15th day of each
month during the term of this Agreement, Forest shall submit to
Spinco (or its designee) an invoice for the Services provided
hereunder during the immediately preceding calendar month
representing amounts determined in accordance with Section 3
above, if any. Subject to Section 5.2, Spinco shall
remit payment within fifteen days after its receipt of such
invoice. Unless otherwise agreed to in writing, Spinco shall
remit all funds due under this Agreement to Forest (or its
designee) by wire transfer in immediately available
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funds based on the instructions set forth in
Exhibit B , a copy of which is attached to and made a
part of this Agreement.
SECTION 5. RECORDS
AND AUDITS
5.1
Records Maintenance and
Audits .
All records and other information generated, gathered or maintained
by Forest in connection with its provision of the Services pursuant
to this Agreement shall be the proprietary material of
Spinco. Forest shall provide Spinco the originals of such
records and other information, and any copies kept by Forest with
Spinco’s consent shall remain subject to the Confidentiality
Agreement, without regard to the termination or expiration date
thereof. Forest shall, for two years after the termination of
this Agreement, maintain records and other evidence sufficient to
accurately and properly calculate the amounts due determined in
accordance with Section 3 hereof. Spinco or its
representatives shall have reasonable access, after requesting such
access in writing, during normal business hours to such records for
the purpose of auditing and verifying the accuracy of the invoices
submitted regarding such amounts due. Any such audits
performed by or on behalf of Spinco shall be at Spinco’s sole
cost and expense. Forest shall fully cooperate with the
auditing party’s representatives to accomplish the
audit. Spinco shall have the right to audit Forest’s
books for a period of two years after the month in which the
Services were rendered.
5.2
Disputed
Amounts .
In the event of a good-faith dispute as to the amount and/or
propriety of any invoices or any portions thereof submitted
pursuant to Sections 3 and 4, Spinco shall pay all charges on such
invoice and shall promptly notify Forest in writing of such
disputed amounts. So long as the parties are attempting in
good faith to resolve the dispute, neither party shall be entitled
to terminate the Services related to, or that are the cause of, the
disputed amounts.
5.3
Undisputed
Amounts .
Any statement or payment not disputed in writing by Spinco within
six months of the date of such statement shall be considered final
and no longer subject to adjustment.
SECTION 6.
CONFIDENTIALITY
Each party acknowledges that in
connection with its performance under this Agreement, it may gain
access to confidential material and information that is of a
proprietary, technical or business nature to the other party.
Therefore, each party agrees that the terms of the Confidentiality
Agreement shall apply, without regard to the termination or
expiration date thereof, to all such confidential material and
information.
Following termination of the
Services hereunder, upon written request at any time by either
party, the parties shall account for and return to the other party
or destroy all papers, books, records and electronic records
containing any such confidential, technical, business or
proprietary information.
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SECTION 7. TERM OF
AGREEMENT
Unless sooner terminated pursuant to
Section 8 hereof, this Agreement shall be for a term
commencing on the date on which the Effective Time occurs and
ending on the last day of the sixth calendar month following the
month in which the Effective Time occurs.
SECTION 8.
TERMINATION
8.1
Termination of
Agreement .
At any time, Spinco may terminate this Agreement for any reason
whatsoever by giving Forest at least thirty days’ prior
written notice to that effect. Spinco shall pay Forest for
all charges determined pursuant to Section 3 and incurred up
to the date of such termination. Subject to Section 5,
Forest may also terminate this Agreement if Spinco does not tender
payment for the Services within fifteen days after Spinco is given
written notice of a failure to pay.
8.2
Termination of
Services .
At any time or from time to time, Spinco may terminate any one or
more of the specific Services provided hereunder by giving Forest
at least thirty days’ prior written notice to that
effect. Either party may terminate any one or more of the
specific Services if the providing of such Service would violate
any applicable regulation, statute, ordinance or other law;
provided, however , that Forest shall give Spinco at
least thirty business days’ prior written notice when it
intends to terminate any specific Services for this
reason.
SECTION 9.
MISCELLANEOUS
9.1
Force
Majeure .
Forest shall not have any obligation to perform any specific
Service hereunder if its failure to do so is caused by or results
from any act of God, governmental action, natural disaster, strike,
terrorism, war, insurrection or other cause or circumstances beyond
its control, which acts or occurrences make it impossible for
Forest to carry out its obligations under this Agreement.
During the term of the force majeure, Spinco shall not have an
obligation to pay for the specific Service that Forest does not
provide as a result of the force majeure.
9.2
Limitation of
Liability .
EXCEPT FOR FAILURE TO COMPLY WITH THE CONFIDENTIALITY PROVISIONS
HEREIN AND FOR FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR
INTENTIONAL BREACH, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND OR NATURE WHATSOEVER,
INCLUDING LOST PROFITS AND GOODWILL. IN NO EVENT SHALL
FOREST’S LIABILITY HEREUNDER EXCEED THE TOTAL AMOUNT OF CASH
COMPENSATION THAT FOREST IS PAID UNDER THIS AGREEMENT.
9.3
Indemnification . Each party shall release, defend (upon
the other party’s request), protect, indemnify and save the
other party, its employees, contractors, subcontractors (of any
tier) and agents harmless from and against all liability, claims,
costs, expenses, demands, suits and causes of action of every kind
and character arising in favor of or against the first party, its
employees, contractors, subcontractors (of any tier) or agents, on
account of personal injuries to or death of a
