SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
December 5, 1996
Date of Report (Date of earliest event reported)
GULFWEST OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation)
33-13760-LA 87-0444770
(Commission File Number) (IRS Employer
Identification Number)
2644 Sherwood Forest Plaza, Suite 229, Baton Rouge, Louisiana 70816
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 293-1100
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ITEM 2. ACQUISITION OF ASSETS
On December 5, 1996, GulfWest Permian Company, a wholly owned subsidiary of
Gulf West Oil Company (collectively, the "Company"), purchased substantially all
of the working interests in four of the five oil fields it agreed to purchase
from Pharaoh Oil & Gas, Inc., Taylor Link Operating Co. and Gary O. Bolen,
Individually and d/b/a Badger Oil Company (collectively, "Pharaoh"), pursuant to
a Purchase and Sale Agreement dated November 6, 1996 with an Addendum dated
December 5, 1996 (the "Agreement"). The five oil fields are located on
approximately 5,000 acres in Pecos, Howard, Sterling and Lynn Counties, Texas
and have estimated proved reserves totaling 3.1 million barrels of oil.
This purchase represents the second phase of the company's expansion into
the West Texas area, following a $3.1 million acquisition which was completed in
October 1996. With the addition of these properties, the company's total proved
reserves will have increased from 1.6 million to 6 million barrels of oil
equivalent (BOE) since the end of 1995.
The four fields were acquired for a purchase price of $7,654,000.00 and the
purchase of the fifth field, which is scheduled for closing no later than March
31, 1997, will bring the total purchase price for the five field acquisition to
$11 million. Terms of the purchase include $150,000.00 cash at closing and the
balance financed by the seller in the form of two term notes:
1) A promissory note in the principal amount of $5.9 million, together with
interest thereon at a variable rate of interest equal to the Prime Rate of the
Texas Commerce Bank National Association of Midland, Texas plus 1.5% per annum.
The note is due and payable in thirty six (36) monthly installments with the
first thirty five (35) in the amount of $49,249.05, plus accrued interest and
the final installment in the amount of the unpaid balance plus accrued and
unpaid interest due on or before December 22, 1999, unless otherwise extended.
The properties are encumbered by a first mortgage held by the Texas Commerce
Bank, who has agreed to release the mortgage upon receipt of $5.9 million in
principal, plus accrued interest.
2) A promissory note in the principal amount of $1,604,000.00 without
interest, payable in four installments as follows:
a) First installment of $250,000.00 due and payable on or before December
20, 1996.
b) Second installment of $141,000.00 due and payable on or before January
20, 1997.
c) Third installment of $281,000.00 due and payable on or before February
10, 1997.
d) Balance of principal of $932,000.00 due and payable on or before March
31, 1997, unless extended as provided for therein.
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The seller has an option up to the close of business at March 31, 1997 to
accept up to $1 million in the Company's Common Stock as a principal reduction
on the note due that date. The Company currently plans to obtain the funds to
meet the financing commitment through a public offering of its Common Stock
during the first quarter of 1997.
Management of the Company negotiated the purchase price based upon an
independent third party engineering report on the properties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
It is impracticable to provide the required financial statements at this
time. Such statements will be filed under cover of Form 8 no later than
February 18, 1997.
(b) Pro Forma Financial Information
Pro forma information will also be filed under cover of Form 8 no later
than February 18,1997.
c) Exhibits
2.1 Purchase and Sale Agreement between Pharaoh, as Seller, and WestCo
Producing Company, as Purchaser, dated November 6, 1996.
2.2 Addendum of Purchase and sale Agreement by and between Pharaoh and
WestCo Producing Company, dated December 5, 1996.
2.3 Assignment of Purchase and Sale Agreement by and between Pharaoh,
GulfWest Permian Company and WestCo Producing Company, dated December
5, 1996.
2.4 Form of Assignment and Bill of Sale by and between Pharaoh as Assignor
and GulfWest Permian Company as Assignee.
4.1 Term Note in the amount of $5,900,000.00 payable to the order of
Pharaoh Oil and Gas, Inc. and executed by GulfWest Permian Company,
dated December 5, 1996.
4.2 Term note in the amount of $1,604,000.00 payable to the order of
Pharaoh Oil and Gas, Inc. and executed by GulfWest Permian Company,
dated December 5, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GULFWEST OIL COMPANY
Date: December 17, 1996 By: /s/Jim C. Bigham
Jim C. Bigham
Executive Vice President\Secretary
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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
November 6, 1996
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is entered into as of the
6th day of November, 1996, between PHARAOH OIL & GAS, INC., TAYLOR LINK
OPERATING CO., Texas corporations, with offices at 1801 West Texas Avenue,
Midland, Texas 79701, and GARY O. BOLEN, Individually and d/b/a BADGER OIL
COMPANY, with offices at 1801 West Texas Avenue, Midland, Texas 79701, herein
collectively referred to as "SELLER" and WESTCO PRODUCING COMPANY, a Texas
corporation, with offices at 16800 Dallas Parkway, Suite 250, Dallas, Texas
75248, herein referred to as "PURCHASER", with SELLER and PURCHASER being
sometimes collectively referred to hereafter as the "PARTIES" or individually as
a "PARTY".
RECITALS:
A. SELLER owns the Properties described and defined in Exhibit "A"
(attached hereto and hereinafter referred to as the "Properties").
B. The Parties hereto have agreed that subject to the exclusions and
conditions set forth herein and in the Assignment, and upon approval by the
Board of Directors of the Parties, SELLER shall sell and convey, and
PURCHASER shall purchase and accept, all of SELLER's right, title and
interest in and to the Properties. WITNESSETH:
IN CONSIDERATION OF the covenants, obligations, and agreements of the
Parties set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, for
themselves and their respective heirs, successors and assigns, covenant,
and agree as follows:
ARTICLE I
SALE AND PURCHASE OF INTERESTS
Section 1.01. Agreement to Sell; Purchase Price. Subject to the terms and
conditions of this Agreement, SELLER shall sell and convey, and PURCHASER shall
purchase and accept all of SELLER's interests in and to the oil, gas and mineral
leases, wells, and equipment related to as set out and described in Exhibit "A",
for a total Purchase Price of ELEVEN MILLION DOLLARS ($11,000,000) (hereinafter
the "Purchase Price"), payable by PURCHASER in the manner and subject to the
conditions described in Section 1.03. All references herein to "$" or "dollars"
shall be to United States currency. Said Purchase Price is contingent upon gross
actual production from the properties averaged for the 30- day period prior to
7:00 a.m. CST on March 31, 1997, being no less than 760 BBLs of oil per day (the
"Production Quota") reflected in the Reserve report attached hereto as Exhibit
"F".
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Section 1.02. Performance Deposit. As evidence of good faith, PURCHASER
agrees to deposit with SELLER a cash performance deposit of ONE HUNDRED FIFTY
THOUSAND DOLLARS ($150,000.00) ("Performance Deposit") payable in installments
of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) upon execution of this agreement
and the remaining FIFTY THOUSAND DOLLARS ($50,000.00) on November 15, 1996.The
Performance Deposit is non-refundable except as specifically provided for
herein, and, if refunded, shall be without interest.
In the event PURCHASER fails, refuses, or is unable for any reason to close
the sale in accordance with the terms and conditions of this Agreement, or a
material breach of this Agreement by SELLER causes the sale not to close, or the
PURCHASER is otherwise expressly excused from performance under the terms and
conditions herein, the amount of the Performance Deposit shall be, at the option
of Purchaser, refunded or applied to the unpaid principal balance of PURCHASER's
promissory note to SELLER dated the 10th day of October, 1996 in the principal
amount of $1,500,000.00, due and payable on or before October 22, 1999 (the
"Vaughn Note") which represents the balance of the purchase price for the Vaughn
Properties assigned to Purchaser on October 10, 1996. If closing occurs, the
amount of the Performance Deposit shall be applied to the purchase price without
credit for interest.
Section 1.03. Payment of Purchase Price. Subject to the terms and
conditions of this Agreement, at the closing for the Properties, PURCHASER shall
pay to SELLER the Purchase Price for the Properties as follows:
(1) Purchaser shall execute an unsecured promissory note in the principal
amount of Eight Million and No/100 Dollars ($8,000,000.00) (the "First Note")
due and payable on or before October 22, 1999. Purchaser shall make monthly
installments on this note commencing on the 22nd day of January, 1997 in an
amount which equals the monthly payments which Seller pays on the $8,000,000.00
of the existing loan with the Midland Texas Commerce Bank ("Pre- Existing
Indebtedness") which loan is secured by the Oil and Gas Interest conveyed
herein. The First Note shall be due and payable on the same terms and conditions
as the Pre-Existing Indebtedness, and Sellers agree to use their best efforts to
extend the Pre Existing Indebtedness.
(2) PURCHASER shall give a second promissory note in the principal amount
of $2,850,000.00 without interest payable on or before March 31, 1997, payable
in four (4) installments with the first installment of $250,000.00 of principal,
and no interest, due and payable on December 15, 1996 and the second installment
of $250,000.00 of principal and no interest, due and payable on or before
January 20, 1997 and the third installment of $500,000.00 of principal and no
interest, due and payable on or before February 10, 1997, and the balance of
principal due on or before March 31, 1997 (the "Second Note") unless extended as
otherwise provided for herein, provided PURCHASER shall be permitted to offset
against the Principal Balance of the Second Note and the First Note respectively
the sum of $14,474.00 per BBL of oil per day deficiency from the agreed upon
"Production Quota". This offset and the Deficiency in the Production Quota shall
be determined as of 7:00 o'clock a.m. CST on March 31, 1996. In an effort to
obtain this Production Quota, Seller agrees to provide and make available its
personnel and equipment and to put forth its best efforts toward the enhancement
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of the Properties as of November 6, 1996.
At Seller's option, Seller shall have the right to accept Rule 144
Restricted Common Stock in Gulf West Oil Company common stock which value equals
the sum of One Million and 00/100 Dollars ($1,000,000.00) as a principal
reduction on the Second Note. Seller agrees the value of the stock (the "Stock
Value") shall be based upon the greater of (i) $4.25 per share or (ii) seventy
(70%) of the NASDAQ Bid Price at the close of business on March 30, 1997. This
option shall be valid until the close of business March 30, 1997.
Purchaser shall be permitted to extend the maturity date of this note an
additional 90 days provided it notifies Seller in writing of its intent to
extend the maturity date on or before March 30, 1997.
Purchaser agrees it will repurchase the GulfWest Oil Company stock paid in
lieu of cash on the Second Note one year from the date Seller accepted the stock
payment on the Second Note. Purchaser agrees to pay the Stock Value for the
stock at closing.
Section 1.04. Conveyance of Title. The Properties shall be assigned and
conveyed by SELLER to PURCHASER on the closing date by delivery of the
assignment in the form of Exhibit B attached hereto (the "Assignment"),
incorporated herein by this reference, which assignment shall be dated effective
as of the 1st day of December, 1996 (the "Effective Date").
Section 1.05. Ownership of Properties. SELLER shall be entitled to all of
the respective rights of ownership of the Properties (and shall be subject to
the duties and liabilities of such ownership) attributable to the Properties and
attributable to periods of time prior to the Closing Date. PURCHASER shall be
entitled to all of the rights of ownership of the Properties (and shall be
subject to the duties and liabilities of such ownership) attributable to the
Properties and attributable to periods of time from and after the Closing Date,
including oil in the tanks at 7:00 a.m. local time on the Closing Date.
ARTICLE II
TITLE MATTERS
Section 2.01. Assignment of Properties. The Assignment shall be made and
evidenced by delivery to PURCHASER of duly executed and acknowledged counterpart
Assignments. Except as provided for herein, the title to the interest in and to
the oil and gas leases and the wells thereon described on the Exhibit "A" is to
be conveyed by SELLER, its heirs, successors and assigns with warranty of title
and special warranty covenants, and indemnities expressly agreed to as set forth
herein, unto PURCHASER, its successors and assigns, against all persons
whomsoever lawfully claiming or to claim the same or any part thereof, by,
through or under it, but not otherwise. The working interest to be conveyed
shall not be greater than nor the Net Revenue Interest to be conveyed less than
as described in Exhibit "A" attached hereto. If differences exist, in the
interest conveyed, Purchaser shall have
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the option to either (i) terminate the acquisition prior to Closing; (ii)
adjust the Purchase Price proportionally based upon Total Barrels of Proved
Reserves set out in Exhibit "F" applicable to the Net Revenue Interest to be
conveyed on or after Closing (iii) reduce the Purchase Price by the amount spent
by Purchaser in acquiring the additional interest from a third party to meet the
Net Revenue Interest to be conveyed hereunder on or after Closing and (iv) at
the request of Purchaser on or after Closing, Seller shall convey to Purchaser
all or a portion of its overriding royalty interests in and to the Properties,
not included in the Net Revenue Interest reflected in Exhibit "A" to meet said
Net Revenue Interests to be conveyed herein.
Section 2.02. Assignment of Personal Property. The sale of the Personal
Property (as such term is defined in the Assignment) is made on an "AS IS, WHERE
IS" basis without any warranty, except to the special warranties, covenants,
representations expressly agreed to by SELLER and PURCHASER herein, and SELLER
makes no warranties or representations, express or implied, with respect to (i)
origin, quantity, quality, condition, merchantability, fitness for any
particular purpose, safety of equipment, and (ii) the quantity, value or
existence of reserves of oil, gas or other minerals producible or recoverable
from the lands, or conditions on the lands and related fixtures and
improvements.
Section 2.03. Indemnity.
(a) Definitions. For purposes of this Agreement, the following terms shall
have the meanings set out below:
(i) "Claims" means any and all claims, costs, and expenses of any nature
whatever, including without limitation on the generality of the foregoing, any
and all pending, asserted, threatened, and/or final claims, demands, suits or
actions (including without limitation any and all state, federal, and/or
municipal arbitral, administrative damage, injunctive, declaratory judgment,
and/or other suits, hearings, and/or actions, and any appeals therefrom, and any
rehearings, trials de nova, and/or new trials in whole or in part thereof),
judgments, orders, rulings, decrees, awards, costs, expenses, attorneys' fees,
court costs, costs and fees of witnesses of any type, costs of investigation,
settlements, causes of action, costs of discovery and depositions, costs of any
bonds (to the extent required under applicable rules and law governing the
filing and/or appeal of any suit or action, or to the extent necessary to
release a lien or garnishment on, or sequestration or, any property), and any
civil and/or criminal penalties or assessments.
(ii) "Covered Events" means any and all Claims which arise out of or in
connection with, or are occasioned by, directly or indirectly, (a) the use,
ownership, operation, maintenance, repair, handling, resale, occupancy,
disposal, and/or abandonment of any of the Properties assigned and/or sold under
this Agreement, (b) any injuries to persons or damages to or loss of property in
connection with the use, ownership, operation, maintenance, repair, handling,
resale, occupancy, disposal, and/or abandonment of any of the Properties
assigned and/or sold under this Agreement, (c) the violation or non-compliance
with any applicable laws,
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rules, orders, and/or regulations (including without limitation, those
relating to the environment) relating to the use, ownership, operation,
maintenance, repair, handling, resale, occupancy, disposal, and/or abandonment
of any of the Properties assigned and/or sold hereunder, and/or (d) the breach
by any Party of the covenants, obligations, and/or warranties of such Party
under this Agreement or the documents and instruments required to be delivered
upon the Closing(s), or under the Leases, unit agreements, operating agreements,
permits, easement, rights of way, licenses, surface leases, gas contracts,
processing agreements, and other Contracts and agreements to which all or any
part of the Properties may be subject or to which such Party may be bound.
(b) Indemnity by PURCHASER. PURCHASER covenants and agrees to, and shall,
indemnify, defend, and hold SELLER (and its successors, assigns, attorneys,
representatives, agents, officers, and employees) harmless from and against any
and all Covered Events arising after the Closing Date. For purposes of the
preceding sentence, a Covered Event "arises" on the date when the first fact,
condition, conduct, act, or omission constituting the basis for such covered
Event occurred or took place, rather than on the date on which a Claim
respecting such Covered Event was asserted or became payable.
Section 2.04. Indemnity by SELLER. SELLER covenants and agrees to, and
shall, indemnify, defend, and hold PURCHASER (and its successors, assigns,
attorneys, representatives, agents, officers, and employees) harmless from and
against any and all Covered Events arising before the Closing Date. For purposes
of the preceding sentence, a Covered Event "arises" on the date when the first
fact, condition, conduct, act, or omission constituting the basis for such
Covered Event occurred or took place, rather than upon the date on which a Claim
respecting such Covered Event was asserted or became payable.
Section 2.05. Liens and Encumbrances. As of the date hereof and the Closing
Date, SELLER represents that the Properties are free and clear of all liens,
encumbrances, and defects, except those liens, encumbrances and defects
described on Exhibit E ("Permitted Encumbrances") and to which PURCHASER agrees.
Section 2.06. Preferential Rights. Without hereby limiting the conditions
in this Agreement or other provisions hereof, SELLER shall obtain and deliver to
PURCHASER 15 days before the Closing Date, waivers of all preferential rights to
purchase all or any part of the Properties and any consent of third parties
necessary to complete the contemplated transfer of the Properties.
Section 2.07. Title Defects. As a condition to PURCHASER's obligations to
purchase under this Agreement, title to the Properties shall as of the Closing
Date be good and marketable, and free and clear of any and all title defects,
mortgages, liens, security interests, encumbrances, encroachments, claims or
requirements prior to the Closing Date ("title defects"). If a title defect
cannot be cured, within 30 days, to the satisfaction of the PURCHASER, the
Performance Deposit will be returned to the PURCHASER, or applied to the Vaughn
Note.
<PAGE>
ARTICLE III
ACCESS TO DATA AND INFORMATION
Section 3.01. Access of PURCHASER. As a public company, PURCHASER has a
reporting requirement to the Securities and Exchange Commission ("SEC") based
upon the accounting data for the properties for the three (3) calendar years
prior to the purchase. Upon the request of Purchaser, Seller shall provide
Purchaser this required information on or after the Closing. SELLER shall
continue to provide PURCHASER full access to SELLER's books, records, files, and
other pertinent data relating to the Properties, including the aforementioned
accounting data, and shall make available to PURCHASER all documents, data, and
information whatsoever relating to the Properties, including, without
limitation, all books, records, files, reports, studies, logs, summaries, and
other data and information in the possession of SELLER. To the extent SELLER
does not have possession of any of the documents, instruments, data, or
information needed by PURCHASER, SELLER shall expend best efforts to obtain same
from any operator or other person(s) in possession thereof.
Section 3.02. Third Party Reserve Report. The PURCHASER is required to have
a third party engineering and evaluation report prepared using S.E.C.
guidelines. It is necessary as a condition of closing that this report reflects
the proved reserves, Net Revenue Interest, and economic value as set forth in
Exhibit "F", which report must be approved by PURCHASER in its sole and
uncontrolled discretion. PURCHASER will be responsible for all cost as of this
report. This report shall be obtained by PURCHASER prior to Closing. Seller
shall make every effort to assist Purchaser in the compilation of data used for
this report.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
Section 4.01. Representations, Warranties and Additional Covenants of
SELLER. SELLER represents, warrants, and covenants to and for the benefit of
PURCHASER that:
(a) This Agreement has been duly executed and delivered on its behalf and
constitutes the binding and legal obligation of SELLER, and at the Closing Date
all documents and instruments required hereunder to be executed and delivered by
it shall have been duly executed and delivered and shall constitute the binding
legal obligation of SELLER.
(b) No suit, action, other proceeding, or claim is, or at and as of the
Closing Date shall be, pending, asserted, anticipated, or threatened before any
court, arbitrator, or governmental agency seeking to restrain or prohibit or
declare illegal, or seeking damages in connection with or related in any manner
to, the Properties.
(c) It has, and will have on and as of the Closing Date, a good and legal
right to sell
<PAGE>
and convey the Properties to PURCHASER and SELLER is in good standing with all
government agencies.
(d) All due and payable taxes and assessments (including applicable
penalties and interest based upon or measured by the ownership of property or
the production of hydrocarbons or the receipt of proceeds therefrom on the
Properties) have been, and will have been on and as of the Closing Date, paid in
full.
(e) It is not, and at Closing shall not be, obligated to deliver
hydrocarbons at some future time without then or thereafter receiving full
payment therefore. No person or entity shall have any call upon, option to
Purchase or similar rights with respect to any portion of the production from
the Properties.
(f) From the date hereof until the Closing Date, it will not enter into any
new agreements or commitments with respect to the Properties, will not incur any
obligations or liabilities other than for normal operating expenses with respect
to the Properties, will not abandon, or consent to abandonment of, any producing
or shut-in well located on the Properties nor release or abandon all or any
portion of any of the Properties, will not modify or terminate any of the
agreements, licenses, leases, or permits relating to the Properties, and will
not encumber, sell or otherwise dispose of the Properties other than personal
property which is replaced by equivalent property or consumed in the ordinary
course of operation of the Properties.
(g) To the best of its knowledge, all valid laws, regulations and orders of
all governmental entities or persons having jurisdiction over the Properties
have been or will have been complied with prior to closing to the satisfaction
of Purchaser.
(h) To the best of its knowledge and belief it has made available to
PURCHASER for inspection and copying copies of all contracts and agreements in
its possession affecting or pertaining to the Properties.
(i) Since the date hereof until Closing, SELLER has caused all debts and
liabilities of any character incurred in the operation, maintenance, and
development of the Properties prior to the Closing Date for such Properties and
attributable to the interest of SELLER to be paid. SELLER has caused all
rentals, royalties, and other payments payable under the leases, surface leases,
and other contracts and agreements forming a part of the Properties to be
properly and timely paid.
Section 4.02. PURCHASERS' Representations and Warranties. PURCHASER
represents to and for the benefit of SELLER that:
(a) The execution, delivery, and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite action on the part of PURCHASER.
<PAGE>
(b) This Agreement has been duly executed and delivered on behalf of
PURCHASER, and at the Closing all documents and instruments required hereunder
to be executed and delivered by PURCHASER shall have been duly executed and
delivered.
Section 4.03. Confidentiality. Until the earlier of the termination of this
Agreement according to its terms or the Closing Date, PURCHASER shall maintain
confidentiality regarding this Agreement and shall not disclose, other than to
its employees, directors, shareholders, affiliates, attorneys, agents,
consultants, financial institutions, financial partners, or participants and as
required by court order, applicable law or regulations, information regarding
the foregoing except with the prior written consent of SELLER, which consent
shall not be unreasonably withheld in the event the SELLER and PURCHASER
consummate the transaction contemplated herein, the obligations of PURCHASER
regarding information contained in this Section shall terminate at the Closing.
After the Closing Date, SELLER shall maintain confidentiality regarding
this Agreement and shall not disclose, other than to its employees, directors,
shareholders, affiliates, attorneys, agents, consultants, financial
institutions, and as required by court order, applicable law or regulations, or
for purposes of the preparation of SELLER's tax returns, information regarding
the foregoing except for announcements of the fact of sale and the purchaser
thereof (but not specific details on the terms of such sale), or except with the
prior written consent of PURCHASER, which consent shall not be unreasonably
withheld.
Section 4.04. Warranties and Representations at Closing. Except or
otherwise provided for in Section 8.06, SELLER and PURCHASER represent and
warrant for a period from the Closing through the expiration of eighteen (18)
calendar months thereafter, that the representations and warranties of the
Parties contained in Sections 4.01 and 4.02 were true at and as of the Closing.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
Section 5.01. Conditions Precedent to SELLER's Obligation to Close. SELLER
shall be obligated to consummate the sale of the Properties as contemplated
hereby at the Closing provided the following conditions precedent shall have
been satisfied, or if not satisfied, shall have been waived in writing by
SELLER:
(a) All representations and warranties of PURCHASER contained in this
Agreement shall be true and correct in all material respects as of the Closing.
(b) PURCHASER in all material respects shall have complied with this
Agreement on or prior to the Closing.
Section 5.02. Conditions Precedent to PURCHASER's Obligation to Close.
PURCHASER shall be obligated to consummate the purchase of the Properties as
contemplated by this Agreement at the Closing, provided that the following
conditions precedent shall have
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been satisfied, or, if not satisfied, shall have been waived in writing by
PURCHASER:
(a) All representations and warranties of SELLER contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing.
(b) SELLER in all material respects shall have complied with this Agreement
on or prior to the Closing.
(c) The conveyance of the Properties from SELLER to PURCHASER will not
violate any laws or agreements applicable to or affecting the Properties; and
PURCHASER, upon consummation of the purchase of the Properties will succeed to
the interest of SELLER in and to the Properties.
(d) Since the date hereof there shall have been no material and adverse
change in the condition or value of the Properties.
(e) PURCHASER shall have received sufficient information from SELLER to
permit PURCHASER, in the opinion of its auditors and legal counsel, to comply
with all reporting and disclosure rules of the SEC and each state.
(f) PURCHASER's obligations to close under this Agreement shall be
contingent upon PURCHASER obtaining financing satisfactory to it in its sole and
uncontrolled discretion.
(g) PURCHASER has approved the Permitted Encumbrances and the economic
value of the oil and gas minerals being conveyed herein.
(h) SELLER has obtained and evidenced same to Purchaser, a release price
and terms and conditions of the release from any secured party secured by the
oil and gas interests being conveyed herein which shall be satisfactory in its
sole and uncontrolled discretion to PURCHASER.
(i) PURCHASER shall have obtained approval from its Board of Directors or
any other authority necessary to consummate this agreement.
ARTICLE VI
CLOSING
Section 6.01. Closing. The consummation of the purchase and sale of the
Properties (the "Closing") shall occur on December 1, 1996 or may be extended by
Purchaser for fifteen (15) business days following the satisfaction of all
conditions hereto, unless extended as provided in other provisions hereof, (the
"Closing Date"), at the offices of PURCHASER, or at
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such other date or place as may be agreed upon by the Parties. At the
Closing, the following shall occur:
(a) SELLER shall execute, acknowledge, and deliver to PURCHASER three (3)
counterpart original Assignments in proper and recordable form.
(b) Subject to Section 1.02, PURCHASER shall pay and deliver, in
immediately available funds, the Purchase Price for the Properties as set forth
in Section 1.03.
(c) SELLER shall deliver to PURCHASER the originals of all consents to
assignment, waivers of preferential rights of purchase, and such other consents
and waivers as may be required under any Leases, surface leases, easements, unit
agreements, operating agreements, or other contracts or agreements affecting all
or any part of the Properties or constituting all or any part of the Properties.
(d) SELLER shall deliver to PURCHASER evidence satisfactory to PURCHASER's
attorneys that all title defects identified by PURCHASER, its attorneys, SELLER,
its attorneys or other persons, have been cured, or provision for their cure
satisfactory to PURCHASER has been made.
(e) SELLER shall deliver to PURCHASER the originals of all lease and well
files (including Leases) surface leases, documents, agreements, instruments,
contracts, unit agreements, data, and information respecting the Properties
and/or constituting a part of the Properties which are required to be made
available to PURCHASER under other provisions of this Agreement.
(f) Each SELLER and PURCHASER shall deliver to the other duly executed,
acknowledged, sworn, and/or certified originals of the following:
(i) Consents and resolutions of their respective Boards of Directors, dated
as of the Closing Date, authorizing each Party's officers to enter into and
consummate this Agreement.
(ii) A certificate from the corporate secretary of each Party dated as of
the Closing Date certifying the authority and signatures of the officers
empowered to execute this Agreement and related documents and instruments, and
certifying that the articles of incorporation and by-laws attached to such
certificates are true and correct and that there exist no amendments thereto
except as attached, and certifying this Agreement and related documents and
instruments to constitute the binding and legal obligation of such Party.
(iii) A copy of the articles of incorporation or organization and
amendments thereto of each Party certified by the Secretary of State of the
State in which each Party is incorporated, on or after the Closing Date.
(iv) Certificates of existence and good standing from the Secretary of
State of
<PAGE>
each State in which each Party is incorporated, on or after the Closing Date.
(g) At the Closing, and thereafter as may be necessary, the Parties hereto
shall execute, acknowledge and deliver such other instruments and shall take
such other action as may be necessary to carry out their respective obligations
under this Agreement. Simultaneously with the consummation of this transaction,
SELLER shall put PURCHASER into full possession and enjoyment of the Properties.
Section 6.02. Letters in Lieu. At the Closing, SELLER and PURCHASER shall
each execute and deliver to the other documents necessary or appropriate to
effect a change in ownership, including Letters in Lieu of Division orders in a
form satisfactory to SELLER and PURCHASER which shall identify the Properties by
the appropriate well, lease, tract, or property numbers used by the purchaser of
production to identify the Properties, and will cause the same to be delivered
to each purchaser of production from the Properties, instructing such purchaser
to make all future payments directly to PURCHASER or its designated agent.
ARTICLE VII
TERMINATION
Section 7.01. Certain Obligations Upon Termination. In the event the
purchase and sale is not consummated and/or this Agreement is terminated in
accordance with its terms prior to Closing, PURCHASER shall return all books,
records, maps, files, papers, and other property in PURCHASER's possession
relating to the Properties belonging to SELLER.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Further Assurances. From time to time, (whether at or after
the Closing) and without further consideration, the Parties as appropriate,
shall execute and deliver or cause to be delivered such further instruments of
conveyance, security, assignment and transfer, including but not limited to,
assignments, bills of sale, transfer and division orders, mortgages and
financing statements and take such other action as may reasonably be requested
in order to more effectively or completely convey and secure the Properties.
Section 8.02. Notices. All communications required or permitted under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly made if actually delivered, or if mailed by
certified mail, Postage Prepaid, addressed to SELLER and to PURCHASER at the
addresses set forth above. Any Party may, by written notice so delivered to the
others, change the address to which delivery shall thereafter be made.
Section 8.03. Entire Agreement. This instrument states the entire agreement
among the Parties hereto with respect to the subject matter hereof and may be
supplemented,
<PAGE>
altered, amended, modified or revoked by writing only, if signed by all of
the Parties.
Section 8.04. Headings. The title and headings that appear in this
Agreement have been included solely for ease of reference and shall not be
considered in the interpretation or construction of this Agreement.
Section 8.05. Exhibits. Wherever a reference to an Exhibit appears in this
Agreement, that Exhibit is incorporated by reference as if fully set out herein.
Section 8.06. Survival. The covenants, indemnities, and obligations of the
Parties shall survive the Closing and not be merged in, impaired, or abrogated
by the consummation of such Closing or the delivery of any documents or
instruments on such Closing.
Section 8.07. No Third Party Beneficiaries. Nothing in this Agreement shall
entitle any party other than PURCHASER and SELLER and their respective
successors and assigns to any claim, cause of action, remedy or right of any
kind.
Section 8.08. Governing Law. The law of the State of Texas shall govern
this Agreement and all transactions contemplated herein, including any choice of
law rules which may require the application of the laws of another state.
Section 8.09. Partial Invalidity. If one or more of the provisions
contained in this Agreement shall be held invalid, illegal or unenforceable in
any respect, such invalidity shall not affect any other provision of this
Agreement and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein unless the
deletion of such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable.
Section 8.10. Expense of this Agreement. Unless otherwise specified in this
Agreement, each Party shall be solely responsible for all expenses incurred by
it in connection with this transaction (including, without limitation, fees and
expenses of its own counsel, engineers, and accountants) and shall not be
entitled to any reimbursement therefor from the other Parties hereto unless such
costs and expenses result from a material breach of this Agreement by the other
Party.
Section 8.11. Signatures. The persons signing below, by their execution,
represent and warrant that they have full and lawful authority to bind the
respective entities on whose behalf they are signing.
Section 8.12. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their respective
successors and assigns.
This Agreement when executed amends that certain Letter of Intent dated
June 25, 1996, and all addendums thereof.
<PAGE>
EXECUTED as of the 6TH day of November, 1996 but made effective as of the
day and year first above mentioned.
SELLER
GARY O. BOLEN, Individually and d/b/a
BADGER OIL COMPANY
BY:/s/Gary S. Barker
Gary S. Barker, Agent and Attorney
in Fact by virtue of Power of Attorney
PHARAOH OIL & GAS, INC.
BY:/s/Gary S. Barker
Gary S. Barker, President
TAYLOR LINK OPERATING CO.
BY:/s/ Gary S. Barker
Gary S. Barker, Vice President
EXECUTED as of the 6TH day of November, 1996 but made effective as of the
day and year first above mentioned.
PURCHASER
WESTCO PRODUCING COMPANY
BY:/s/ Marshall A. Smith, III
Marshall A. Smith, III, President
<PAGE>
EXHIBIT 2.2
ADDENDUM TO PURCHASE AND SALE AGREEMENT
This Addendum when executed amends that certain Purchase and Sale Agreement
dated November 6, 1996, by and between PHARAOH OIL & GAS, INC., TAYLOR LINK
OPERATING CO., and GARY O. BOLEN, Individually and d/b/a BADGER OIL COMPANY,
as "Seller" and WESTCO PRODUCING COMPANY, as "Purchaser".
WHEREAS, Seller has agreed to sell and Purchaser has agreed to buy certain
interests in Oil, Gas and Mineral Leases as set forth and described in Exhibit
"A" attached to and made a part of the aforementioned agreement, (the
"Properties").
WHEREAS, Seller now desires to retain their interest in certain Oil, Gas
and Mineral Leases known as the Hollingsworth, Hollingsworth A, and
Hollingsworth D Leases in the Wentz Field located in Pecos County, Texas, (the
"Wentz Field Property"). Said interest being valued by Seller as reflected in
Exhibit "A-1", attached hereto.
WHEREAS, Seller and Purchaser have since agreed to forego the closing of
the Wentz Field Property until such time as provided for herein and have further
agreed to adjust the Purchase Price of the remaining Properties accordingly.
NOW, THEREFORE, Seller and Purchaser hereby agree as follows:
1) The Purchase Price of $11,000,000.00 as set out in Section 1.01 is
amended to SEVEN MILLION SIX HUNDRED FIFTY-FOUR THOUSAND DOLLARS
($7,654,000.00), (the "Amended Purchase Price").
2) The unsecured promissory note in the principal amount of $8,000,000.00,
(the "First Note") as set out in Section 1.03(1) is amended to FIVE MILLION NINE
HUNDRED THOUSAND DOLLARS ($5,900,000.00) due and payable on or before December
22, 1999, with monthly installments adjusted accordingly and commencing on the
22nd day of January, 1997.
3) The second promissory note in the principal amount of $2,850,000.00
without interest, (the "Second Note") as set out in Section 1.03(2) is amended
to ONE MILLION SIX HUNDRED FOUR THOUSAND DOLLARS ($1,604,000.00)
without interest due and payable in four (4) installments adjusted as
follows:
a) First installment of $250,000.00 due and payable on or before
December 20, 1996.
b) Second installment of $141,000.00 due and payable on or before
January 20, 1997.
c) Third installment of $281,000.00 due and payable on or before
February 10, 1997.
d) Balance of principal of $932,000.00 due and payable on or before
March 31, 1997, unless extended as provided for therein.
1
<PAGE>
4) On or before December 31, 1996, Purchaser shall reimburse Seller
for cost incurred by Seller for the enhancement of the Properties as a
requirement of Seller as set out in Section 1.03(2) in an amount mutually
acceptable by the Parties and not to exceed $30,000.00.
5) The effective date of the transfer and conveyance of title of the
1st day of December, 1996 as set out in Section 1.04, is amended to 11:59
p.m. local time the 30th day of November, 1996, (the "Effective Date").
FURTHER, it is agreed that on or before March 1, 1997, Seller shall
replace the Wentz Field Property with property of equal value now owned or
to be owned by Seller, (the "Substitute Property"). Said value to be
determined by Purchaser and acceptable to Purchaser upon evaluation and
preparation of a third party reserve report prepared by Ryder Scott.
It is further agreed that, upon mutual agreement by the Parties:
1) The Parties will proceed with the closing on the Wentz Field
Property, at a purchase price equal to the amount of the reduction of the
original Purchase Price of said Purchase and Sale Agreement of THREE
MILLION THREE HUNDRED FORTY-SIX THOUSAND DOLLARS ($3,346,000.00)to be
reduced by the net revenue received by Seller from the sale of oil for the
interim period beginning December 1, 1996 until the effective date of
closing, (the "Wentz Field Purchase Price"), payment to be made subject to
terms and conditions acceptable to Purchaser;
2) The closing on the Wentz Field Property will be postponed to allow
for sufficient evaluation of the Substitute Property by Purchaser; or,
3) The Purchaser will release Seller from its obligation to close on
the Wentz Field Property or the Substitute Property.
EXECUTED on this the 5th day of December, 1996, but made effective as of
the 30th day of November, 1996.
SELLER
GARY O. BOLEN, Individually and d/b/a BADGER OIL COMPANY
BY:/s/Gary S. Barker
Gary S. Barker, Agent and Attorney
in Fact by virtue of Power of Attorney
2
<PAGE>
PHARAOH OIL & GAS, INC.
BY:/s/Gary S. Barker
Gary S. Barker, President
TAYLOR LINK OPERATING CO.
BY:/s/Gary S, Barker
Gary S. Barker, Vice President
EXECUTED on this the day of December, 1996, but made effective as of
the 30th day of November, 1996.
PURCHASER
WESTCO PRODUCING COMPANY
BY:/s/Marshall A. Smith, III
Marshall A. Smith, III, President
3
<PAGE>
EXHIBIT 2.3
ASSIGNMENT OF PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is hereby entered into and made effective on this 30th day
of November, 1996, by and between:
GARY O. BOLEN, Individually and d/b/a BADGER OIL COMPANY,
a resident of the full age of majority of the County of Lubbock, State of
Texas, appearing herein by and through Gary S. Barker, his agent and
attorney-in-fact,
PHARAOH OIL & GAS, INC.,
a Texas business corporation appearing herein through Gary S. Barker, its
duly authorized President,
TAYLOR LINK OPERATING CO.,
a Texas business corporation appearing herein through Gary S. Barker, its
duly authorized Vice President,
hereinafter collectively referred to as "Sellers", and
WESTCO PRODUCING COMPANY,
a Texas business corporation appearing herein through Marshall A. Smith,
III, its duly authorized President, hereinafter referred to as "WestCo", and
GULFWEST PERMIAN COMPANY,
a Texas business corporation appearing herein through Marshall A. Smith,
III, its duly authorized President, hereinafter referred to as "Purchaser",
who declared that:
WHEREAS, Sellers entered into that Purchase and Sale Agreement dated
November 6, 1996 and amended by that Addendum to Purchase Agreement effective
November 30, 1996 (collectively referred to as the "Purchase and Sale
Agreement") wherein Sellers agreed to assign Oil and Gas Leases to WestCo; and
WHEREAS, WestCo has agreed to assign all of its rights, title, and interest in
and to the Purchase and Sale Agreement to Purchaser and Purchaser does hereby
agree to purchase from Sellers said Oil and Gas Leases:
<PAGE>
NOW, THEREFORE, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. WestCo assigns all of its rights, title, and interest in and to
the Purchase and Sale Agreement unto Purchaser;
2. Purchaser agrees to be bound by all of the terms and conditions
of the Purchase and Sale Agreement;
3. Sellers hereby consent to the assignment of the Purchase and Sale
Agreement to Purchaser ;
4. All of the parties hereto agree that in all other respects, the
covenants, representations, warranties, indemnities, obligations,
terms, and conditions of the Purchase and Sale Agreement shall
remain in full force and effect.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, their respective heirs, successors and assigns.
THUS DONE AND SIGNED this the 5th day of December, 1996 but made effective
as of the date first above written, after reading of the whole.
GARY O. BOLEN, individually and d/b/a
BADGER OIL COMPANY
BY:/s/Gary S. Barker
Gary S. Barker, Agent and
Attorney-in-Fact
PHARAOH OIL & GAS, INC.
BY:/s/Gary S. Barker
Gary S. Barker, President
TAYLOR LINK OPERATING CO.
BY:/s/Gary S. Barker
Gary S. Barker, Vice President
<PAGE>
WESTCO PRODUCING COMPANY
BY:/s/ Marshall A. Smith, III
Marshall A. Smith, III, President
GULFWEST PERMIAN COMPANY
BY:/s/Marshall A. Smith, III
Marshall A. Smith, III, President
<PAGE>
EXHIBIT 2.4
ASSIGNMENT AND BILL OF SALE
STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS
COUNTY OF PECOS
This Assignment and Bill of Sale is entered into this 5th day of December,
1996, by and between PHARAOH OIL & GAS, INC. and TAYLOR LINK OPERATING CO.,
Texas corporations, with offices at 1801 West Texas Avenue, Midland, Texas
79701, and GARY O. BOLEN, Individually and d/b/a BADGER OIL COMPANY, with
offices at 1801 West Texas Avenue, Midland, Texas 79701, herein referred to as
"Assignor", and GULFWEST PERMIAN COMPANY, a Texas corporation, with offices at
16800 Dallas Parkway, Suite 250, Dallas, Texas 75248, herein referred to as
"Assignee".
For an adequate consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor does hereby grant, assign and convey, with
warranty of title and special warranty covenants and subject to the terms and
conditions contained herein, unto Assignee all of Assignor's right, title and
interest in the Oil and Gas Leases and the wells thereon, said leases described
on Exhibit "A" attached hereto and incorporated herein by this reference for all
purposes, together with all of Assignor's interest in all personal property and
equipment, to include but not limited to wellbores, casing, tubing, all surface
equipment, tank batteries, buildings, storage yard, etc. located on, used or
obtained in connection with said leases and lands and operations thereof as
follows: SAVE AND EXCEPT any and all overriding royalty interest now owned by
Assignor for which Assignor reserves unto itself, its heirs, successors and
assigns.
SEE ATTACHED EXHIBIT "A"
The interests assigned herein are conveyed subject to the following:
1. The terms and provisions of said leases and any and all intervening
assignments thereof.
2. All federal, state and local laws, rules. orders and regulation which
may govern or apply to the acquisition, ownership, operation or transfer of said
leases, or any portion thereof, and
3. It is the intent of the Assignor hereunder to assign all of its right,
title and interest in and to the leases described in Exhibit "A" attached
hereto, including, but not limited to the interests in the leasehold described
therein as to those depths held of record by Assignor as of the effective date
of this assignment.
4. Assignor shall be responsible for all ad valorem taxes, real property
taxes, personal property taxes, production severance taxes, and similar
obligations arising from and incurred during the operations and ownership of
Assignor. With respect to the year 1996, ad valorem taxes have been prorated
accordingly between the parties. Assignor shall be solely responsible for the
payment of same to the appropriate taxing authority for the year 1996 and
Assignee shall be solely responsible for all subsequent years.
5. Assignor saves and excepts herefrom any and all sums, adjustments of
production, and proceeds owed Assignor accruing by virtue of production sold
from the Lease(s) and the Lands prior to the Effective date of this Assignment,
and any and all payments owed Assignor under any other agreements, as set out
below, to which this Assignment is made subject. Assignor and Assignee agree
that production in the tanks as of the effective date hereof is hereby assigned
and conveyed to Assignee.
6. Assignee expressly agrees to fully protect, defend, indemnify and hold
harmless Assignor, its employees and agents, successors and assigns from and
against each and every claim, demand, action, cause of action, or lawsuit, and
any liability, cost, expense, damage, or loss, including court costs and
attorney's fees, and including claims based upon theories of negligence, gross
negligence or willful misconduct (collectively, "Claims") arising from or
relating to, directly or indirectly, Assignee's operation or ownership of the
Property after the Effective Date.
<PAGE>
7. Assignor expressly agrees to fully protect, defend, indemnify and hold
harmless Assignee, its employees and agents, successors and assigns from and
against each and every claim, demand, action, cause of action, or lawsuit, and
any liability, cost, expense, damage, or loss, including court costs and
attorney's fees, and including claims based upon theories of negligence, gross
negligence or willful misconduct (collectively, "Claims") arising from or
relating to, directly or indirectly, Assignor's operation or ownership of the
Property prior to the Effective Date.
8. This Assignment and Bill of Sale of the personal property and equipment
is made on an "AS IS, WHERE IS" basis without any warranty, except to the
special warranties, covenants, representations expressly agreed to by Assignor
and Assignee in that certain Purchase and Sale Agreement dated November 6, 1996,
and all subsequent addendums thereof; and, ASSIGNOR MAKES NO WARRANTIES OR
REPRESENTATIONS EXPRESS OR IMPLIED WITH RESPECT TO 1) ORIGIN, QUANTITY, QUALITY,
CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, SAFETY OF
EQUIPMENT, AND 2) THE QUANTITY, VALUE OR EXISTENCE OF RESERVES OF OIL, GAS OR
OTHER MINERALS PRODUCIBLE OR RECOVERABLE FROM THE LANDS, OR CONDITION OF THE
LANDS AND RELATED FIXTURES AND IMPROVEMENTS. FURTHER, except as provided for
herein, the title to the interest in and to the oil and gas leases and the wells
thereon described in Exhibit "A" is conveyed herein by Assignor, its heirs,
successors and assigns with special warranties, covenants and indemnities
expressly agreed to in the hereinabove described Purchase and Sale Agreement,
unto Assignee, its successors and assigns, against all persons whomsoever
lawfully claiming or to claim the same or any part thereof, by, through, or
under it, but not otherwise.
All descriptions set forth herein and all information heretofore or
hereafter furnished to Assignee by Assignor concerning any or all of the leases,
lands, wells, contracts and/or personal property and the operation thereof, have
been and shall be furnished solely for Assignee's convenience and have not
constituted and shall not constitute a representative or warranty of any kind by
Assignor, and any reliance thereupon by Assignee shall be at Assignee's sole
risk and liability.
This Assignment shall be binding upon and inure to the benefits of
Assignor, Assignee and their respective heirs, successors and assigns.
This Assignment and Bill of Sale is dated this 5th day of December, 1996,
but shall be effective as of 11:59 p.m. local time, the 30th day of November,
1996.
ASSIGNOR
GARY O. BOLEN, Individually and d/b/a
BADGER OIL COMPANY
By:/s/Gary S. Barker
Gary S. Barker, Agent and Attorney in
Fact by virtue of Power of Attorney
PHARAOH OIL & GAS, INC.
BY:/s/Gary S. Barker
Gary S. Barker, President
TAYLOR LINK OPERATING CO.
BY:/s/ Gary S. Barker
Gary S. Barker, Vice President
ASSIGNEE:
GULFWEST PERMIAN COMPANY
BY:/s/Marshall A. Smith, III
Marshall A. Smith, III, President
<PAGE>
EXHIBIT 4.1
TERM NOTE
Dallas, Texas December 5, 1996 $5,900,000.00
For value received, GULFWEST PERMIAN COMPANY, a Texas corporation
(hereinafter called "Maker", whether one or more, and jointly and severally, if
more than one) promises to pay to the order of Pharaoh Oil & Gas, Inc.
(hereinafter called "Assignor") at its offices at 1801 West Texas Avenue,
Midland, Midland County, Texas 79701, in lawful money of the United States of
America, the sum of FIVE MILLION NINE HUNDRED THOUSAND AND NO/100 DOLLARS
($5,900,000.00), together with interest thereon from the date hereof until
maturity at a variable rate of interest per annum ("Variable Rate") equal to
Prime Rate of the Texas Commerce Bank National Association of Midland, Texas
(Bank), as hereinafter defined, plus one and one-half percentage points (1.5%)
per annum, but in no event to exceed the Highest Lawful Rate, as hereinafter
defined, with adjustments in the Variable Rate to be made on the same date as
any change in the Prime Rate and adjustments due to changes in the Highest
Lawful Rate to be made on the effective date of any change in the Highest Lawful
Rate.
Notwithstanding the foregoing, if at any time the Variable Rate exceeds the
Highest Lawful Rate, the rate of interest to accrue on this Note shall be
limited to the Highest Lawful Rate. but any subsequent reductions in such
Variable Rate shall not reduce the rate of interest to accrue on this Note below
the Highest Lawful Rate until the total amount of interest accrued on this Note
equals the amount of interest which would have accrued if the Variable Rate had
at all times been in effect.
If at maturity or final payment of this Note the total amount of interest
paid or accrued under the foregoing provisions is less than the total amount of
interest which would have accrued if the Variable Rate had at all times been in
effect, then Maker agrees to pay to Assignor, to the extent permitted by law, an
amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on this Note if the Highest Lawful Rate had at
all times been in effect, or (ii) the amount of interest which would have
accrued if the Variable Rate had at all times been in effect, and (b) the amount
of interest accrued in accordance with the other provisions of this Note.
The term "Prime Rate" shall mean the rate as determined from time to time
by the Bank as being its prime rate, and thereafter entered in the minutes of
the Bank's Loan and Discount Committee. Without notice to the Maker or any other
person, the Prime Rate shall change automatically from time to time as and in
the amount by which the prime rate shall fluctuate, with each such change to be
effective as of the date of each change in such prime rate. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Bank may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
The term "Highest Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged, collected or received by the Bank in connection with
this Note under laws applicable to the Bank which are presently in effect, or to
the extent allowed by law, under applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
All past due principal and interest on this Note shall bear interest from
the maturity thereof until paid, at the Highest Lawful Rate. Unless otherwise
specified below, interest and fees shall be computed on a monthly basis of a
month of 30 days and on a per annum basis of 360 days and for the actual number
of days elapsed (including the first but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on a monthly basis of the actual number of days in each month and on
a per annum basis of a year of 365 or 366 days, as the case may be.
<PAGE>
This Note shall be due and payable in thirty-six (36) monthly installments
with the first thirty-five (35) due and payable on or before the 22nd day of
each and every month, beginning on January 22, 1997, and one final installment
of the entire unpaid balance of principal and accrued interest due on or before
December 22, 1999 unless extended as hereinafter set forth.
(1) The first (1st) through and including the thirty-fifth (35th) monthly
installments shall each be in the amount of $49,249.05, plus accrued interest;
and
(2) The thirty-sixth (36th) and final installment shall be in the amount of
the unpaid balance of principal plus accrued and unpaid interest, and shall be
due and payable on or before December 22, 1999 unless otherwise extended.
The payment provisions of this Note are made subject to the rights, terms
and conditions set forth in the Purchase and Sale Agreement dated November 6,
1996 and addendum between WestCo and Pharaoh whereby it was mutually agreed that
all rights have been assigned to the Maker of this Note.
If any installment or payment of principal or interest of this Term Note is
not paid when due; or if Maker or any drawer, acceptor, endorser, guarantor,
surety, accommodation party, or other person now or hereafter primarily or
secondarily liable upon or for payment of all or any part of this Note shall
become insolvent (however such insolvency may be evidenced); or if any
proceeding, procedure, or remedy supplementary to or in enforcement of judgment
shall be restored to or commenced against Maker or any other liable party, or
with respect to any property of any of them; or it any governmental authority or
any court at the instance thereof shall take possession of any substantial part
of the property of or assume control over the affairs or operations of, or a
receiver shall be appointed for or take possession of the property of, or a writ
or order of attachment or garnishment shall be issued or made against any of the
property of Maker or any other liable party; or any other liable party (if other
than a natural person) shall be dissolved, wound up, liquidated or otherwise
terminated, or a party to any merger or consolidation without the written
consent of Assignor; thereupon at the option of Assignor, the principal balance
and accrued interest of this Note shall become and be due and payable forthwith
without presentment, protest or notice of dishonor, all of which are hereby
expressly waived by Maker and each other liable party.
If this Note is not paid at maturity whether by acceleration or otherwise
and is placed in the hands of an attorney for collection. or suit is filed
hereon, or proceedings are had in probate, bankruptcy, receivership,
reorganization. arrangement or other legal proceedings for collection hereof,
Maker and each other liable party agree to pay Assignor its collection costs,
including a reasonable amount (which is agreed to be an additional amount equal
to ten (10%) percent of the unpaid principal and interest hereof) for attorney's
fees, but in no event to exceed the maximum amount permitted by law. Maker and
each other liable party are and shall be directly and primarily, jointly and
severally, liable for the payment of all sums called for hereunder, and Maker
and each other liable party hereby expressly waive bringing of suit and
diligence in taking any action to collect any sums owing hereon and in the
handling of any security, and Maker and each other liable party hereby consent
to and agree to remain liable hereon regardless of any renewals, extensions for
any period or rearrangements hereof, or partial prepayments hereon, or any
release or substitution of security hereof, in whole or in part, with or without
notice, from time to time, before or after maturity.
It is the intention of Maker and Assignor to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law, then, in that event, notwithstanding anything to
the contrary herein or in any agreement entered into in connection with or as
security for this Note, it is agreed as follows: (I) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or under any of
the other aforesaid agreements or otherwise in connection with this Note shall
under no circumstances exceed the maximum amount of nonusurious interest allowed
by applicable law, and any excess shall be credited on this Note by the holder
hereof (or, to the extent that this Note shall have been or would thereby be
paid in full, refunded to Maker); and (ii) in the event that maturity of this
Note is accelerated by reason of an election by the holder hereof resulting from
any default hereunder or otherwise, or in the event of any required or permitted
<PAGE>
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount of nonusurious interest allowed by applicable law,
and excess interest, if any, provided for in this Note or otherwise shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on this Note (or, to the extent that this
Note shall have been or would thereby be paid in full, refunded to Maker).
The principal of this Note may be prepaid, in whole or in part, at any time
and from time to time, without premium or penalty, provided, however, there
shall be no interest past due under the terms of this Note on the date(s) of
such prepayment.
This Note shall be non-transferable, non-assignable and non-negotiable.
All payments hereunder, whether designated as payment of principal or
interest, shall be applied first to the payment of interest, and second to the
reduction of principal.
This Note shall be construed under and governed by the laws of the State of
Texas.
Unless changed in accordance with law, the applicable rate ceiling under
Texas law shall be the indicated (weekly) rate ceiling from time to time in
affect as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
Maker warrants and represents to Assignor, and to all other holders of this
Note that all loans evidenced by this Note are and will be for business,
commercial, investment or other similar purposes and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter One of
Title 79, Texas Revised Civil Statutes, 1925, as amended.
GULFWEST PERMIAN COMPANY
BY:/s/Marshall A. Smith, III
Marshall A. Smith, III, President
<PAGE>
EXHIBIT 4.2
TERM NOTE
Dallas, Texas December 5, 1996 $1,604,000.00
For value received, GULFWEST PERMIAN COMPANY, a Texas corporation
(hereinafter called "Maker", whether one or more, and jointly and severally, if
more than one) promises to pay to the order of Pharaoh Oil & Gas, Inc.
(hereinafter called "Assignor") at its offices at 1801 West Texas Avenue,
Midland, Midland County, Texas 79701, in lawful money of the United States of
America, the sum of ONE MILLION SIX HUNDRED FOUR THOUSAND AND NO/100 DOLLARS
($1,604,000.00) principal only, due and payable in four (4) installments as
follows:
1) The First (1st) installment of $250,000.00 shall be due and payable on
December 20, 1996.
2) The Second (2nd) installment of $141,000.00 shall be due and payable
January 20, 1997.
3) The Third (3rd) installment of $281,000.00 shall be due and payable on
February 10, 1997.
4) The Fourth (4th) and Final installment of $932,000.00 shall be due and
payable on March 31, 1997, unless otherwise extended.
The payment provisions of this Note are made subject to the rights, terms
and conditions set forth in the Purchase and Sale Agreement dated November 6,
1996 and addendum between WestCo and Pharaoh whereby it was mutually agreed that
all rights have been assigned to the Maker of this Note.
If any installment or payment of principal of this Term Note is not paid
when due; or if Maker or any drawer, acceptor, endorser, guarantor, surety,
accommodation party, or other person now or hereafter primarily or secondarily
liable upon or for payment of all or any part of this Note shall become
insolvent (however such insolvency may be evidenced); or if any proceeding,
procedure, or remedy supplementary to or in enforcement of judgment shall be
restored to or commenced against Maker or any other liable party, or with
respect to any property of any of them; or it any governmental authority or any
court at the instance thereof shall take possession of any substantial part of
the property of or assume control over the affairs or operations of, or a
receiver shall be appointed for or take possession of the property of, or a writ
or order of attachment or garnishment shall be issued or made against any of the
property of Maker or any other liable party; or any other liable party (if other
than a natural person) shall be dissolved, wound up, liquidated or otherwise
terminated, or a party to any merger or consolidation without the written
consent of Assignor; thereupon at the option of Assignor, the principal balance
of this Note shall become and be due and payable forthwith without presentment,
protest or notice of dishonor, all of which are hereby expressly waived by Maker
and each other liable party.
If this Note is not paid at maturity whether by acceleration or otherwise
and is placed in the hands of an attorney for collection. or suit is filed
hereon, or proceedings are had in probate, bankruptcy,
<PAGE>
receivership, reorganization. arrangement or other legal proceedings for
collection hereof, Maker and each other liable party agree to pay Assignor its
collection costs, including a reasonable amount (which is agreed to be an
additional amount equal to ten (10%) percent of the unpaid principal hereof) for
attorney's fees, but in no event to exceed the maximum amount permitted by law.
Maker and each other liable party are and shall be directly and primarily,
jointly and severally, liable for the payment of all sums called for hereunder,
and Maker and each other liable party hereby expressly waive bringing of suit
and diligence in taking any action to collect any sums owing hereon and in the
handling of any security, and Maker and each other liable party hereby consent
to and agree to remain liable hereon regardless of any renewals, extensions for
any period or rearrangements hereof, or partial prepayments hereon, or any
release or substitution of security hereof, in whole or in part, with or without
notice, from time to time, before or after maturity.
The principal of this Note may be prepaid, in whole or in part, at any time
and from time to time, without premium or penalty.
This Note shall be non-transferable, non-assignable and non-negotiable.
This Note shall be construed under and governed by the laws of the State of
Texas.
Maker warrants and represents to Assignor, and to all other holders of this
Note that all loans evidenced by this Note are and will be for business,
commercial, investment or other similar purposes and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter One of
Title 79, Texas Revised Civil Statutes, 1925, as amended.
GULFWEST PERMIAN COMPANY
BY:/s/ Marshall A. Smith, III
Marshall A. Smith, III, President
