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UNITED STATES
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
Date of Report
(Date of earliest event reported)
March 31, 1998
Commission file number 0-19766
THE HOME-STAKE OIL & GAS COMPANY
(Exact name of small business issuer as specified in its charter)
Oklahoma 73-0288030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 East 5th Street, Suite 2800
Tulsa, Oklahoma 74103
(Address of principal executive offices)
(918) 583-0178
(Registrant's telephone number)
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Item 2. Acquisition of Assets
On March 31, 1998, The Home-Stake Oil & Gas Company (the "Company")
consummated the purchase of certain natural gas properties (the "Bass
Properties") from Sid R. Bass, Inc. et al for a purchase price of approximately
$6.6 million, subject to certain adjustments for operations subsequent to
January 1, 1998. The purchase price for such properties was determined in an
open sale in which competitive bids were submitted. The Bass Properties contain
estimated proved reserves of approximately 6.4 Bcf of natural gas at December
31, 1997. In addition, management of the Company believes the properties contain
other future development opportunities. This purchase was effective as of
January 1, 1998.
The Bass Properties consist of 18 non-operated producing gas properties
located in three producing fields in Oklahoma. The largest of these is the
Wilburton Field located in Latimer County. This interest includes 9 producing
wells comprising 99.6% of the total value of the Bass Properties. The remaining
9 properties are located in Beckham, Garvin, Lincoln and Washita Counties.
On March 31, 1998, the Company entered into a new financing arrangement
with NationsBank, N.A. to finance the acquisition of the Bass Properties. The
new bank note is due May 1, 2000 and provides for monthly maturities of
$110,000, plus interest. Interest will be at bank prime less 1/2% and certain of
the Company's producing properties were pledged to collateralize the loan. In
addition, the Company has a new revolving bank line of credit in the amount of
$5,000,000 available until May 1, 1999 which provides for monthly payments of
interest on the outstanding borrowings at bank prime less 1%. In connection with
this line of credit, the Company will pay a commitment fee of one-half of one
percent (1/2%) per annum on the unused portion of the line.
In connection with the Company's bank loans and credit facility, there are
certain covenants which require, among other things, that the Company maintain
(i) a ratio of cash flow (defined in the loan agreement to be income before
income taxes plus depreciation, depletion and amortization expense) to current
maturities of long-term debt of more than 1.75 to 1.0, (ii) a ratio of total
liabilities to stockholders' equity of not more than 1.0 to 1.0, and (iii) a
minimum net worth of not less than $20,000,000. In addition, the Company's
annual cash dividends are limited to the lesser of $550,000 or net income.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
It is impractical to provide any of the financial information with
respect to the acquisition of the Bass Properties required by this
Item at the time of this filing. The required financial information
will be filed as soon as practicable, but no later than 60 days after
the due date of this report.
(b) Pro forma financial information.
It is impractical to provide any of the pro forma financial
information with respect to the acquisition of the Bass Properties
required by this Item at the time of this filing. The required pro
forma financial information will be filed as soon as practicable, but
no later than 60 days after the due date of this report.
(c) Exhibits
Exhibit No. Description
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2 Purchase and Sale Agreement between Sid R. Bass,
Inc. et al and The Home-Stake Oil & Gas Company,
effective as of January 1, 1998.
10 Amended and Restated Loan Agreement dated March
31, 1998 between the Company and NationsBank, N.A.
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Signatures
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.
The Home-Stake Oil & Gas Company
(Registrant)
Date: April 15, 1998 By: /s/ Robert C. Simpson
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Robert C. Simpson
Chairman of the Board, C.E.O.,
President and Treasurer
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PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SID R. BASS, INC., LEE M. BASS, INC.
KEYSTONE, INC., THRU LINE INC., W. D. Partners, L.P.,
Edward P. Bass, Robert M. Bass, Sid R. Bass, Trustee
and PERRY R. BASS, Trustee
as Sellers
and
THE HOME-STAKE OIL & GAS COMPANY
as Buyer
Dated March 5, 1998
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TABLE OF CONTENTS PAGE
1. Property to be Sold and Purchased................................. 1
2. Purchase Price.................................................... 2
3. Deposit........................................................... 2
4. Allocation of Base Purchase Price................................. 2
5. Seller's Representations.......................................... 2
6. Buyer's Representations........................................... 3
7. Covenants of Seller and Buyer Pending Closing..................... 3
8. Due Diligence Reviews............................................. 5
9. Adverse Environmental Conditions.................................. 7
10. Remedial Action; Compliance with Law.............................. 9
11. Certain Price Adjustments to the Base Purchase Price.............. 9
12. Conditions Precedent to Buyer's Obligations....................... 9
13. Conditions Precedent to Seller's Obligations...................... 10
14. The Closing....................................................... 10
15. After Closing..................................................... 12
16. Certain Accounting Adjustments to the Purchase Price.............. 12
17. Assumption and Indemnification.................................... 14
18. Environmental Assessment and Indemnification by Buyer............. 14
19. Disclaimer of Warranties.......................................... 15
20. Special Exception to Assumption and Identification ............... 15
21. Buyer's Covenant Not to Sue Seller Group.......................... 16
22. Commissions....................................................... 16
23. Casualty Loss..................................................... 16
24. Notices........................................................... 16
25. Survival of Provisions............................................ 16
26. Miscellaneous Matters............................................. 17
Exhibit A - Oil and Gas Leases/ Mineral Interests *
Exhibit B - Wells *
Exhibit C - Assignment and Bill of Sale*
Exhibit D - Suits, Actions, or other Legal Proceedings Pending *
Exhibit E - Allocation of Values *
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* Omitted. The Registrant agrees to furnish supplementally a copy of any such
omitted Exhibits to the Securities and Exchange Commission upon its
request.
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PURCHASE AND SALE AGREEMENT
This Agreement, dated March 5, 1998 is made by and between the signatory
parties shown below under "Sellers" (hereinafter collectively called "Seller")
and The Home-Stake Oil & Gas Company, an Oklahoma Corporation (hereinafter
called "Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Properties, as defined below, from
Seller, and Seller desires to sell the same Properties to Buyer, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, In consideration of the mutual promises made herein and the
benefits to be derived hereunder, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows:
1. Properties to be Sold and Purchased. Seller agrees to sell, and Buyer
agrees to purchase, for the consideration herein set forth, and subject to the
terms and provisions herein contained, the following described properties,
rights, and interests:
(a) All rights, titles, and interests of Seller in and to: 1) the oil, gas,
and mineral leases and mineral interests described in Exhibit A hereto
(including landowner's royalty and any ratifications and amendments to such
leases, whether or not such ratifications and amendments are described in
Exhibit A); and 2) the wells described in Exhibit B hereto;
(b) All rights, titles, and interests of Seller in and to, or otherwise
derived from, all presently existing and valid oil, gas, and mineral
unitization, pooling, and communitization agreements, declarations, and
orders (including, without limitation, all units formed under orders,
rules, regulations, or other official acts of any federal, state, or other
authority having jurisdiction, and voluntary unitization agreements,
designations, and declarations) relating to the properties described in
subsection 1.(a) to the extent such rights, titles, and interests are
attributable to the properties described in subsection 1.(a);
(c) All rights, titles, and interests of Seller in and to all presently
existing and valid production sales contracts, operating agreements,
farmout agreements, farmin agreements, and other agreements and contracts
that relate to any of the properties described in subsections l.a. and
l.b., to the extent such rights, titles, and interests are assignable and
attributable to the properties described in subsections 1.(a) and 1.(b);
(d) All rights, titles, and interests of Seller in and to all
rights-of-way, easements, surface leases, permits, and licenses appurtenant
to the properties described in subsections 1.(a) and 1.(b); and
(e) All rights, titles, and interests of Seller in and to all materials,
supplies, machinery, equipment, improvements, and other personal property
and fixtures (including, but not limited to, wellhead equipment, pumping
units, flowlines, tanks, buildings, injection facilities, saltwater
disposal facilities, compression facilities, gathering systems, and other
equipment) located on the properties described in subsections 1.(a) and
1.(b) and/or used in connection with the exploration, development,
operation, or maintenance thereof.
The properties and interests specified in subsections 1.(a), 1.(b), 1.(c), 1.(d)
and 1.(e) are herein sometimes collectively called the "Properties". The defined
term "Properties" shall include seismic data, geological and geophysical data,
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and other similar data related thereto. Seller shall provide Buyer with all data
Seller has in its files, excluding any data which Seller cannot provide to Buyer
without breaching, or risking a breach of, a confidentiality agreement with a
third party; provided, however, Seller agrees to use its best efforts to obtain
the consent of any such third party to the furnishing of such data to Buyer.
2. Purchase Price. The unadjusted purchase price for the Properties shall
be Six Million Six Hundred Eighty Five Thousand dollars ($6,685,000.00) payable
in United States dollars (herein called the "Base Purchase Price"). The Base
Purchase Price may be adjusted, as provided in Sections 7.(c) and 11. hereof.
The Base Purchase Price, as so adjusted and as otherwise adjusted by mutual
agreement of the parties herein, shall be called the "Purchase Price."
3. Deposit. Upon entering into this Agreement, as evidence of good faith,
Buyer shall pay to Seller Six Hundred Sixty Eight Thousand Five Hundred dollars
($668,500.00) hereinafter called the "Deposit". If Buyer and Seller consummate
the transaction contemplated hereby in accordance with the terms hereof, the
Deposit shall be applied to the Purchase Price. If Buyer and Seller do not
consummate the transaction contemplated hereby because of a material default by
Seller, Seller shall return the Deposit to Buyer. Except as provided in Sections
12. and 13., if Buyer fails or refuses to consummate the transaction
contemplated hereby, in violation of the provisions of this Agreement, Seller
may retain the Deposit. The Deposit is neither an earnest money deposit nor an
amount pre-determined for purposes of liquidated damages. Forfeiture of the
Deposit as provided herein shall be in addition to, and not in lieu of, the
rights and remedies Seller may have at law or in equity for Buyer's failure to
perform as provided in this Agreement. In no event shall the Deposit accrue
interest.
4. Allocation of Base Purchase Price. Buyer has allocated the Base Purchase
Price to the Properties including equipment and personal property. These
allocations are shown on Exhibit E and have been made in good faith by Buyer and
may be relied upon by Seller for all purposes of this Agreement.
5. Seller's Representations. Each of the individual entities comprising
Seller represent to Buyer that:
(a) Each is a legal entity duly organized and legally existing under the
laws of the State of Texas, is qualified to do business in the State of
Oklahoma and is in good standing, or will be at Closing.
(b) Each has full power and ability to enter into this Agreement and
perform its obligations hereunder and has taken all necessary action to
enter into this Agreement and perform its obligations hereunder.
(c) Seller's execution and delivery of this Agreement, the consummation of
the transaction contemplated hereby, and Seller's compliance with the terms
hereof, will not result in any default under any agreement or instrument to
which Seller, or any individual party thereof, is a party or by which the
Properties are bound that would be material to this transaction. Seller's
execution and delivery of this Agreement will not violate any contractual
provision, order, writ, injunction, decree, statute, rule, or regulation
applicable to Seller, or any individual party thereof, or to the Properties
that would be material to this transaction, except the following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"); and,
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(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for in
Section 14.(a)(i) hereof and any other documentation provided for herein to
be executed by Seller, will, when executed and delivered, constitute the
legal, valid, and binding obligations of Seller, enforceable according to
their terms, except as limited by bankruptcy or other laws applicable
generally to creditor's rights and as limited by general, equitable
principles.
(e) Except as disclosed on Exhibit D, there are no pending suits, actions,
or other proceedings in which Seller is a party that materially affect the
Properties (including, without limitation, any actions challenging or
pertaining to Seller's title to any of the Properties) or affect the
execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby.
6. Buyer's Representations. Buyer represents to Seller that:
(a) Buyer is a corporation duly organized and legally existing under the
laws of its state of organization. Buyer is qualified to do business in the
State of Oklahoma and is in good standing, or will be at Closing.
(b) Buyer has full power and ability to enter into and perform its
obligations under this Agreement (including, but not limited to the payment
of the Purchase Price at Closing) and has taken all necessary action to
enter into this Agreement and perform its obligations hereunder.
(c) Buyer's execution and delivery of this Agreement, the consummation of
the transaction contemplated hereby, and Buyer's compliance with the terms
hereof, will not result in any default under any agreement or instrument to
which Buyer is a party or by which the Properties are bound that would be
material to this transaction. Buyer's execution and delivery of this
Agreement will not violate any contractual provision, order, writ,
injunction, decree, statute, rule, or regulation applicable to Buyer or to
the Properties that would be material to this transaction, except the
following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the "HSR Act;" and,
(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for in
Section 14.(a)(i) hereof and any other documentation provided for herein to
be executed by Buyer, will, when executed and delivered, constitute the
legal, valid, and binding obligations of Buyer, enforceable according to
their terms, except as limited by bankruptcy or other laws applicable
generally to creditor's rights and as limited by general, equitable
principles.
(e) There are no pending suits, actions, or other proceedings in which
Buyer is a party that materially affect the execution and delivery of this
Agreement or the consummation of the transaction contemplated hereby.
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(f) Buyer is a knowledgeable purchaser, owner, and operator of oil and gas
properties, has the ability to evaluate, and has evaluated, the Properties
for purchase, and is acquiring the Properties for its own account and not
with the intent to make a distribution within the meaning of the Securities
Act of 1933, as amended (and the rules and regulations pertaining thereto),
or a distribution thereof in violation of any other applicable securities
laws, rules, or regulations.
7. Covenants of Seller and Buyer Pending Closing. Between the date of this
Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access at all
reasonable times during normal business hours to the Properties and,
at Seller's office, to Seller's records (including, without
limitation, title files, division order files, well files, production
records, equipment inventories, and production severance, and ad
valorem tax records) pertaining to the ownership and operation of the
Properties, to conduct due diligence reviews as contemplated by
Section 8. below. Buyer may make copies of such records, at its
expense but shall, if Seller so requests, return all copies so made if
the Closing does not occur. Seller shall not be obligated to provide
Buyer with access to any records or data that Seller cannot provide to
Buyer without breaching, or risking a breach of, confidentiality
agreements with other parties, provided, however, Seller agrees to use
its best efforts to obtain the consent of any such third party to the
furnishing of such records or data to Buyer. All records and data
provided shall be subject to the previously executed Confidentiality
Agreement between Buyer and Seller. SELLER MAKES NO WARRANTY, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS
OF THE FILES AND OTHER INFORMATION THAT IT MAY PROVIDE TO BUYER OR
THAT MAY BE PROVIDED BY OTHERS.
(ii) Seller shall make a good faith effort to give Buyer, or Buyer's
authorized representatives, who have a legitimate need to know, at
reasonable times and upon adequate notice to Seller, physical access
to the Properties for the purpose of inspecting same. Buyer recognizes
that some of the Properties are operated by third parties and that
Seller's ability to obtain access to such properties, and the manner
and extent of such access, is subject to the consent of such third
parties. Buyer agrees to comply fully with the rules, regulations, and
any instructions issued by Seller or third party (where a Property is
operated by such third party) regarding the actions of Buyer while
upon, entering, or leaving the Properties.
(iii) If Buyer exercises rights of access under this Section or
otherwise, or conducts examinations or inspections under this Section
or otherwise, then (a) Buyer will be accompanied by Seller's
representative at all times; (b) such access, examination, and
inspection shall be at Buyer's sole risk, cost, and expense, and Buyer
waives and releases all claims against Seller (its affiliates and
their respective directors, officers, employees, attorneys,
contractors, and agents) arising in any way therefrom or in any way
connected therewith or arising in connection with the conduct of its
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directors, officers, employees, attorneys, contractors, and agents in
connection therewith; and (c) BUYER SHALL RELEASE, INDEMNIFY, DEFEND,
AND HOLD HARMLESS SELLER (AND ITS PARENT, SUBSIDIARY COMPANIES, AND
OTHER AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, CONTRACTORS, AND AGENTS) (HEREINAFTER COLLECTIVELY REFERRED
TO AS "SELLER GROUP") FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES (INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES),OR LIENS OR
ENCUMBRANCES FOR LABOR OR MATERIALS, ARISING OUT OF OR IN ANY WAY
CONNECTED WITH SUCH ACCESS, EXAMINATION, AND INSPECTION. THE FOREGOING
RELEASE AND INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS,
ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR
EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE,
SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR
(ii) STRICT LIABILITY.
(b) Seller shall continue to conduct its business in its ordinary course,
and in accordance with all applicable ordinances, statutes, rules, and
regulations of all local, state, and federal governments. Seller shall not
enter into or assume any contract or commitment which is not in the
ordinary course of business as heretofore conducted in association with the
Properties and shall carry on its business and operate the Properties as a
reasonably prudent operator. Subject to existing contractual obligations,
Seller shall not conduct, or commit to participate in, on behalf of Buyer,
any operation affecting the Properties in which Seller's net share of
expense is greater than $50,000.00 for such operation without Buyer's prior
written consent. However, Seller may take such steps and incur such
expenses as it deems necessary in its sole opinion to deal with an
emergency to safeguard any part of the Property without first consulting
with Buyer. As soon as possible after the emergency, Seller shall advise
Buyer of such emergency action. Except as set forth in this Agreement,
Seller shall not sell, assign, transfer, mortgage, farmout, or otherwise
dispose of, abandon, or encumber any material portion of the Properties.
(c) Seller shall use reasonable efforts, consistent with industry practices
in transactions of this type, to identify, with respect to each material
portion of the Properties, (i) all preferential rights to purchase that
would apply to the transaction contemplated hereby and (ii) the parties
holding such rights. In attempting to identify the same, Seller shall not
be obligated to go beyond its own records. Seller shall request from the
parties so identified, and in accordance with the documents creating such
rights, waivers of the preferential rights to purchase. Seller shall have
no obligation hereunder other than to attempt to identify such preferential
rights and to request such waivers. Seller shall not be obligated to assure
that such waivers are obtained. Seller may tender to any party refusing to
waive such a preferential right the interest covered by such right at a
price equal to the value allocated to such interest according to Exhibit E.
To the extent that such an interest is actually sold to a party exercising
such a preferential right, it shall be excluded from the transaction
contemplated hereby, and the Base Purchase Price shall be reduced by the
amount such party paid to Seller for such interest unless the parties
hereto agree otherwise.
(d) If applicable, as soon as practicable after the execution hereof, Buyer
shall prepare and submit any necessary filings in connection with the
transaction contemplated by this Agreement under the HSR Act. Buyer shall
pay all filing fees in connection with such filing, shall request expedited
treatment of such filing by the Federal Trade Commission ("FTC"), shall
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promptly make any appropriate or necessary subsequent or supplemental
filings, and shall furnish to Seller copies of all filings made under the
HSR Act at the same time they are filed with the FTC. Seller shall
cooperate with Buyer as to all filings required by the HSR Act.
(e) After both parties have executed this Agreement, Seller shall deliver
to Buyer a copy of its "pay list" for each well listed on Exhibit B (which
pay list shall include the name, address, social security number, and
applicable share of proceeds of production, to the extent such information
is contained in Seller's records, for each party to whom Seller is
disbursing proceeds of production with respect to such property); and, a
list of all parties for whom it is holding in suspense proceeds of
production. Seller does not represent or warrant to Buyer the accuracy of
the "pay lists" so delivered.
8. Due Diligence Reviews.
(a) The term "Defect" as used in this Section shall mean any of the
following:
(i) As of the Effective Date, Seller's ownership of a well listed on
Exhibit B hereto either, (A) entitles Seller to receive a share of the
oil, gas, and other hydrocarbons produced from, or allocated to, such
well that is less than the share set forth on Exhibit B for such well
in the columns headed "Net Revenue Interest (NRI)" and "Overriding
Royalty Interest (ORI)", excepting any decreases caused by an increase
in the landowner's royalty payable to the Federal and State
Governments or pursuant to contractual obligations, including, without
limitation, sliding scale overriding royalties, which are tied to
amount of production, or as mandated by Federal and State statutes as
promulgated in the respective Federal and State Rules and Regulations;
or, (B) causes Seller to bear a share of the cost of operating such
well greater than the share set forth on Exhibit B for such well in
the column headed "Working Interest (WI)" (without a proportionate
increase in the share of production to which Seller is entitled from
such well);
(ii) Seller's ownership of a Property is subject to a lien other than
(A) a lien that will be released at or before Closing, (B) a lien for
taxes not yet delinquent, or (C) a lien under an operating agreement
or similar agreement, to the extent the same relates to expenses
incurred that are not yet due;
(iii)Seller's ownership of a Property is subject to a preferential
right to purchase, unless a waiver of such right has been obtained
with respect to the transaction contemplated hereby or an appropriate
tender of the applicable interest has been made to the party holding
such right and the period of time required for such party to exercise
such right has expired without such party exercising such right;
(iv) Seller's ownership of a Property is subject to an imperfection in
title that, if asserted, would cause a Defect, as defined in clause
(i) above, to exist, and such imperfection in title normally would not
be waived by reasonable and prudent persons engaged in the oil and gas
business with knowledge of all the facts and their legal implications
and would materially impair or prevent Buyer from receiving payment
from the purchasers of production, and would prevent the economic
benefit Buyer could reasonably expect by acquiring the Properties;
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(v) Seller's ownership of a non-producing Property is subject to an
imperfection in title that, if asserted, would cause Seller's
ownership as shown on Exhibit A to be less; and such imperfection in
title normally would not be waived by reasonable and prudent persons
engaged in the oil and gas business with knowledge of all the facts
and their legal implications and would materially prevent the economic
benefit Buyer could reasonably expect by acquiring such Property.
(b) Buyer may conduct, to the extent it deems appropriate and at its sole
risk and cost, such examinations and investigations as it may choose with
respect to the Properties in order to determine whether "Defects" exist.
Unless waived, Buyer shall notify Seller in writing of such Defects as soon
as they are identified, but no later than March 27, 1998, [unless extended
pursuant to 14.(i) or 14.(ii)] (hereinafter "Defect Notice Date"). Those
Defects identified in such notice to Seller are herein called "Asserted
Defects". Such notification shall include a description of the Asserted
Defect, the lease(s) described on Exhibit A affected by such Asserted
Defect, the well(s) listed on Exhibit B to which the Asserted Defect
relates, and all supporting documentation reasonably necessary fully to
describe in detail the basis for the Asserted Defect; and, for each
property, lease and applicable well, the size of any variance from "Net
Revenue Interest (NRI)", "Overriding Royalty Interest (ORI)", or "Working
Interest (WI)" set forth in Exhibit B that does or could result from such
Asserted Defect. Buyer hereby waives all Defects that it fails to identify
to Seller as Asserted Defects on or before the Defect Notice Date. If Buyer
timely notifies Seller of Asserted Defects, Seller (i) shall have the right
(but not the obligation) to attempt to cure such Asserted Defects prior to
Closing, and (ii) shall also have the right (which may be exercised at any
time before the Closing Date) to postpone the Closing by designating a new
Closing Date not later than thirty (30) days after the Closing Date then
existing, if Seller desires additional time to attempt to cure (including
determining if it will attempt to cure) one or more Asserted Defects. In
lieu of curing or attempting to cure an Asserted Defect, Seller may elect,
at any time prior to Closing with respect to any Asserted Defect, to
indemnify and hold Buyer harmless from and against any damages or loss
(including consequential damages, special damages, or similar damages)
Buyer may suffer as a result of a third party claim based on such Asserted
Defect. If Seller elects to indemnify Buyer as to an Asserted Defect, such
Asserted Defect will be treated under this Agreement as cured.
(c) Buyer shall have the right to make an environmental assessment of the
Properties during the period beginning on the date of execution of this
Agreement and ending on the Defect Notice Date. Subject to Buyer's rights
to access under Section 7. hereof, Buyer and its agents shall have the
right to enter upon the Properties and all buildings and improvements
thereon, inspect the same, conduct soil and water tests and borings, and
generally conduct such tests, examinations, investigations, and studies as
Buyer may deem necessary or appropriate for the preparation of appropriate
engineering and other reports in relation to the Properties and their
physical and environmental condition. If Buyer proposes to undertake an
environmental assessment, Buyer's proposed plan, the consultants to be
used, and testing protocol must be approved by Seller before the work may
begin, which approval will not be unreasonably withheld. Buyer agrees
promptly to provide to Seller a copy of the environmental assessment,
including any reports, data, and conclusions. Buyer shall keep all data and
information acquired by such examinations and the results of all analyses
of such data and information strictly confidential and shall not disclose
same to any person or agency without the prior written approval of Seller.
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BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SELLER GROUP
FROM AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY
WHATSOEVER, INCLUDING ATTORNEYS' FEES, ARISING OUT OF THE MAKING OF THE
ENVIRONMENTAL ASSESSMENT INCLUDING, BUT NOT LIMITED TO, INJURY TO OR DEATH
OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR ABOUT THE PROPERTIES
AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH INJURIES OR DAMAGES CAUSED
SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MEMBER OF THE
SELLER GROUP).
(d) After the Defect Notice Date, Buyer shall be deemed to have inspected
the Properties or waived its right to inspect the Properties for all
purposes.
9. Adverse Environmental Conditions.
(a) Buyer shall have until the Defect Notice Date to notify Seller of any
material adverse environmental condition of the Properties which Buyer
deems unacceptable and provide evidence of the condition to Seller. An
environmental condition is a material adverse environmental condition
("Condition") only if the following criteria are met:
(i) The environmental condition would have been required to be
remediated on the Effective Date under the Environmental Laws; and,
(ii) The total cost to remediate all environmental conditions
identified by Buyer affecting the Properties to the state required by
the Environmental Laws is reasonably estimated to be at least
$100,000.00.
(b) "Environmental Law" shall mean any federal, state, or local law, rule,
regulation, order, or ordinance in effect as of the Effective Date of this
Agreement pertaining to protecting the public health, welfare, and the
environment.
(c) At Closing, Seller may elect any of the following provided a Condition
exists:
(i) Decrease the Base Purchase Price by a mutually acceptable amount
reflecting Seller's proportionate share, based on its working
interest, of the cost reasonably estimated to remediate a Condition
affecting the Properties to such a state as required by the
Environmental Laws;
(ii) Remove the affected Properties from this Agreement and adjust the
Base Purchase Price by the amount allocated to the affected Properties
according to Exhibit E.
(iii) Remedy, or agree to remedy, the Condition, as provided below;
or,
(iv) Terminate this Agreement.
(d) If option (c)i. above is chosen, Buyer shall be responsible for any
remediation. If the actual cost to remediate a Condition exceeds the amount
of the estimate, Buyer shall pay the additional costs to remediate the
Condition as required by applicable law. If the actual cost to remediate a
Condition is less than the amount of the estimate, Buyer shall be entitled
to retain the amount by which the estimate exceeds the actual cost.
(e) If option (c)iii. above is chosen, the following shall govern the
remediation:
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(i) Seller shall be responsible for all negotiations and contacts with
federal, state, and local agencies and authorities with regard to the
Condition or remediation. Buyer may not make any independent contacts
with any agency, authority, or other third party with respect to the
Condition or remediation and will keep all information regarding the
Condition and remediation confidential, except in each instance to the
extent required by applicable law.
(ii) Seller shall remediate the Condition to the state agreed upon by
Seller and Buyer, but in no event will Seller be required to remediate
the Condition beyond the state required by the Environmental Laws.
(iii) Buyer will use its best efforts to obtain access to the affected
Properties after Closing to Seller and third parties conducting
assessments or remediation, to the extent and as long as necessary to
conduct and complete the assessment or remediation work, to remove
equipment and facilities, and to perform any other activities
reasonably necessary in connection with assessment or remediation.
(iv) Buyer will use its best efforts not to interfere with Seller's
ingress and egress or assessment or remediation activities. Seller
shall make reasonable efforts to perform the work so as to minimize
disruption to Buyer's business activities and to the Properties.
(v) Seller shall continue remediation of the Condition until the first
of the following occurs:
(1) The appropriate governmental authorities provide written
notice to Seller or Buyer that no further remediation of the
Condition is required; or
(2) Seller and Buyer jointly agree that the Condition has been
remediated to the state required by the Environmental Laws or as
agreed by the parties.
Upon the occurrence of (1) above, Seller shall notify Buyer that
remediation of the Condition is complete and provide a copy of
the notification described in (1) above. Upon delivery of
Seller's notice, Seller shall be released from all liability and
have no further obligations under any provisions of this
Agreement in connection with a Condition.
(vi) Until Seller completes remediation of a Condition, Seller and
Buyer will each notify the other of any pending or threatened claim,
action, or proceeding by any authority or private party that relates
to or would affect the Condition, the assessment, or the remediation
of the affected Properties.
(vii) If Seller will assess or remediate the affected Properties after
Closing, the Assignment and Bill of Sale or other recordable
instrument will restate the rights and obligations of this section.
10. Remedial Action; Compliance with Law. When any lease terminates, an
interest in which has been assigned under this Agreement, Buyer, to the extent
it can do so as non-operator will undertake testing, assessment, closure,
reporting, or remedial action with respect to the Properties affected by the
termination as is necessary to satisfy all local, state, or federal requirements
in effect at that time and necessary to restore the Properties. Buyer agrees to
release, indemnify, hold harmless, and defend Seller as to all claims and
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liabilities arising therefrom to the same extent as described in Sections 17.
and 18.
11. Certain Price Adjustments to the Base Purchase Price.
(a) If Buyer presents Asserted Defects to Seller as a part of the due
diligence reviews provided for in Section 8. above, and if Seller is unable
or unwilling to cure such Asserted Defects prior to Closing, or if Buyer
has elected to treat a Property affected by a casualty loss pursuant to
Section 22. as if it were a Property affected by an Asserted Defect, then
an appropriate adjustment to the Base Purchase Price to account for such
Asserted Defects shall be made by using those values set forth in Exhibit E
hereto and those Properties, or any part thereof, associated with such
Asserted Defects shall be deleted from this Agreement and any rights of
Buyer thereto shall terminate.
(b) If it is determined that Seller's interest in a well listed on Exhibit
B is greater or lesser than the interest shown for such well under the
columns headed "Net Revenue Interest (NRI)" and "Overriding Royalty
Interest (ORI)" on Exhibit B, then Seller or Buyer may propose an increase
or decrease, as applicable, in the Base Purchase Price, in which case such
increase or decrease shall be handled in the same manner as provided above
with respect to adjustments for Asserted Defects; provided that the party
making such determination shall notify the other party of such adjustment
on or before the Defect Notice Date. Buyer shall have an affirmative
obligation to disclose to Seller circumstances discovered by Buyer in its
due diligence review that could result in an increase in the Base Purchase
Price hereunder.
(c) Notwithstanding the adjustments to be made pursuant to subsections
11.(a)and 11.(b) above, if such adjustments do not exceed $100,000.00, no
such adjustments shall be made and none of the Properties that would
otherwise have been excluded pursuant to subsection 11.(a) above shall be
excluded. If the adjustments to be made pursuant to subsections 11.(a) and
11.(b) above, do exceed $100,000.00, the Base Purchase Price shall be
adjusted by the amount of such adjustments.
12. Conditions Precedent to Buyer's Obligations. Buyer's obligations under
this Agreement are subject to each of the following conditions:
(a) Seller's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and at Closing,
except as to changes specifically contemplated by this Agreement or
consented to by Buyer in writing.
(b) Seller shall have performed and complied in all material respects with
every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless performance or compliance
therewith shall have been waived by Buyer in writing.
(c) If applicable, Buyer and Seller shall have received approval from the
FTC under the HSR Act of the transaction contemplated by this Agreement, or
shall have received notification that the waiting period under such act has
been terminated, or the waiting period under such act shall have expired.
(d) The Base Purchase Price increase or decrease resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does not
exceed Seven Hundred Fifty Thousand dollars ($750,000.00).
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(e) On the Closing Date, no material suit, action, or other proceeding
against Buyer or Seller shall be pending before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transaction contemplated by this
Agreement.
If any such condition precedent to the obligations of Buyer under this Agreement
is not met as of the Closing Date, this Agreement may be terminated at the
option of Buyer. If Buyer thus terminates this Agreement, the Deposit shall be
returned to Buyer and the parties shall have no further obligations to one
another hereunder (other than the indemnifications contained in Sections
7.(a)(iii), 8.(c), and 21. hereof, which shall survive such termination).
Notwithstanding the foregoing, if a condition set forth above, other than
condition 12. (c) or 12.(d), is not met (and is asserted by Buyer as a failure
of one of its conditions of Closing), and if the reasons such condition is not
met relate only to some, but not all, of the Properties, failure of such
condition to be met may, at the option of either Buyer or Seller, be treated as
an uncured Asserted Defect and handled in accordance with the process set forth
in Section 11. above.
13. Conditions Precedent to Seller's Obligations. Seller's
obligations under this Agreement are subject to each of the following
conditions:
(a) Buyer's representations under this Agreement shall be true and accurate
in all material respects as of the date when made and at Closing, except as
to changes specifically contemplated by this Agreement or consented to by
Seller.
(b) Buyer shall have performed and complied in all material respects with
every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless compliance therewith shall have
been waived by Seller.
(c) If applicable, Buyer and Seller shall have received approval from the
FTC under the HSR Act of the transaction contemplated by this Agreement, or
shall have received notification that the waiting period under such act has
been terminated, or the waiting period under such act shall have expired.
(d) The Base Purchase Price reduction resulting from the adjustments to be
made pursuant to subsections 11.(a) and 11.(b) does not exceed Seven
Hundred Fifty Thousand dollars $(750,000.00).
(e) On the Closing Date, no material suit, action, or other proceeding
against Seller shall be pending before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transaction contemplated by this
Agreement.
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this agreement may be terminated at
the option of Seller. If Seller terminates this agreement because of Buyer's
failure to fulfill condition 13.(a) or 13.(b), the Deposit shall not be returned
to Buyer. If Seller terminates this Agreement because of conditions 13.(c),
13.(d), or 13.(e), the Deposit shall be returned to Buyer. Thereafter, Seller
and Buyer shall have no further obligations to one another hereunder (other than
the indemnifications contained in Section 7.(a)(iii), 8.(c), and 21. hereof,
which shall survive such termination).
14. The Closing. If the conditions referred to in Section 12. of this
Agreement (the "Conditions Precedent to Buyer's Obligations") and Section 13. of
this Agreement (the "Conditions Precedent to Sellers Obligations") have been
satisfied or waived, the consummation of the transaction contemplated hereby
("Closing") shall take place in the offices of Seller, at 201 Main Street, Fort
Worth, Texas 76102, on March 31, 1998, at 1:00 p.m. Central Standard Time, or at
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such other date and time (i) as the Buyer and Seller may agree or, (ii) to which
Seller may postpone the Closing pursuant to Section 8.(b) hereof (such date and
time herein called the "Closing Date"). At the Closing:
(a) Seller shall:
(i) Execute, acknowledge, and deliver to Buyer a conveyance of the
Properties containing a special warranty of title (the "Assignment and
Bill of Sale"), in the form attached hereto as Exhibit C (with
Exhibits A and B attached thereto), effective as of seven o'clock
a.m., (7:00 a.m.) Central Standard Time on January 1, 1998, (herein
called the "Effective Date");
(ii) Execute (and, where required, acknowledge) and deliver to Buyer
forms of conveyance or assignment as required by the applicable
authorities for transfers of interests in state or federal leases
included in the Properties;
(iii) Execute and deliver to Buyer letters in lieu of transfer orders
(or similar documentation), in form acceptable to both parties;
(iv) If Buyer requests, deliver to Buyer an affidavit or other
certification (as permitted by the Internal Revenue Code of 1986, as
amended) that Seller is not a "foreign person" within the meaning of
Section 1445 (or similar provisions) of such code (i.e., Seller is not
a non-resident alien, foreign corporation, foreign partnership,
foreign trust, or foreign estate, as those terms are defined in such
code and regulations promulgated thereunder);
(v) Deliver to Buyer certificates in form and substance satisfactory
to Buyer, effective as of the Closing Date and executed by Seller's
duly authorized officer, partner, or owner, as appropriate, to the
effect that (1) Seller has all requisite corporate, partnership, or
other power and authority to sell the Properties on the terms of this
Agreement and to perform its other obligations under this Agreement
and has fulfilled all corporate, partnership, or other prerequisites
to closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Seller.
(vi) Deliver possession of the Properties to Buyer.
(b) Buyer shall:
(i) Deliver to Seller, by wire transfer to an account designated by
Seller in a bank located in the United States, an amount payable in
United States dollars equal to the amount as set forth on the Closing
Settlement Statement as provided for in Section 16.(c) below;
(ii) Deliver to Seller, except to the extent waived by Seller's,
certificates in form and substance satisfactory to Seller, effective
as of the Closing Date and executed by Buyer's duly authorized
officer, partner, or owner, as appropriate, to the effect that (1)
Buyer has all requisite corporate, partnership, or other power and
authority to purchase the Properties on the terms of this Agreement
and to perform its other obligations under this Agreement and has
fulfilled all corporate, partnership, or other prerequisites to
closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Buyer.
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(iii) Execute such forms and take such other steps as Seller may
reasonably require to (A) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (B) assume any and all liabilities of Seller with respect to the
wells described on Exhibit B; and,
(iv) Take possession of the Properties.
15. After Closing. Within thirty (30) days after Closing, Seller shall
deliver to Buyer all of Seller's files related to the Properties, including but
not limited to lease files, abstracts and title opinions, division order files,
production records, well files, copies of accounting records (but not including
general financial accounting or tax accounting records), and other similar files
and records that directly relate to the Properties. In addition, Seller shall
deliver to Buyer any seismic data, geological and geophysical data, and other
similar data, and any interpretations thereof or other data or records related
thereto except as expressly provided in Section 1. hereof. Seller shall retain
such files, or copies thereof, or such information as it deems necessary for
preparing a Final Settlement Statement as provided in Section 16., or for
purposes of filing tax returns covering the Properties. Any files or materials
retained by Seller after Closing pursuant hereto, shall be sent to Buyer as soon
as reasonably practicable after final payment is made in accordance with the
Final Settlement Statement. Seller may, at its own expense, have access to and
make copies of all, or any part thereof, of the files and records provided Buyer
hereunder at reasonable times and upon reasonable notice during regular business
hours for as long as the Properties remain in effect.
As to those wells which Seller is disbursing proceeds of production, Seller
shall continue to collect proceeds of production as long as it remains operator
and shall be responsible for making disbursements, in accordance with its normal
procedures (and at normal times), of such proceeds of production so collected to
the parties entitled to same, with any proceeds of production thereafter
collected by Seller to be forwarded promptly to its successor as operator.
16. Certain Accounting Adjustments to the Purchase Price.
(a) Appropriate adjustments to the Purchase Price shall be made between
Buyer and Seller to reflect the following:
(i) All rights to proceeds, receipts, reimbursements, credits, and
income attributable to the Properties and accruing before the
Effective Time, as defined below, shall be the property of Seller. All
proceeds, receipts, credits, income, and charges attributable to the
Properties acquired by Buyer hereunder and accruing on and after the
Effective Time shall be the property of Buyer. As to Properties
operated by Seller and purchased by Buyer hereunder and concerning
accounts held in suspense, Seller will pay in full the royalty
accounts that were suspended because the amount due is less than the
statutory or contractual minimum for payment. As to all other
suspended accounts, if any, Seller shall transfer to its successor as
operator all monies held in a suspended account which were received
for production produced from or allocated to the Properties on and
after the Effective Time. As to proceeds received for production
produced from or allocated to the Properties before the Effective Time
and held in a suspensed account, Seller may either: 1) Retain the
suspended amounts after Closing and, upon proof satisfactory to
Seller, release the money to the proper party; or, 2) Transfer the
suspended amounts to Buyer for future disbursement. Once suspended
amounts have been transferred to Buyer for future disbursement, Buyer
agrees to be responsible for disbursing the suspended monies to the
proper parties and shall release, indemnify, defend, and hold harmless
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the Seller Group from any and all claims, actions, causes of action,
liabilities, damages, losses, costs, or expenses (including, without
limitation, court costs and attorneys' fees), arising out of or in any
way connected with making such disbursements, or failure to make a
disbursement.
(ii) Seller shall be responsible for and pay (A) all charges and
invoices for costs and expenses (including, without limitation, lease
maintenance payments, drilling and operating expenses, capital
expenditures, and overhead charges) accruing before the Effective Time
and attributable to the Properties and (B) necessary royalty
disbursements of proceeds realized from the sale of production
produced from and allocated to the Properties before the Effective
Time. Buyer shall be responsible for payment of (C) all charges and
invoices for costs and expenses (including, without limitation, lease
maintenance payments, drilling and operating expenses, capital
expenditures, and operator overhead charges) accruing on and after the
Effective Time and attributable to the Properties acquired hereunder
and (D) necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
acquired hereunder on and after the Effective Time. All payments made
by Seller for items under (C) above for which Buyer is responsible
shall be reimbursed by Buyer. Seller shall reimburse Buyer for all
monies received by Seller from non-operators as payment of Seller's
invoices for the operations of the wells described on Exhibit B for
periods on and after the Effective Time.
(b) In making such adjustments, the Parties agree that:
(i) Seller has caused such oil storage facilities which store oil
produced from the Properties to be gauged or strapped as of 7:00 a.m.
Central Standard Time on the Effective Date, hereinafter referred to
as the Effective Time. Seller also has caused the gas production meter
charts (or if such do not exist, the sales meter charts) or gas
production statements on the pipelines transporting gas production
from the Properties to be read as of the Effective Time. The results
of such gauging, strapping, or chart reading are conclusive and shall
be made available to Buyer. The production in such storage facilities
or through such meters on the gas pipelines as of the Effective Time
shall be owned by Seller; and, thereafter, production placed in such
storage facilities and gas production passing through the aforesaid
meters on the pipelines shall be owned by Buyer, insofar as to the
interests subject hereto as of Closing.
(ii) All ad valorem, production and similar taxes applicable to the
Properties shall be prorated between Seller and Buyer as of the
Effective Date. Therefore, all ad valorem, production and similar
taxes for 1997 and prior years levied against the Properties shall be
borne and paid by Seller; and, all ad valorem, production and similar
taxes for 1998 and thereafter levied against the Properties shall be
borne and paid by Buyer, irrespective if the amount levied is based on
the previous year's production or any other basis.
(iii) Each party shall be responsible for its own income taxes.
(c) With respect to matters that can be determined as of Closing, Seller
shall prepare, in accordance with the provisions of this Agreement and with
generally accepted accounting principles, a statement (the "Closing
Settlement Statement") setting forth each adjustment to the Base Purchase
Price and to the Purchase Price to the best of Seller's knowledge, whether
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upward or downward, as may be required in accordance herewith. Seller shall
submit to Buyer the Closing Settlement Statement no later than five (5)
days prior to the Closing Date and shall afford Buyer access to Seller's
records pertaining to the computation of the Closing Settlement Statement.
Prior to the Closing, Buyer and Seller will agree upon the adjustments
stated therein to be made to the Purchase Price, or will specify the
adjustments to which there are differences and the adjustments to be
omitted therefrom. Only the agreed upon adjustments shall be taken into
account in computing the adjustments to be made to the Purchase Price at
Closing. Final adjustments to the Purchase Price to be made hereunder shall
be made within one hundred-twenty (120) days after the Closing Date for all
matters other than Asserted Defects according to (c) hereinbelow as
follows:
(d) As soon as practicable after the Closing, and in no event later than
sixty (60) days following the Closing Date, Seller shall deliver to Buyer,
in accordance with the provisions of this Agreement and with generally
accepted accounting principles, a statement ("Final Settlement Statement")
setting forth each adjustment under this Agreement which was not determined
as of the Closing. Within sixty (60) days after Buyer's receiving the Final
Settlement Statement, the Parties shall agree upon the adjustments and
payments stated in such Final Settlement Statement, and the net of such
adjustments and payments shall be paid in cash to the appropriate Party by
the other Party within five (5) days following agreement as to the Final
Settlement Statement.
17. Assumption and Indemnification. SUBJECT TO THE PROVISIONS OF SECTION
20. BELOW, UPON DELIVERY TO AND ACCEPTANCE BY BUYER OF THE ASSIGNMENT AND BILL
OF SALE, BUYER SHALL BE DEEMED TO HAVE ASSUMED, TO PAY AND PERFORM TIMELY, ALL
DUTIES, EXPENSES, OBLIGATIONS, LOSSES, HAZARDS AND LIABILITIES RELATING TO THE
OWNERSHIP OR OPERATION OF THE PROPERTIES ARISING ON AND AFTER THE EFFECTIVE DATE
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY LEASE,
CONTRACT, AGREEMENTS, DOCUMENT, PERMIT OR RULE, OR DELAY IN OBTAINING APPROVAL
OF FEDERAL OR STATE ASSIGNMENTS); AND, TO RELEASE, INDEMNIFY, DEFEND, AND HOLD
HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS,
LIABILITIES, LOSSES, DAMAGES, COSTS, OR EXPENSES (INCLUDING COURT COSTS AND
ATTORNEYS' FEES) OF ANY KIND OR CHARACTER ARISING OUT OF OR OTHERWISE RELATING
TO THE OWNERSHIP OR OPERATION OF THE PROPERTIES ON AND AFTER THE EFFECTIVE DATE.
IN CONNECTION WITH (BUT NOT IN LIMITATION OF) THE FOREGOING, IT IS SPECIFICALLY
UNDERSTOOD AND AGREED THAT MATTERS ARISING OUT OF OR OTHERWISE RELATING TO THE
OWNERSHIP OR OPERATION OF THE PROPERTIES ON AND AFTER THE EFFECTIVE DATE SHALL
BE DEEMED TO INCLUDE ALL MATTERS ARISING OUT OF THE STATUS AND THE CONDITION OF
THE PROPERTIES ON THE EFFECTIVE DATE INCLUDING, WITHOUT LIMITATION, ALL
OBLIGATIONS TO PROPERLY PLUG AND ABANDON WELLS LOCATED ON THE PROPERTIES, TO
RESTORE THE SURFACE OF THE PROPERTIES TO AS NEAR ITS ORIGINAL CONDITION AS
PRACTICABLE AND TO COMPLY WITH, OR BRING THE PROPERTIES INTO COMPLIANCE WITH,
APPLICABLE ENVIRONMENTAL LAWS AND REGULATIONS, INCLUDING ALL LIABILITY AND
EXPENSE FOR ANY RESTORATION, REMEDIATION, CLEAN-UP, DISPOSAL OF WASTE, OR
REMOVAL THAT MAY BE INCURRED AS A RESULT OF THE EXISTENCE OR DISCOVERY OF
NATURALLY OCCURRING RADIOACTIVE MATERIALS, OR OTHER HAZARDOUS OR DELETERIOUS
SUBSTANCES IN, ON, UNDER OR ASSOCIATED WITH THE PROPERTIES, REGARDLESS OF WHEN
THE EVENTS OCCURRED THAT GIVE RISE TO SUCH CONDITION, AND THE ABOVE PROVIDED FOR
ASSUMPTIONS AND INDEMNIFICATIONS BY BUYER SHALL EXPRESSLY COVER AND INCLUDE SUCH
MATTERS. THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR
NOT SUCH DUTIES, OBLIGATIONS, OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (I)
NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE,
ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER GROUP OR ANY OTHER INDEMNIFIED
PARTY, OR (II) STRICT LIABILITY.
18. Environmental Assessment and Indemnification By Buyer. BUYER EXPRESSLY
ACKNOWLEDGES THAT IT HAS MADE AN ENVIRONMENTAL ASSESSMENT OF THE PROPERTIES, OR
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WILL BE GIVEN THE OPPORTUNITY TO DO SO SUBJECT TO THE TERMS OF THIS AGREEMENT.
SUBJECT TO THE PROVISIONS OF SECTION 20. BELOW, BUYER HEREBY AGREES TO ASSUME
THE RISKS THAT THE PROPERTIES MAY CONTAIN WASTE MATERIALS OR HAZARDOUS
SUBSTANCES, AND THAT ADVERSE PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO
THE PRESENCE OF WASTE MATERIALS OR HAZARDOUS SUBSTANCES OR THE PRESENCE OF
UNKNOWN ABANDONED OIL AND GAS WELLS, WATER WELLS, SUMPS AND PIPELINES, MAY EXIST
IN, ON, OR UNDER THE PROPERTIES AS OF THE EFFECTIVE DATE, ALL RESPONSIBILITY AND
LIABILITY RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, WILL BE
TRANSFERRED FROM SELLER TO BUYER. SUBJECT TO THE PROVISIONS OF SECTION 20.
BELOW, BUYER ASSUMES FULL RESPONSIBILITY FOR, AND AGREES TO INDEMNIFY, HOLD
HARMLESS AND DEFEND SELLER FROM AND AGAINST ALL LOSS, LIABILITY, CLAIMS, FINES,
EXPENSES, COSTS (INCLUDING ATTORNEYS' FEES AND EXPENSES) AND CAUSES OF ACTION
CAUSED BY OR ARISING OUT OF ANY FEDERAL, STATE OR LOCAL LAWS, RULES, ORDERS AND
REGULATIONS APPLICABLE TO ANY NATURALLY OCCURRING RADIOACTIVE MATERIALS, WASTE
MATERIAL OR HAZARDOUS SUBSTANCES ON OR ASSOCIATED WITH THE PROPERTIES OR THE
PRESENCE, DISPOSAL, RELEASE OR THREATENED RELEASE OF ALL NATURALLY OCCURRING
RADIOACTIVE MATERIALS, WASTE MATERIAL OR HAZARDOUS SUBSTANCES FROM THE
PROPERTIES INTO THE ATMOSPHERE OR INTO OR UPON LAND OR ANY WATER COURSE OR BODY
OF WATER, INCLUDING GROUND WATER, WHETHER OR NOT ATTRIBUTABLE TO SELLER'S
ACTIVITIES OR THE ACTIVITIES OF THIRD PARTIES (REGARDLESS OF WHETHER OR NOT
SELLER WAS OR IS AWARE OF SUCH ACTIVITIES) PRIOR TO, DURING OR AFTER THE PERIOD
OF SELLER'S OWNERSHIP OF THE PROPERTIES. THIS INDEMNIFICATION AND ASSUMPTION
SHALL ALSO APPLY TO LIABILITY FOR VOLUNTARY ENVIRONMENTAL RESPONSE ACTIONS
UNDERTAKEN PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY ACT (CERCLA) OR ANY OTHER FEDERAL, STATE OR LOCAL LAW.
19. Disclaimer of Warranties. THE PROPERTIES SHALL BE CONVEYED PURSUANT
HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER, WHETHER EXPRESS,
IMPLIED OR STATUTORY (OTHER THAN A SPECIAL WARRANTY OF TITLE) AS TO,
DESCRIPTION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO
THE MODELS OR SAMPLES OF MATERIALS, OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS
FITNESS FOR ANY PURPOSE, OR OTHERWISE. SUBJECT TO THE PROVISIONS OF SECTION 20.
BELOW, BUYER SHALL HAVE INSPECTED, OR WAIVED (AND AS OF THE DEFECT NOTICE DATE
SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION,
BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED TO, CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES, ASBESTOS, OR OTHER MANMADE FIBERS OR NATURALLY
OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON, OR UNDER THE PROPERTIES. BUYER
SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL OF THE SAME "AS IS, WHERE
IS". WITHOUT LIMITATION OF THE FOREGOING, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR
MATERIALS NOW, HERETOFORE, OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, PRICING
ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE
TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER
MATTERS CONTAINED IN THE PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR
MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. ANY
AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION, AND OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE OR
DISCLOSED TO BUYER ARE PROVIDED TO BUYER AS A CONVENIENCE AND SHALL NOT CREATE
NOR GIVE RISE TO ANY LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ON OR USE
OF THE SAME SHALL BE AT BUYER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY
LAW.
NOTWITHSTANDING THE ABOVE DISCLAIMER OF WARRANTIES, SELLER WARRANTS AND AGREES
TO DEFEND TITLE TO THE PROPERTIES AGAINST THE LAWFUL CLAIMS AND DEMANDS OF ALL
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PERSONS CLAIMING THE SAME OR ANY PART THEREOF BY, THROUGH, OR UNDER SELLER, BUT
NOT OTHERWISE.
20. Special Exception To Assumption And Identification By Buyer For
Environmental Claims: THE PARTIES ACKNOWLEDGE BUYER'S ASSUMPTION OF
RESPONSIBILITY AND INDEMNIFICATION OF SELLER FOR ENVIRONMENTAL CLAIMS, COSTS AND
EXPENSES SET FORTH IN SECTIONS 17., 18. AND 19. ABOVE. NOTWITHSTANDING ANYTHING
CONTAINED IN SUCH SECTIONS TO THE CONTRARY, SUCH ASSUMPTION OF RESPONSIBILITY
AND INDEMNIFICATION BY BUYER DOES NOT APPLY TO AND SELLER WILL NOT BE SO
INDEMNIFIED FOR ENVIRONMENTAL CLAIMS PROVIDED THAT:
(i) SUCH CLAIM IS PROVEN TO BE CAUSED BY A CONDITION EXISTING ON THE
PROPERTIES PRIOR TO THE EFFECTIVE DATE, AND
(ii) SUCH CLAIM OR CONDITION GIVING RISE TO SUCH CLAIM IS DISCOVERED WITHIN
TWO (2) YEARS AFTER THE CLOSING; AND
(iii) BUYER NOTIFIES SELLER IN WRITING OF SUCH CLAIM WITHIN TWO (2) YEARS
AFTER THE CLOSING, SUCH NOTICE TO INCLUDE A DESCRIPTION OF THE CONDITION,
THE WELL OR WELLS LISTED ON EXHIBIT "B" AFFECTED BY SUCH CONDITION, THE
ENVIRONMENTAL LAW APPLICABLE TO SUCH CONDITION AND ALL SUPPORTING
DOCUMENTATION REASONABLY NECESSARY TO FULLY IN DETAIL DESCRIBE THE
CONDITION AND
(iv)THE NET ESTIMATED COST TO REMEDIATE THE CONDITION OR SATISFACTION OF
ANY CLAIM ARISING THEREFROM EXCEEDS TWENTY FIVE THOUSAND DOLLARS
($25,000.00).
SELLER AGREES TO BE FULLY RESPONSIBLE FOR EVERY CLAIM OR CLAIMS MEETING THE
SPECIFIC CRITERIA OF THIS SECTION AND SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD
HARMLESS BUYER FROM AND AGAINST ANY AND ALL SUCH CLAIMS AND THE LIABILITIES,
LOSSES, DAMAGES, COSTS AND EXPENSES (INCLUDING COURT COSTS AND ATTORNEYS' FEES)
OF ANY KIND OR CHARACTER ARISING OUT OF OR OTHERWISE RELATING THERETO.
21. Buyer's Covenant Not to Sue Seller Group. Except to enforce the
provisions of this agreement or the responsibilities and liabilities of Seller
for claims, costs and expenses with respect to the Properties prior to the
Effective Date according to Sections 17. and 20., Buyer covenants not to sue
Seller Group with regard to any claim or liability relating to the Properties,
or this transaction, regardless of when or how the claim or liability arose or
arises or whether the claim or liability was foreseeable or unforeseeable.
BUYER'S COVENANT NOT TO SUE SELLER GROUP INCLUDES CLAIMS AND LIABILITIES
RESULTING IN ANY WAY FROM THE NEGLIGENCE OR STRICT LIABILITY OF SELLER GROUP
(OTHER THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER THE NEGLIGENCE OR
STRICT LIABILITY IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.
22. Commissions. Seller agrees to indemnify and hold harmless Buyer, its
parent and subsidiary companies and other affiliates, and their directors,
officers, employees, and agents from and against any and all claims,
obligations, actions, liabilities, losses, damages, costs, or expenses
(including court costs and attorneys' fees) of any kind or character arising out
of or resulting from any agreement, arrangement, or understanding by, or on
behalf of, Seller with any broker or finder in connection with this Agreement or
the transaction contemplated hereby. Buyer agrees to indemnify and hold harmless
Seller Group from and against any and all claims, obligations, actions,
liabilities, losses, damages, costs, or expenses (including court costs and
attorneys' fees) of any kind or character arising out of or resulting from any
agreement, arrangement, or understanding by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.
23. Casualty Loss. If the Properties are damaged by fire or other casualty
prior to the Closing, this Agreement shall remain in full force and effect, and
(unless Buyer and Seller shall otherwise agree) in such event as to each such
damaged Property that Seller, in its sole discretion, elects not to repair,
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Buyer either may treat such Property as if it had an Asserted Defect or elect
not to adjust the Purchase Price therefor. If Buyer elects hereunder to treat
the damaged Property as if it had an Asserted Defect, the procedure provided for
in Section 11. shall apply to such Property, and all rights to insurance
proceeds and claims against third parties related thereto shall belong to
Seller. If Buyer elects hereunder not to adjust the Purchase Price for such
damaged Property, and if Seller is entitled to any claims under an insurance
policy with respect to such damage, Seller shall either collect and pay over, or
assign, such insurance claims to Buyer. Buyer shall then take title to such
Property without reduction of the Purchase Price. If Seller elects to repair a
damaged Property, all rights to insurance proceeds and claims against third
parties related thereto shall belong to Seller.
24. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing, unless otherwise specifically provided
herein, and shall be delivered by recognized commercial courier or delivery
service (which provides a receipt), by facsimile (with receipt acknowledged), or
by registered or certified mail (postage prepaid), at the following addresses:
If to Buyer: The Home Stake Oil & Gas Company
15 East 5th Street, Suite 3700
Tulsa, Oklahoma 74103
Attn: Robert C. Simpson
If to Seller: Bass Enterprises Production Co.
210 Main Street
Fort Worth, Texas 76102
Attn: W. Frank McCreight
All such notices and communications shall be considered delivered on the date of
receipt. Buyer or Seller may specify as its proper address any other address
within the continental United States by giving notice to the other party, in the
manner provided in this Section.
25. Survival of Provisions. All representations, warranties, and
indemnifications made herein, shall survive the Closing and the delivery of the
Assignment and Bill of Sale. All obligations hereunder not satisfied at Closing
shall survive Closing and delivery of the Assignment and Bill of Sale to the
extent the Parties intend for such obligations to be satisfied after Closing.
Buyer shall have until the Defect Notice Date in which to satisfy itself as to
the quantity and quality of Seller's title to the Properties.
26. Miscellaneous Matters.
(a) Further Assurances. After the Closing, Seller and Buyer shall execute
and deliver, and shall otherwise cause to be executed and delivered, from
time to time, such further instruments, notices, division orders, transfer
orders, and other documents, and do such other and further acts and things
as may be reasonably necessary more fully and effectively to grant, convey,
and assign the Property to Buyer and to effectuate the purposes of this
agreement.
(b) Assignability. Except as provided below, neither party shall have the
right to assign its rights under this Agreement without the prior written
consent of the other party, and any such assignment in violation of this
provision shall be void.
(c) Gas Balances. On the Closing Date (and upon the delivery to Buyer of
the Assignment and Bill of Sale), Buyer shall assume the position of Seller
with respect to all gas imbalances affecting the Properties acquired
(whether wellhead imbalances or pipeline or gathering imbalances) and to
the position of Seller with respect to all make-up obligations unless the
applicable gas balancing agreement requires a cash settlement when an
interest is assigned, in which event, Seller reserves the gas imbalance
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account and the right to the cash settlement. As a result of such
succession, Buyer (i) shall be entitled to receive any and all benefits,
including payments of proceeds of production in excess of amounts that it
would otherwise be entitled to produce and receive by virtue of ownership
of the Properties that Seller would have been entitled to receive by virtue
of such position and (ii) shall be obligated to suffer any detriments
(whether the same be in the form of obligations to deliver production that
would have otherwise been attributable to its ownership of the Properties
without receiving full payment therefor, or be in the form of the
obligation to make payment in cash) that Seller would have been obligated
to suffer by virtue of such position.
(d) Confidentiality Agreement. Any Confidentiality Agreement executed by
Buyer and Seller in connection with the transaction contemplated hereby
remains in full force and effect and is not superseded or modified by this
Agreement.
(e) Prior Entire Understanding/Headings/Gender. This Agreement contains the
entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter, except as provided above with respect to any
Confidentiality Agreement. The headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Within this Agreement,
words of any gender shall be held and construed to cover any other gender,
and words in the singular shall be held and construed to cover the plural,
unless the context otherwise requires. Time is of the essence in this
Agreement.
(f) Amendments. This Agreement may be amended, modified, supplemented,
restated, or discharged (and provisions hereof may be waived) only by an
instrument executed by both parties.
(g) Associated Expenses. Each party shall bear and pay all expenses it
incurred and that are associated with the transaction contemplated by this
Agreement. Payment of recording fees, filing fees, and any other fees
imposed on the Properties on and after the Effective Date, excluding
Seller's income taxes, shall be paid by Buyer. Seller shall remit on behalf
of Buyer all city, county and state sales taxes due on the equipment and
personal property included in the Properties. Buyer will reimburse Seller
at the Closing for all such sales taxes paid on behalf of Buyer.
(h) Successors and Assigns. This Agreement shall be binding on the parties
hereto and their respective heirs, successors, representatives, and
assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one (1) and the same instrument. It shall not be necessary
for both parties to sign the same counterpart.
(j) Enforceability. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OKLAHOMA.
(k) Publicity. Prior to Closing, Buyer shall not issue any publicity or
press release concerning this Agreement or the transaction contemplated
hereby without the prior written consent of Seller unless, in the written
opinion of legal counsel acceptable to Seller, such disclosure is required
by applicable law or other applicable rules or regulations of any
governmental authority or stock exchange and such publicity or press
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release contains no more than the minimum information necessary to comply
therewith. This provision shall not replace or restrict any provision in
any prior agreement between the parties affecting confidentiality or the
disclosure of information about the Properties.
(l) Use of Seller's Name. Buyer agrees that, as soon as practicable after
the Closing, it shall remove or cause to be removed the names and signs
used by Seller, and all variations and derivatives thereof and logos
relating thereto from the Properties and shall not thereafter make any use
whatsoever of such names, signs, and logos. After Closing and as to those
Properties Buyer has taken over as operator, Seller reserves the right of
access to confirm that Buyer has removed Seller's name, signs, and logos.
If Seller is forced to remove its name, signs, and logos because Buyer has
failed to do so, Seller shall charge its costs to Buyer and Buyer shall pay
Seller's invoice within fifteen (15) days of receipt.
(m) Severability. If any term or provision of this Agreement is determined
to be invalid, illegal, or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic
or legal substance of the transactions contemplated hereby is not affected
in any material fashion to either Buyer or Seller. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, Buyer and Seller shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(n) Reservation of Claims. Seller reserves all rights to claims, demands,
cause of action, and lawsuits concerning the Properties against third
parties that accrued before the Effective Date, whether discovered before
or after the Effective Date, excluding any rights or claims associated with
gas imbalances.
(o) Buyer's Duty to Defend. Where Buyer has agreed to indemnify, defend,
and hold Seller harmless under this Agreement, Seller, at its sole option,
may elect to (a) manage its own defense, in which event Buyer will
reimburse Seller for all attorney's fees, court, and other costs reasonably
incurred in defending a claim, upon delivery to Buyer of invoices for such
expenses; or (b) allow Buyer to be responsible for all aspects of defense.
(p) Exhibits. All exhibits referenced herein and attached hereto are by
reference incorporated into this Agreement.
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IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above, but effective as of the Effective Date.
SELLERS
Sid R. Bass, Inc.
Lee M. Bass, Inc.
Keystone, Inc.
Thru Line Inc.
By: /s/ W. Frank McCreight
-----------------------------------------------
W. Frank McCreight, Vice President
W.D. Partners, L.P. by
D.W. Genpar, Inc., General
Partner
By: /s/ W. Frank McCreight
-----------------------------------------------
W. Frank McCreight, Vice President
/s/ W. Frank McCreight for
-----------------------------------------------
Edward P. Bass
/s/ W. Frank McCreight for
-----------------------------------------------
Robert M. Bass
/s/ W. Frank McCreight for
-----------------------------------------------
Sid R. Bass, Trustee
/s/ Perry R. Bass
-----------------------------------------------
Perry R. Bass, Trustee
BUYER
ATTEST: THE HOME-STAKE OIL & GAS COMPANY
By: /s/ Chris K. Corcoran By: /s/ Robert C. Simpson
-------------------------- -------------------------
Chris K. Corcoran Robert C. Simpson
Secretary President
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AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (hereinafter the "Agreement") is
dated as of the 31st day of March, 1998 and is entered into in Tulsa, Oklahoma,
by and between THE HOME-STAKE OIL & GAS COMPANY, an Oklahoma corporation (on
behalf of itself as successor by merger to The Home-Stake Royalty Corporation,
an Oklahoma corporation) (hereinafter the "Borrower"), whose mailing address,
principal place of business and chief executive offices are at 15 East 5th
Street, Suite 2800, Tulsa, Oklahoma, 74103 and NATIONSBANK, N.A. (formerly known
as Boatmen's National Bank of Oklahoma, successor by merger to BANK IV OKLAHOMA,
N.A., a national banking association) (the "Lender") whose address is 515 South
Boulder (or P. O. Box 2360, 74101), Tulsa, Oklahoma 74103.
RECITALS
A. Borrower, in its own capacity and also as successor by merger to The
Home-Stake Royalty Corporation, an Oklahoma corporation ("Royalty") has had a
financing arrangement with the Lender as currently set forth and provided under
the following documents:
(1) that certain Third Amended and Restated Loan Agreement dated as of
May 29, 1995 made, executed and entered into between Borrower and Bank IV
Oklahoma, N.A. ("Bank IV") (the "Original Oil & Gas Loan Agreement") as
amended by (i) that certain First Amendment and Modification Agreement
dated as of May 1, 1996 (the "First Oil & Gas Amendment") made, executed
and entered into between Borrower and Bank IV; and (ii) that certain Second
Amendment and Modification Agreement (the "Second Oil & Gas Amendment")
dated as of May 1, 1997 made, executed and entered into between the
Borrower and Boatmen's National Bank of Oklahoma ("Boatmen's") (the
Original Oil & Gas Loan Agreement as amended by the First Oil & Gas
Amendment and Second Oil & Gas Amendment thereto being collectively
referred to as the "Oil & Gas Loan Agreement").
(2) that certain Third Amended and Restated Loan Agreement dated as of
May 29, 1995 made, executed and entered into between The Home-Stake Royalty
Corporation ("Royalty") and Bank IV (the "Original Royalty Loan Agreement")
as amended by (i) that certain First Amendment and Modification Agreement
dated as of May 1, 1996 (the "First Royalty Amendment") made, executed and
entered into between Royalty and Bank IV; and (ii) that certain Second
Amendment and Modification Agreement (the "Second Royalty Amendment") made,
executed and entered into between Royalty and Bank IV; and (iii) that
certain Third Amendment and Modification Agreement (the "Third Royalty
Amendment") dated as of May 1, 1997 made, executed and entered into between
the Borrower and Boatmen's (the Original Royalty Loan Agreement as amended
by the First Royalty Amendment and Second Royalty Amendment thereto being
collectively referred to as the "Royalty Loan Agreement"). The Oil & Gas
Loan Agreement and the Royalty Loan Agreement are collectively referred to
as the "Loan Agreements".
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B. Borrower's indebtedness to the Lender as provided under the Loan
Agreements is currently evidenced by the following promissory notes, each of
which represents a renewal and extension of a prior note or is currently
evidenced by the letter of credit applications described below:
(1) that certain Promissory Note (the "Original Oil & Gas Revolving
Note") dated May 1, 1997 in the original principal amount of $500,000.00
for which no principal balance is outstanding as of the date hereof; and
(2) that certain Promissory Note (the "Original Royalty Revolving
Note") dated May 1, 1997 in the original principal amount of $700,000.00,
for which no principal balance is outstanding as of the date hereof; and
(3) That certain outstanding Letter of Credit (the "Aetna LC") dated
July 11, 1997, identified as LC #960208, with a maturity of July 11, 1998,
issued pursuant to that certain Application dated July 11, 1997 made by
Borrower to Lender (the "Aetna LC Application"); and
(4) That certain outstanding Letter of Credit (the "TRC LC") dated
January 2, 1998, identified as LC #970249, with a maturity of March 31,
1999, issued pursuant to that certain Application dated January 2, 1998
made by Borrower to Lender (the "TRC LC Application").
All Term Notes under the Loan Agreements have been paid in full.
C. Repayment of the "Indebtedness" as defined in the Loan Agreements is
secured by the Mortgaged Property, as described in the Loan Agreements.
D. The Borrower has requested that the Lender amend and modify the
financing arrangement between Borrower and the Lender by advancing the principal
amount of $6,600,000.00 in the form of a term loan and additionally, to extend,
renew and increase the prior revolving loans whereby the Lender shall advance up
to the principal amount of $5,000,000.00 in the form of a revolving loan.
E. The purpose of this Agreement is to amend, modify, extend and completely
restate the terms of the general financing arrangement between the parties
hereto and supersede the terms of the previous loan documents and any prior
agreement inconsistent with the terms hereof.
NOW THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt of which is hereby acknowledged, Borrower
and Lender agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
When used herein, the following terms shall have the following meanings:
1. "Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under common control with, such Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
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to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Shares or by contract or otherwise.
2. "Applicable Prime Rate" shall mean the annual rate of interest as quoted
daily in the Money Rate Section of the Southwest Edition of the Wall Street
Journal as the "Prime Rate". The Applicable Prime Rate shall be adjusted daily
as announced, calculated on the basis of a year of 360 days but assessed for the
actual days elapsed in each accrual period. Changes in the Applicable Prime Rate
are effective, without notice, on the same day as the change in the Applicable
Prime Rate as announced from time to time. The Applicable Prime Rate shall not
necessarily be the Lender's "best" or lowest rate. Should the Wall Street
Journal fail to announce a prime rate, then the Applicable Prime Rate shall be
the rate announced by the Lender from time to time as its prime rate.
3. "Business Day" shall mean a day other than a Saturday, Sunday or a day
upon which banks in the State of Oklahoma are closed to business generally.
4. "Cash Flow" shall mean the net profits before taxes of the Borrower for
the twelve month period immediately preceding the date of calculation, plus all
depreciation, depletion and amortization expense of the Borrower for such period
all as determined in accordance with GAAP.
5. "Collateral" shall mean the Mortgaged Property.
6. "Commitment" shall mean the agreement of the Lender to make the
Revolving Loan pursuant to this Agreement.
7. "Debt Service" shall mean the current maturities of Borrower's long-term
debt as determined in accordance with GAAP.
8. "Default Rate" shall mean the Applicable Prime Rate plus five percent
per annum.
9. "ERISA" shall mean the Federal Employee Retirement Income Security Act
of 1974, as amended, together with all regulations and rulings promulgated with
respect thereto.
10. "Event of Default" shall mean any of the events specified in Section
7.1 of this Agreement, and "Default" shall mean any event, which together with
any lapse of time or giving of any notice, or both, would constitute an Event of
Default.
11. "GAAP" shall mean generally accepted accounting principles applied on a
consistent basis in all material respects to those applied in the preceding
period. Unless otherwise indicated herein, all accounting terms will be defined
according to GAAP.
12. "hereby", "herein", "hereof", "hereunder" and similar such terms shall
mean and refer to this Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
13. "Indebtedness" shall have the meaning set forth in Section 3.6 hereof.
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14. "Laws" shall mean all statutes, laws, ordinances, regulations, orders,
writs, injunctions, or decrees of the United States, any state or commonwealth,
any municipality, any foreign country, any territory or possession, or any
Tribunal.
15. "Letters of Credit" shall mean any and all letters of credit issued by
the Lender pursuant to the request of the Borrower which at any time remain
outstanding and subject to draw by the beneficiary, whether in whole or in part.
16. "Lien" shall mean any mortgage, pledge, security interest, tax lien,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
jurisdiction), whether arising by agreement or under any statute or law, or
otherwise.
17. "Loan Documents" shall mean this Agreement, the Notes (including any
renewals or extensions thereof), the Security Instruments and all other
documents, instruments and certificates executed and delivered to the Lender by
the Borrower pursuant to the terms of this Agreement, and any supplements
thereto or modifications thereof.
18. "Loans" shall mean the Term Loan and the Revolving Loan.
19. "Mortgage" shall mean collectively, those certain Mortgages with Power
of Sale, Security Agreement, Assignment of Production and Financing Statement on
Oil, Gas and Other Minerals, as described in the Original Loan Agreements which
are herein incorporated by reference, as amended by those certain Amendments and
Supplemental Agreements in substantially the form set forth in Exhibit "A"
attached hereto, together with those certain Mortgage (or Deed of Trust),
Security Agreement, Assignment of Production and Financing Statement on Oil, Gas
and Other Minerals, substantial in the form as shown in Exhibit "B" attached
hereto and made a part hereof, and such additional or supplemental mortgages or
deeds of trust, in similar form, that Borrower may execute and deliver from time
to time to the Lender as security for repayment of the Indebtedness.
20. "Mortgaged Property" shall mean that certain property as described in
the Mortgage.
21. "Net Worth" shall mean, on any date as of which the amount thereof is
to be determined, the stockholders equity for the Borrower, determined in
accordance with GAAP.
22. "Notes" shall mean the Revolving Note and the Term Note.
23. "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, and a government or any department, agency or political
subdivision thereof.
24. "Related Person" shall mean any Affiliate of Borrower, any individual,
corporation, organization or other entity who is a stockholder, officer,
director or employee of Borrower, or any entity, five percent (5%) of the
capital (or any class of capital) of which is owned by Borrower, , or five
percent (5%) of the partnership, limited liability company membership, or other
ownership interest in such entity, of which Borrower is the owner. The term
"Related Person" shall also include any corporation, organization or other
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entity, fifty percent (50%) of the capital (or fifty percent (50%) of any class
of capital) of which is owned by a Related Person.
25. "Revolving Loan" shall mean the Revolving Loan as described above.
26. "Revolving Note" shall mean the Borrower's $5,000,000.00 revolving
credit note in the form of Exhibit "C" annexed to this Agreement, together with
any and all extensions, renewals, modifications, substitutions and changes in
form thereof which may be from time to time and for any term or terms effected.
27. "Revolving Loan Request" shall mean a Loan Request in the form of
Exhibit "D" annexed to this Agreement and to be delivered to the Lender by the
Borrower pursuant to Sections 2.6 of this Agreement.
28. "Security Instruments" shall mean the Mortgage and all other financing
statements, mortgages, deeds of trust, assignments, lien entry forms, security
agreements, documents or writings and any and all amendments and supplements
thereto, granting, conveying, assigning, transferring or in any manner providing
the Lender with a security interest or mortgage lien in any property as security
for the repayment of all or any part of the Indebtedness.
29. "Subsidiary" shall mean any corporation in which the Borrower owns or
controls (directly or indirectly) fifty percent (50%) or more of the outstanding
capital stock.
30. "Taxes" shall mean all taxes, assessments, fees, or other charges or
levies from time to time or at any time imposed by any Laws or by any Tribunal.
31. "Term Loan" shall mean the non-revolving loan evidenced by the Term
Note.
32. "Term Note" shall mean Borrower's $6,600,000.00 term note in the form
of Exhibit "E" annexed to this Agreement, to be delivered to the Lender pursuant
to Section 2.2 of this Agreement, together with any and all extensions,
renewals, modifications, substitutions and changes in form thereof which may be
from time to time and for any term or terms effected.
33. "Title Defect" shall mean the following: (i) Borrower's ownership in
the Mortgaged Property or any part thereof is such that with respect to such
property, it (A) entitles Borrower to receive a percentage share of the oil, gas
and other hydrocarbons produced from, or allocated to, such property which is
less than the percentage share set forth on Exhibit "F" attached hereto and made
a part hereof in connection with such property, in the column headed "NRI" or
(B) causes Borrower to be obligated to bear a percentage share of the costs of
operation of such property greater than the percentage share set forth on
Exhibit "F" attached hereto in the column headed "WI" (unless the NRI for such
property listed in Exhibit "F" is proportionately increased); or (ii) Borrower's
ownership of the Mortgaged Property is subject to any Lien other than a Lien for
taxes not yet delinquent, or a mechanic's or materialmen's lien (or other
similar lien) or a lien under an operating agreement or similar agreement, to
the extent, and only to the extent, the same relates to expenses incurred which
are not yet due; or (iii) Borrower's ownership of the Mortgaged Property is
subject to an imperfection in title which, if asserted, would cause the Borrower
not to have Marketable Title (as defined in the title standards as adopted by
the Oklahoma Bar Association) and such imperfection in title is such that a
payment for the purchase of production from the oil, gas or other mineral
interest is suspended or such imperfection in title is not such as would
normally be waived by lenders engaged in oil and gas lending.
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34. "Tribunal" shall mean any municipal, state, commonwealth, federal,
foreign, territorial or other sovereign, governmental entity, governmental
department, court, commission, board, bureau, agency or instrumentality,
including but not limited to the Oklahoma Corporation Commission.
35. "Total Liabilities" shall mean the amount of all liabilities of the
Borrower determined in accordance with GAAP.
36. "Voting Shares" shall mean shares of any class or classes (however
designated) having ordinary voting power for the election of at least a majority
of the members of the Board of Directors (or other governing bodies) of such
corporation, other than shares having such power only by reason of the happening
of a contingency.
ARTICLE II
THE LOANS
A. THE TERM LOAN
1. The Term Loan. The Lender hereby agrees to lend to Borrower the
principal amount of Six Million Six Hundred Thousand and no/100 ($6,600,000.00)
(the "Term Loan") in the form of a term loan, upon the terms and conditions set
forth herein.
2. Term Note. Concurrently with the execution of this Agreement, Borrower
shall execute and deliver to the Lender a certain Promissory Note (the "Term
Note") in the face amount of $6,600,000.00 in the form as shown in Exhibit "E"
attached hereto and incorporated herein by reference which shall evidence
Borrower's obligation to repay the Term Loan corresponding therewith.
B. REVOLVING LOAN
3. Revolving Loan Commitment. Subject to the other terms and conditions of
this Agreement, the Lender agrees to make advances to Borrower in the form of a
revolving line of credit, in an amount not to exceed the principal amount of
Five Million and No/100 Dollars ($5,000,000.00) (the "Revolving Loan") for the
purpose of (i) causing letters of credit ("Letters of Credit") to be issued on
behalf of Borrower upon request by Borrower as provided herein, (ii) funding
acquisitions of properties, (iii) funding Borrower's operations, and (iv) for
such other purposes and in such amounts as may from time to time be requested by
Borrower, provided however, the sum of all issued and unexpired Letters of
Credit (excluding the Aetna LC and the TRC LC) and the principal amount
outstanding at any time under the Revolving Note shall not exceed the principal
sum of $5,000,000.00. Notwithstanding the above, no Letter of Credit (except the
Aetna LC or the TRC LC as specifically approved by Lender) shall be issued on
behalf of or for the account of Borrower after April 30, 1999 or with an
expiration date later than May 1, 1999. This commitment shall expire, unless
earlier terminated at 2:00 p.m. Tulsa, Oklahoma, time on May 1, 1996 unless the
Lender and Borrower agree to an extension hereof; provided, however, that
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nothing herein shall constitute an agreement on the part of the Lender to grant
an extension hereof.
4. Revolving Note. Concurrently with the execution of this Agreement,
Borrower shall execute and deliver to the Lender a certain Promissory Note (the
"Revolving Note") in the face amount of $5,000,000.00 in the form shown as
Exhibit "C" attached hereto and incorporated herein by reference, which shall
evidence Borrower's obligation to repay advances under the Revolving Loan.
5. Total Indebtedness Limit. The total outstanding indebtedness of Borrower
to the Lender pursuant to the Revolving Loan shall not exceed at any one time
the aggregate principal amount of $5,000,000.00. Nothing in this paragraph shall
constitute a commitment on the part of the Lender to make any future loan to
Borrower.
6. Loan Requests. Each request of Borrower under this commitment shall be
made in writing, by a person who is designated by Borrower in advance in writing
by appropriate action or resolution of Borrower, by Borrower's submission to the
Lender of a Loan Request ("Loan Request") in the form attached hereto as Exhibit
"D" and incorporated herein by reference. Borrower shall make no loan request
which would cause the total principal amount outstanding under the Revolving
Note together with all issued and unexpired Letters of Credit (except the Aetna
LC and the TRC LC) to exceed $5,000,000. All advances made by the Lender under
the Revolving Loan shall, for mutual convenience, be deposited to the general
deposit account of the Borrower with the Lender, and the Lender shall have no
responsibility to monitor the distribution of such advances in any other
respect.
7. Evidence of Loans. Each loan which the Lender now makes or may hereafter
make under this commitment shall be evidenced by a notation on, and constitute a
draw pursuant to the Revolving Note.
8. Request for Letter of Credit. Each request by Borrower for the issuance
of a Letter of Credit shall be accompanied by (i) a fully executed Letter of
Credit application on a form provided by the Lender; (ii) the fee associated
therewith as provided in Section 2.10 hereof; (iii) a written specification of
any certifications required of the beneficiary to present any site draft; (iv) a
written specification of any documents that must accompany any site drafts; (v)
a written specification of any special instructions; and (vi) such other and
further information as the Lender may reasonably request.
9. Payment of Letter of Credit. At the time any site draft is timely
received by the Lender on a respective Letter of Credit issued hereunder, except
the Aetna LC and the TRC LC, the Lender shall advance such funds on Borrower's
behalf under the Revolving Note, provided however that the sum of (i) all issued
and unexpired Letters of Credit (excluding the Aetna LC and the TRC LC); and
(ii) the outstanding principal amount due under the Revolving Note shall not at
any one time exceed the principal sum of $5,000,000.00. At the time any site
draft is timely received by the Lender on the Aetna LC or the TRC LC, the Lender
shall advance such funds on Borrower's behalf under the applicable application
relating thereto.
10. Fees. In consideration of the Lender's agreement to make the Revolving
Loan, the Borrower agrees to pay the Lender quarterly, a fee equal to one half
percent (1/2%) per annum of the unused portion of the Revolving Loan, to be
calculated on the unused portion of the Revolving Loan on a daily basis and to
be paid within ten (10) days of written notice from the Lender. Further, in
consideration of the Lender's agreement to issue Letters of Credit the Borrower
agrees to pay the Lender fees in accordance with fees generally charged by the
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Lender for letters of credit which fees shall be payable at the time of issuance
of each Letter of Credit.
C. TERM LOAN - REVOLVING LOAN - GENERAL
11. Payments. The principal of and interest on both of the Notes shall be
payable in lawful money of the United States of America at the principle office
of the Lender. All such payments shall be made to Lender not later than 2:00
p.m. Tulsa time on the date due and funds received after such hour on any day
shall be treated for all purposes of this Agreement as having been received on
the next succeeding full business day in Tulsa, Oklahoma. Interest on the Notes
shall be calculated for the actual days elapsed on the basis of a year
containing 360 days. In any case where a payment of principal and/or interest on
the Notes or any part thereof is due on a day on which the Lender is not open
for normal banking business, the Borrower shall be entitled to delay such
payment until the next succeeding business day, but interest shall continue to
accrue until the payment is in fact made.
12. Prepayment. The Borrower may from time to time prepay the indebtedness
evidenced by the Term Note and/or the Revolving Note in whole or in part without
premium or penalty. Any and all prepayments shall be applied and credited first
against interest then due and then to payment on the principal due under the
Term Note or Revolving Note, as the case may be.
13. Application of Payments. All payments of principal or interest under
the Term Note and the Revolving Note shall be applied by the Lender first to
accrued and unpaid interest, and second, to the outstanding principal balance of
the Term Note and Revolving Note, respectively. Upon the occurrence of an Event
of Default hereunder, all payments thereafter received by the Lender may be
applied by the Lender to the payment of principal or interest under either the
Term Note or the Revolving Note, in the order or manner as the Lender may
determine in its sole discretion.
14. Offset. In addition to and not in limitation of all rights of offset
that the Lender may have under applicable law, the Lender after the maturity
date under the Term Note or the Revolving Note, whether by acceleration or
otherwise, shall have the right to appropriate and apply to the payment of the
Term Note and/or the Revolving Note, in the manner and order as may be
determined by the Lender in its sole discretion, any and all balances, credits,
deposits, accounts or monies of the Borrower then or thereafter held by the
Lender, which by reference herein are given to secure repayment of the Revolving
Note and the Term Note.
ARTICLE III
THE COLLATERAL
1. The Collateral & Ratification. The repayment of the Indebtedness shall
be secured by a first and prior mortgage lien, security interest and assignment
in and to all of the Mortgaged Property. The foregoing interest shall be granted
to the Lender pursuant to the terms of the Mortgages made, execute and delivered
to the Lender concurrently with the execution hereof. Borrower hereby ratifies,
confirms and reaffirms all security interests, liens and other encumbrances
created under the Security Interests as security for repayment of Borrower's
Indebtedness (as defined below) and all other unreleased security agreements,
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mortgages and deeds of trust in favor of the Lender, all of which shall continue
in full force and effect and with the same priority as security for repayment
and satisfaction of the Indebtedness and all extensions, modifications and
renewals thereof, including but not limited to the Term Note and the Revolving
Note. Further, as a condition precedent to the execution hereof by the Lender,
Borrower shall make, execute and deliver to the Lender such Amendments to
Mortgages or Deeds of Trust in form and substance acceptable to the Lender
whereby the Security Instruments shall be amended throughout consistent
herewith.
2. Additional Collateral. In the event the Revolving Loan becomes fully
funded at any one time or in the event the discounted present worth of the
Mortgaged Property, as determined by the Lender, shall at any time be less than
$12,000,000.00, Borrower shall make, execute and deliver to the Lender such
mortgages, deeds of trust, security agreements and such other documents as may
be reasonably requested by the Lender to grant to the Lender a first priority
security, mortgage or deed of trust interest in so much of Borrower's oil and/or
gas interests, royalty interests or other mineral interests as may be requested
by the Lender, in its sole discretion.
3. Further Assurance. Borrower, at its expense, shall promptly and
diligently take all action necessary to maintain and preserve the security
interest granted by the Security Instruments and shall either cause to be timely
filed, together with the payment of all necessary filing fees and taxes, such
UCC financing and continuation statements in such offices of public record, or
shall cause to be promptly delivered to the Lender such statements, instruments,
assignments, documents or papers, as may be necessary to keep the security
interest granted therein continuously perfected in such Collateral, and shall
execute and acknowledge and deliver or cause to be done, executed, acknowledged
and delivered, all and every such further act, deed, conveyance, financing
statement, continuation statement, transfer and assurance as the Lender may from
time to time request for the better assuring, conveying, transferring and
confirming unto the Lender such collateral that is now and hereafter
constituted. Notwithstanding the above, the Lender is hereby appointed
Borrower's attorney-in-fact, coupled with an interest, to do, at the Lender's
option and at Borrower's expense, all acts and things which the Lender may deem
necessary to perfect and continue perfecting the security interest referred to
or created by this Agreement and to protect the Lender's lien and security
interest in such Collateral.
4. Release. Borrower acknowledges and agrees that the Lender may, without
the consent of Borrower and without impairing or releasing the obligations of
Borrower under this Agreement, the Notes or other Loan Documents, release any
Collateral at any time pledged to secure or securing the Indebtedness of
Borrower to the Lender.
5. Indebtedness. For purposes hereof, Indebtedness shall mean and include
any and all: (i) indebtedness, obligations and liabilities of the Borrower to
the Lender incurred or which may be incurred or purportedly incurred hereafter
pursuant to the terms of this Agreement or any of the other Loan Documents, and
any extensions, renewals, substitutions, amendments and increases in amount
thereof, including such amounts as may be evidenced by the Notes and all lawful
interest, loan closing fees, service fees, facility fees, commitment fees, fees
in lieu of balances and other charges, and all costs and expenses incurred in
connection with the preparation, filing and recording of the Loan Documents,
including attorneys' fees and legal expenses; (ii) all other indebtedness,
obligations (whether direct or indirect, primary or secondary, fixed or
contingent) and liabilities of the Borrower to the Lender, including future
advances and loans made by the Lender to the Borrower and any extensions,
renewals, substitutions, amendments and increases in amount thereof; (iii) all
reasonable costs and expenses paid or incurred by the Lender, including
attorneys' fees, in enforcing or attempting to enforce collection of any
Indebtedness and in enforcing or realizing upon or attempting to enforce or
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realize upon any collateral or security for any Indebtedness, including interest
on all sums so expended by the Lender accruing from the date upon which such
expenditures are made until paid, at an annual rate equal to the Default Rate;
(iv) all sums expended by the Lender in curing any Event of Default of the
Borrower under the terms of this Agreement, the other Loan Documents or any
other writing evidencing or securing the payment of the Notes together with
interest on all sums so expended by the Lender accruing from the date upon which
such expenditures are made until paid, at an annual rate equal to the Default
Rate; and (v) all "Indebtedness" or "Secured Indebtedness" as said terms are
defined in each of the Loan Documents.
6. Lien Survives Until Full Repayment. The Borrower hereby acknowledges
that all of the Collateral is granted to the Lender as security for the
repayment of all of the Indebtedness. Except as specifically limited herein, if
one or more Notes is paid in full or satisfied, but any portion of the
Indebtedness remains unsatisfied, the Lender may retain its security interest in
all of the Collateral until the remaining Indebtedness is paid in full, even if
the value of the Collateral far exceeds the amount of Indebtedness outstanding.
ARTICLE IV
CONDITIONS PRECEDENT TO LOANS
1. Conditions Precedent. The obligation of the Lender to make the Loans as
contemplated herein is subject to the satisfaction of all of the following
conditions on or prior to the Closing Date (in addition to the other terms and
conditions set forth herein):
(a) No Default. There shall exist no Event of Default or Default on
the Closing Date.
(b) Representations and Warranties. The representations, warranties
and covenants set forth in Article VI shall be true and correct with the
same effect as though made on and as of the date hereof.
(c) Certificate. The Borrower shall have delivered to the Lender a
Certificate, dated as of the Closing Date, and signed by the President or
Vice President and the Secretary of Borrower, substantially in the form as
shown in Exhibit "G" annexed hereto and made a part hereof. The Lender may
conclusively rely on such Certificate until it receives notice in writing
to the contrary.
(d) Proceedings; On or before the Closing Date, all corporate
proceedings of the Borrower shall be taken in connection with the
transactions contemplated by the Loan Documents and shall be satisfactory
in form and substance to the Lender and its counsel; the Lender shall have
received certified copies, in form and substance satisfactory to the Lender
and its counsel, of the Articles or Certificate of Incorporation and
By-Laws of the Borrower and the resolutions of the Board of Directors of
the Borrower, as adopted, authorizing the execution and delivery of the
Loan Documents, the borrowings under this Agreement, and the granting of
the security interests and mortgage liens in, and assignment and pledge of,
the Collateral to secure the payment of the Indebtedness.
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(e) Certificate of Good Standing. The Borrower shall have delivered to
the Lender a Certificate of Good Standing from the Secretary of State of
the State of Oklahoma as of a recent date.
(f) Notes and Other Loan Documents. The Borrower shall have delivered
the Notes and other Loan Documents to the Lender, appropriately executed.
(g) Other Information. The Lender shall have received such other
information, documents and assurances as shall be reasonably requested by
the Lender.
(h) Intentionally Omitted.
(i) Continuing Conditions Precedent to Advances under Revolving Loan.
The Lender shall not be obligated to make any advances under the Revolving
Loan (i) if at such time any Event of Default shall have occurred or any
Default shall have occurred and be continuing; (ii) if any of the
representations, warranties and covenants contained in Article VI of this
Agreement shall be false or untrue in any material respect on the date of
such loan, as if made on such date; or (iii) unless the Borrower shall have
provided to the Lender the appropriate Revolving Loan Request duly executed
by authorized officers and in proper form, all in conformity with Article
II hereof. Each request by the Borrower for an additional Revolving Loan
shall constitute a representation by the Borrower that there is not at the
time of such request an Event of Default or a Default, and that all
representations, warranties and covenants in Article VI of this Agreement
are true and correct on and as of the date of each such request.
ARTICLE V
COVENANTS
The Borrower covenants and agrees with the Lender that from the date hereof
and so long as this Agreement is in effect (by extension, amendment or
otherwise) and until payment in full of all Indebtedness and the performance of
all other obligations of the Borrower under this Agreement, unless the Lender
shall otherwise consent in writing:
1. Payment of Taxes and Claims. The Borrower will pay and discharge or
cause to be paid and discharged all Taxes imposed upon the income or profits of
the Borrower or upon the property, real, personal or mixed, or upon any part
thereof, belonging to the Borrower before the same shall be in default, and all
lawful claims for labor, rentals, materials and supplies which, if unpaid, might
become a Lien upon its property or any part thereof; provided however, that the
Borrower shall not be required to pay and discharge or cause to be paid or
discharged any such Tax, assessment or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and adequate book
reserves shall be established with respect thereto, and the Borrower shall pay
such Tax, charge or claim before any property subject thereto shall become
subject to execution.
2. Maintenance of Corporate Existence. Except as provided in Section 5.25
hereof, the Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
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franchises and will continue to conduct and operate its business substantially
as being conducted and operated presently. The Borrower will become and remain
qualified to conduct business in each jurisdiction where the nature of the
business or ownership of property by the Borrower may require such
qualification.
3. Preservation of Property. The Borrower will at all times maintain,
preserve and protect all franchises and trade names and keep all the remainder
of its properties which are used or useful in the conduct of its business
whether owned in fee or otherwise, or leased, in good repair and operating
condition; from time to time make, or cause to be made, all needful and proper
repairs, renewals, replacements, betterments and improvements thereto so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; and comply with all material leases to
which it is a party or under which it occupies property so as to prevent any
material loss or forfeiture thereunder.
4. Insurance. The Borrower will keep or cause to be kept adequately insured
by financially sound and reputable insurers its equipment, motor vehicles, and
all other property of a character usually insured by businesses engaged in the
same or similar businesses, including the Collateral. Upon demand by the Lender
any insurance policies covering the Collateral shall be endorsed to provide for
payment of losses to the Lender as its interest may appear, to provide that such
policies may not be canceled, reduced or affected in any manner for any reason
without thirty days prior notice to the Lender, and to provide for any other
matters which the Lender may reasonably require; and such insurance shall be
against fire, casualty and any other hazards normally insured against and shall
be in the amount of the full value (less a reasonable deductible not to exceed
amounts customary in the industry for similarly situated businesses and
properties) of the property insured. The Borrower shall at all times maintain
adequate insurance against damage to persons or property, which insurance shall
be by financially sound and reputable insurers and shall without limitation
provide the following coverages: comprehensive general liability (including
without limitation coverage for environmental damage, damages caused by caustic
substances and pollutants, damage caused by explosion, damage to underground
minerals or resources, broad form property damage coverage, broad form coverage
for contractually independent contractors), worker's compensation, products
liability and automobile liability.
5. Compliance with Applicable Laws. The Borrower will comply with the
requirements of all applicable Laws and orders of any Tribunal and obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business, except where
failure to comply would not materially impair the ability of Borrower to carry
on its business substantially as now conducted.
6. Financial Statements and Reports.
(a) Quarterly Financial Statements. The Borrower shall maintain a
standard system of accounting and shall furnish to the Lender as soon as
practicable after the end of each fiscal quarter, and in any event within
forty-five (45) days after the end of each said calendar quarter, operating
statements for the Borrower which shall be certified, on the Borrower's
behalf, by the President or the chief financial officer of the Borrower to
have been prepared in accordance with GAAP consistently applied and to
fairly present the financial condition of the Borrower for such period, and
shall include at least a balance sheet as at the end of such period, and a
statement of income and a statement of cash flow for such period, all in
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reasonable detail, and acceptable to the Lender, accompanied by a
no-default certificate signed by Borrower's chief executive officer or
chief financial officer.
(b) Annual Audited Financial Statements. As soon as practicable after
the end of each fiscal year of the Borrower and in any event within 120
days thereafter, the Borrower shall furnish to the Lender the following
audited financial statements, together with a report thereon, prepared in
accordance with GAAP, unqualified as to scope limitations imposed by the
Borrower, of reputable independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the Lender:
(i) A balance sheet of the Borrower at the end of such year,
(ii) A statement of income and retained earnings of the Borrower
for such year, and
(iii) A statement of cash flow of the Borrower for such year
setting forth in comparative form the figures for the previous fiscal
year, if applicable, all in reasonable detail.
(iv) A separate report of the independent certified public
accountants that in the course of the audit necessary for their report
on the financial statements, they have obtained no knowledge of any
Event of Default or Default as defined herein, or, if any Event of
Default or Default existed or exists, specifying the nature and period
of existence thereof; provided, however, that such accountants shall
not be liable to the Lender by reason of their failure to obtain
knowledge of any such Event of Default or Default which would not be
disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards.
Such annual financial statement shall also be accompanied by a no-default
certificate signed by Borrower's chief executive officer or chief financial
officer. The "no-default" certificate required in this paragraph and
paragraph 5.6(a) above, shall in each instance certify that to the best of
the chief executive officer or chief financial officer's knowledge (i) that
the information shown or reflected on the financial statements for the
Borrower is true and correct as of the date of such statements; (ii) that
there has been no change in the financial condition of Borrower which
significantly impairs the security of the Lender or significantly increases
the Lender's risk or affects the Borrower's ability to satisfy its debts
and obligations in a timely manner; (iii) that no default has occurred
under this Agreement or any of the other Loan Documents; and (iv) that all
conditions, covenants, representations and warranties, as set forth in this
Agreement and the other Loan Documents are true and correct as of the date
of such no-default certificate.
(c) Special Auditing Reports. Promptly upon receipt thereof, the
Borrower shall deliver to the Lender a copy of each report submitted to the
Borrower by Borrower's independent accountants in connection with any
annual, interim or special audit made by them of the books and records of
the Borrower including, without limitation, any comment letter submitted by
such accountants to management in connection with their audit.
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7. Notice of Default. Immediately upon the happening of any condition or
event which constitutes an Event of Default or Default or any default or event
of default under any other loan, mortgage, financing or security agreement, the
Borrower will give the Lender a written notice thereof specifying the nature and
period of existence thereof and what actions, if any, the Borrower is taking and
proposes to take with respect thereto.
8. Notice of Litigation. Immediately upon becoming aware of the existence
of any action, suit or proceeding at law or in equity before any Tribunal or any
claim thereof, an adverse outcome in which would (i) materially impair the
ability of the Borrower to carry on its business substantially as now conducted,
(ii) materially and adversely affect the condition (financial or otherwise) of
the Borrower, or (iii) result in monetary damages in excess of $200,000, the
Borrower will give the Lender a written notice specifying the nature thereof and
what actions, if any, the Borrower is taking and proposes to take with respect
thereto.
9. Notice of Claimed Default. Immediately upon becoming aware that the
holder of any note or any evidence of indebtedness or other security of the
Borrower has given notice or taken any action with respect to a claimed default
or event of default thereunder, the Borrower will give the Lender a written
notice specifying the notice given or action taken by such holder and the nature
of the claimed default or event of default thereunder and what actions, if any,
the Borrower is taking and proposes to take with respect thereto.
10. Changes in or Creation of Subsidiaries. The Borrower will give the
Lender notice promptly upon the creation of any Subsidiaries.
11. Notice of Change of Management. Within seven (7) days after any change
in management of the Borrower involving any officers of the Borrower holding an
office of President, Chairman or chief financial officer, the Borrower shall
give written notice thereof to the Lender, together with a description of the
reasons for the change.
12. Requested Information. With reasonable promptness, the Borrower will
give the Lender such other data and information relating to the Borrower as from
time to time may be reasonably requested by the Lender.
13. Inspection. The Borrower will keep complete and accurate books and
records with respect to the Collateral and its other properties, businesses and
operations and will permit employees and representatives of the Lender to audit,
inspect and examine the same and to make copies thereof and extracts therefrom
during normal business hours. All such records shall be at all times kept and
maintained at the offices of the Borrower in Tulsa, Oklahoma. Upon any Default
or Event of Default, the Borrower will surrender copies of all such records
relating to the Collateral to the Lender upon receipt of any request therefor
from the Lender.
14. Maintenance of Employee Benefit Plans. The Borrower will maintain each
employee benefit plan as to which it may have any liability or responsibility in
compliance with ERISA and all other Laws applicable thereto.
15. Ratio of Cash Flow to Debt Service. The Borrower shall not permit the
ratio of its Cash Flow to the Debt Service to be less than 1.75 to 1.0.
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16. Total Liabilities to Net Worth. The Borrower shall not permit the ratio
of its Total Liabilities to Net Worth to exceed 1.0 to 1.0.
17. Net Worth. The Borrower shall not permit its Net Worth to be less than
$20,000,000.00 during the term hereof.
18. Limitation on Other Indebtedness. The Borrower will not create, incur,
assume, become or be liable in any manner in respect of, or suffer to exist, any
indebtedness, whether evidenced by a note, bond, debenture, agreement, letter of
credit or similar or other obligation, or accept any deposits or advances of any
kind, except (i) trade payables and current indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in, the ordinary
course of business, provided that such indebtedness shall be promptly paid and
discharged when due or in conformity with customary trade terms; (ii)
indebtedness arising under the Shareholders rights Agreement described in
Section 5.26 below; and (iii) the Indebtedness.
19. Payment of Operating Expenses. Borrower shall pay all bills, charges
and other expenses due and payable by the Borrower in connection with the
drilling or operation of its oil and gas properties, including but not limited
to the Mortgaged Property, as and when the same shall become due and payable.
20. Limitation on Liens. The Borrower will not create or suffer to exist
any Lien upon any of its inventory, property or assets, including but not
limited to the Collateral and all other oil and gas properties or interests
owned by Borrower whether now owned or hereafter acquired, except (i) Liens in
favor of the Lender securing the Indebtedness; (ii) Liens arising in the
ordinary course of business for sums not due or sums being contested in good
faith and by appropriate proceedings and not involving any deposits, advances,
borrowed money or the deferred purchase price of property or services; and (iii)
Liens permitted to exist under the terms of any of the Security Instruments.
21. Contingent Liabilities; Advances. The Borrower will not, either
directly or indirectly, (i) guarantee, become surety for, discount, endorse,
agree (contingently or otherwise) to purchase, repurchase or otherwise acquire
or supply or advance funds in respect of, or otherwise become or be contingently
liable upon the indebtedness, obligation or liability of any Person, (ii)
guarantee the payment of any dividends or other distributions upon the stock of
any corporation, (iii) discount or sell with recourse or for less than the face
value thereof, any of its notes receivable, accounts receivable or chattel
paper; (iv) lend or, agree to lend to any Person; or (v) enter into any
agreement for the purchase or other acquisition of any goods, products,
materials or supplies, or for the making of any shipments or for the payment of
services, if in any such case payment therefor is to be made regardless of the
non-delivery of such goods, products, materials or supplies or the
non-furnishing of the transportation of services; provided, however that the
foregoing shall not be applicable to endorsement of negotiable instruments
presented to or deposited with a Lender for collection or deposit in the
ordinary course of business.
22. Limitation on Investments. The Borrower will not make any investment in
any Person, except for investments which consist of:
(a) trade or customer accounts receivable for inventory sold or
services rendered in the ordinary course of business;
(b) obligations issued or guaranteed as to principal and interest by
the United States of America;
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(c) certificates of deposit issued by the Lender or any other Lender
organized under the laws of the United States of America or any state
thereof and having total assets of at least $400,000,000 and the payment of
which is insured by the Federal Deposit Insurance Corporation;
(d) commercial paper or finance company paper which is issued by
NationsBank, N.A., or any which is rated not less than prime-one or A-1 or
their equivalents by Moody's Investors Service, Inc. or Standard & Poor's
Corporation or their successors; and
(e) repurchase agreements secured by any one or more of the foregoing.
(f) entry into operating agreements, joint ventures, working
interests, royalty interests, oil and gas or mineral leases, unitization
agreements, pooling arrangements and other similar or customary
arrangements and expenditures in connection therewith, in each case in the
ordinary course of Borrower's oil and gas business.
23. Engineers Report. Borrower shall provide to the Lender on or before
March 15 of each year, an engineering report prepared by an engineer acceptable
to the Lender and in form and content acceptable to the Lender, on all major
producing oil and/or gas leases, royalties and minerals owned by the Borrower,
including but not limited to all of the Mortgaged Properties. Such engineering
report shall evaluate the proved producing oil and gas reserves attributable to
the Borrower's interest in the Mortgaged Property and other oil and gas
properties owned by Borrower, together with a forecast of the rates of
production therefrom and expenses attributable thereto and the estimated cash
flow to the Borrower from such production for the estimated economic life of
such property.
24. Disposition of Assets. The Borrower will not sell, lease, transfer,
scrap or otherwise dispose of any of its properties or assets, whether for
replacement or not, to the extent that the fair market value of such assets
exceeds $200,000.00 in the aggregate for all such assets disposed of by the
Borrower during any fiscal year unless such sale or disposition shall be in the
ordinary course of business and for a full and fair consideration.
25. Merger, Consolidation, Acquisition, Etc. Borrower will not merge or
consolidate with or into any other Person; or permit any other Person to
consolidate with or merge into the Borrower; or acquire all or substantially all
of the assets or properties or capital stock of any other Person; or adopt or
effect any plan of reorganization, recapitalization, liquidation or dissolution;
or acquire any properties or assets, other than in the ordinary course of
business.
26. Dividends, Etc. Except as provided in the Shareholders' Rights
Agreement as amended through February 10, 1995, copies of which have been
delivered to the Lender and has not been modified or amended as of the date
hereof, the Borrower will not declare, pay (except as provided below) or become
obligated to declare or pay any dividend on any class of its capital stock now
or hereafter outstanding, make any distribution of cash or property to holders
of any shares of such stock, or redeem, retire, purchase or otherwise acquire,
directly or indirectly, any shares of any class of its capital stock now or
hereafter outstanding; provided however if no Event of Default or Default shall
then exist, notwithstanding the above, Borrower may pay dividends in an amount
not to exceed the lesser of (i) $550,000.00 in the aggregate for any fiscal year
or (ii) Borrower's Net Income for such fiscal year.
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27. Salaries and Bonuses. Borrower shall not make any payment of or
commitment for salaries or bonuses, fees or other compensation; current or
deferred, in excess of an amount which is reasonable with respect to the
services provided.
28. Related Persons. The Borrower shall not engage in any transaction or
transactions with any Related Person, except upon terms similar to those
prevailing in like transactions with Persons other than Related Persons.
29. Change of Fiscal Year. The Borrower will not change its fiscal year
from its present fiscal year.
30. Articles of Incorporation and By-Laws. Without the prior written
consent of Lender, the Borrower will not amend, alter, modify or restate its
Articles or Certificate of Incorporation or By-Laws in any way which would (i)
change the corporate name or adopt a trade name for the Borrower, except for the
change of Borrower's name to "Home Stake Oil & Gas Company"; or (ii) in any
manner adversely affect the Borrower's obligations or covenants to the Lender
hereunder.
31. Other Agreements. The Borrower will not enter into or permit to exist
any agreement (i) which would cause an Event of Default or a Default hereunder;
or (ii) which contains any provision which would be violated or breached by the
performance of Borrower's obligations hereunder or under any of the other Loan
Documents.
32. Payment of Indebtedness. The Borrower hereby agrees to pay, when due
and owing, all Indebtedness, whether or not evidenced by the Notes.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Revolving
Loan and the Term Loan to the Borrower under the provisions hereof, and in
consideration thereof, the Borrower represents, warrants and covenants as
follows:
1. Organization and Qualification. The Borrower is duly organized, validly
existing, and in good standing under the Laws of its jurisdiction of
incorporation, and is duly licensed and in good standing as a foreign
corporation in each jurisdiction in which the nature of the business transacted
or the property owned is such as to require licensing or qualification as such.
2. Litigation. There is no action, suit, investigation or proceeding
threatened or pending before any Tribunal against or affecting the Borrower or
any properties or rights of the Borrower, or any claim thereof, which, if
adversely determined, would result in a liability of greater than $200,000 or
would otherwise result in any material adverse change in the business or
condition, financial or otherwise, of the Borrower. The Borrower is not in
default with respect to any judgment, order, writ, injunction, decree, rule or
regulation of any Tribunal the default of which would materially impair the
ability of Borrower to carry on its business substantially as now conducted.
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3. Financial Statements. The Borrower's audited financial statements as of
December 31, 1997, copies of which have been furnished to the Lender, have been
prepared in conformity with GAAP, show all material liabilities, direct and
contingent, and fairly present the financial condition of the Borrower as at
such date and the results of its operations for the period then ended, and since
such date there has been no material adverse change in the business, financial
condition or operations of the Borrower.
4. Title to Properties; Authority. The Borrower has full power, authority
and legal right to own and operate the properties which it now owns and operates
and to carry on the lines of business in which it is now engaged, and the
Borrower has good title to the Collateral free of all Title Defects, subject to
no Lien of any kind except Liens in favor of the Lender or otherwise permitted
by this Agreement. The Borrower has full power, authority and legal right to
execute and deliver and to perform and observe the provisions of this Agreement
and the other Loan Documents.
5. Conflicting Agreements and Other Matters. The Borrower is not in default
in the performance of any obligation, covenant, or condition in any agreement to
which it is a party or by which it is bound. The Borrower is not a party to any
contract or agreement or subject to any charter or other corporate restriction
which materially and adversely affects its business, property or assets, or
financial condition. The Borrower is not a party to or otherwise subject to any
contract or agreement which restricts or otherwise affects the right or ability
of the Borrower to execute the Loan Documents or the performance of any of their
respective terms. Neither the execution nor delivery of any of the Loan
Documents, nor fulfillment of nor compliance with their respective terms and
provisions will conflict with, or result in a breach of, the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any Lien upon any of the properties or assets of
the Borrower pursuant to, or require any consent, approval or other action by or
any notice to or filing with any Tribunal pursuant to, the charter or By-Laws of
the Borrower, any award of any arbitrator, or any agreement, instrument or Law
to which the Borrower is subject.
6. Corporate Authorization. The Board of Directors of the Borrower has duly
authorized, and the Borrower has the corporate power necessary for, the
execution and delivery of each of the Loan Documents and the performance of
their respective terms. No other consent of any other Person, except for the
Lender, is required as a prerequisite to the validity and enforceability of the
Loan Documents.
7. Purposes. The Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any borrowing hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. If requested by the Lender, the Borrower will furnish to the Lender a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U, to the foregoing effect. The Borrower has not taken
nor will it take any action which might cause this Agreement or the Notes to
violate any regulation of the Board of Governors of the Federal Reserve System
(including but not limited to Regulations G, T, U and X) or to violate any
securities laws, state or federal, in each case as in effect now or as the same
may hereafter be in effect.
8. Compliance with Applicable Laws. The Borrower is in compliance with all
Laws, ordinances, rules, regulations and other legal requirements applicable to
it and the business it conducts, the violation of which could or would have a
material adverse effect on its business or condition, financial or otherwise.
Neither the ownership of any capital stock of the Borrower nor any continued
role of any Person in the management or other affairs of the Borrower (i)
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results or could result in the Borrower's noncompliance with any Laws,
ordinances, rules, regulations and other legal requirements applicable to the
Borrower, or (ii) could or would have a material adverse effect on the business
or condition, financial or otherwise, of the Borrower.
9. Possession of Franchises, Licenses, Etc. The Borrower possesses all
material franchises, certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory authorities, free from
burdensome restrictions, that are necessary in any material respect for the
ownership, maintenance and operation of its properties and assets, and the
Borrower is not in violation of any thereof in any material respect.
10. Leases. The Borrower enjoys peaceful and undisturbed possession of all
leases necessary in any material respect for the operation of its properties and
assets, none of which contains any unusual or burdensome provisions which might
materially affect or impair the operation of such properties and assets. All
such leases are valid and subsisting and are in full force and effect.
11. Taxes. The Borrower has filed all Federal, state and other income tax
returns which are required to be filed and has paid all Taxes, as shown on said
returns, and has paid all Taxes due or payable without returns and all
assessments received to the extent that such Taxes or assessments have become
due. All Tax liabilities of the Borrower are adequately provided for on the
books of the Borrower, including interest and penalties. No income tax liability
of a material nature has been asserted by taxing authorities for Taxes in excess
of those already paid. There is no proposed tax assessment against Borrower and
there is no basis for any such assessment.
12. Operating Expenses. All bills, charges and other expenses due and
payable by the Borrower in connection with the drilling or operation of all of
Borrower's oil and gas properties, including but not limited to the Mortgaged
Property, are current in the payment thereof.
13. Disclosure. Neither this Agreement nor any other Loan Document or
writing furnished to the Lender by or on behalf of the Borrower in connection
herewith contains any untrue statement of a material fact nor do such Loan
Documents and writings, taken as a whole, omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to the Borrower and not reflected in the
financial statements provided to the Lender which materially adversely affects
or in the future may materially adversely affect the business, property, or
assets, or financial condition of the Borrower which has not been set forth in
this Agreement, in the Loan Documents or in other documents furnished to the
Lender by or on behalf of the Borrower prior to the date hereof in connection
with the transactions contemplated hereby.
14. Net Revenue Interest. With respect to the Mortgaged Property, Borrower
is entitled to not less than that portion of the net revenue Property as is set
forth opposite the name of such property on Exhibit "F" attached hereto and made
a part hereof and payments are being received from purchasers of production with
respect to said interests and no such payments are subject to any suspension.
15. Environmental. To the best of Borrower's knowledge, information and
belief, none of the Mortgaged Property is subject to any Hazardous Materials
Contamination. To Borrower's knowledge, no investigation, administrative order,
consent order and agreement, litigation or settlement with respect to Hazardous
Materials Contamination is proposed, threatened, anticipated or in existence
with respect to any of the Mortgaged Property. For the purposes of this Loan
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Agreement unless the context otherwise specifies or requires, the following
terms shall have the meaning herein specified:
(i) "Hazardous Materials" shall mean (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended from time to
time, and regulations promulgated thereunder; (c) any substance the
presence or use of which on the Mortgaged Property is prohibited or
regulated by any Governmental Requirements (as hereinafter defined); and
(d) any other substance which by any Governmental Requirements requires
special handling or notification of any federal, state or local
governmental entity in its collection, storage, treatment, or disposal. For
purposes herein "Governmental Requirements" shall mean all laws,
ordinances, statutes, codes, rules, regulations, orders and decrees of the
United States, the state, the county, the city, or any other political
subdivision in which the Property is located, and any other political
subdivision, agency or instrumentality exercising jurisdiction over
Borrower or the Mortgaged Property.
(ii) "Hazardous Materials Contamination" shall mean the contamination
(whether presently existing or hereafter occurring) of the improvements,
facilities, soil, groundwater, air or other elements on or of the Mortgaged
Property by Hazardous Materials, or the contamination of the soil,
groundwater, air or other elements on or of any other property as a result
of Hazardous Materials at any time (whether before or after the date of
this Agreement) emanating from the Mortgaged Property.
16. Issuance of Capital Stock. All of the shares of the capital stock of
the Borrower have been duly issued and are fully paid and non-assessable. All of
the outstanding shares of capital stock of the Borrower were issued under a
valid exemption to the registration provisions of the Securities Act of 1933, as
amended, and all applicable state securities Laws, and do not require compliance
with the Trust Indenture Act of 1939.
17. Subsidiaries. Borrower owns no Subsidiaries as of the date hereof.
18. Investment Company Act Representation. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
19. ERISA. Since the effective date of Title IV of ERISA, no Reportable
Event has occurred with respect to any Plan. For the purposes of this section
the term "Reportable Event" shall mean an event described in Section 4043(b) of
ERISA. For the purposes hereof the term "Plan" shall mean any plan subject to
Title IV of ERISA and maintained for employees of the Borrower, or of any member
of a controlled group of corporations, as the term "controlled group of
corporations" is defined in Section 1563 of the Internal Revenue Code of 1986,
as amended (the "Code"), of which the Borrower is a part. Each Plan established
or maintained by the Borrower is in material compliance with the applicable
provisions of ERISA, and the Borrower has filed all reports required by ERISA
and the Code to be filed with respect to each Plan. The Borrower has met all
requirements with respect to funding Plans imposed by ERISA or the Code. Since
the effective date of Title IV of ERISA there have not been any nor are there
now existing any events or conditions that would permit any Plan to be
terminated under circumstances which would cause the lien provided under Section
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4068 of ERISA to attach to the assets of the Borrower. The value of each Plan's
benefits guaranteed under Title IV of ERISA on the date hereof does not exceed
the value of such Plan's assets allocable to such benefits on the date hereof.
20. Fiscal Year. The fiscal year of the Borrower ends December 31.
21. Corporate Name. Borrower has not during the preceding three (3) years,
been known as or used any other corporate, fictitious or trade name and Borrower
has not been the surviving corporation of a merger or consolidation, except for
the merger of Royalty with and into Borrower and except for the trade name of
Home Stake Oil & Gas Company.
ARTICLE VII
DEFAULT AND REMEDIES
1. Events of Default. The following shall be events of default hereunder
(individually an "Event of Default" and collectively "Events of Default"):
(i) The failure of Borrower to perform or observe any obligation
arising under, or to make any payment required or governed by this
Agreement, the Revolving Note, the Term Note, or any other Loan Document,
or a default under any of the other Loan Documents, including but not
limited to the Term Note and/or the Revolving Note and with respect to a
monetary default, the continuation thereof for a period of ten (10)
business days, and with respect to a non monetary default (but not a
monetary default) the continuation thereof for a period of thirty (30)
business days after written notice by the Lender to Borrower.
(ii) The falseness or incompleteness of any material representation,
report, application or other communication from Borrower to the Lender, or
the breach of any covenant, representation or warranty, or the failure of
any condition hereunder.
(iii) Dissolution or termination of existence of Borrower.
(iv) The failure of Borrower to pay any other indebtedness at
maturity, or the occurrence of any event which results in the acceleration
of the maturity of any obligation of Borrower to the Lender or to others,
under any promissory note, agreement or undertaking.
(v) The material change in Borrower's business, management, control or
ownership.
(vi) Any assignment for the benefit of creditors, or petition or
application to any tribunal for appointment of a custodian, receiver or any
trustee for Borrower (said Borrower being hereinafter referred to in this
subparagraph 7.1(vi) as "Obligor") or a substantial part of Obligor's
assets; the commencement by Obligor of any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or a statute of any jurisdiction, whether now or hereafter
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in effect; any filing of any such petition or application, or the
commencement of any such proceedings against Obligor, in which an order for
relief is entered; or any indication by Obligor, by any act or omission, of
consent to, approval of or acquiescence in any such petition, application
or proceeding or order for relief or for the appointment of a custodian,
receiver or any trustee for Obligor or any substantial part of any of
Obligor's properties, or the sufferance of any such custodianship,
receivership or trusteeship; or the failure of Obligor generally to pay
Obligor's debts as such debts become due; or the concealment or removal, by
act or omission, of any part of the property of Obligor, with intent to
hinder, delay or defraud its creditors or any of them, or the transfer of
any of Obligor's property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or any transfer of Obligor's property
to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or suffering or permitting, while
insolvent, any creditor to obtain a lien upon any of Obligor's property
through legal proceedings or distraint.
2. Remedies. In the event a default occurs under this Agreement, the Lender
shall have the right, at its sole option, to accelerate all of the Indebtedness
secured hereby and to exercise any other right or remedy it may have available
either under this Agreement, under any other Loan Documents or any other rights
at law or in equity. All such rights and remedies shall be cumulative and may be
exercised simultaneously or in order which the Lender deems to be in its best
interests; and the exercise or omission to exercise any right or remedy of the
Lender shall not affect any subsequent right of the Lender to exercise the same
or any other right or remedy.
ARTICLE VIII
MISCELLANEOUS
1. Notices. All notices required or permitted hereunder shall be deemed to
be given when deposited in the U.S. Mail by registered or certified mail,
postage prepaid, and addressed to Borrower or the Lender at the respective
addresses shown below or when transmitted by FAX to Borrower at the number shown
below:
Borrower: The Home-Stake Oil & Gas Company
15 East 5th Street, Suite 2800
Tulsa, Oklahoma 74103
Fax: 918-583-0237
The Lender: NationsBank, N.A.
515 South Boulder
(or P. O. Box 2360, 74101)
Tulsa, Oklahoma 74103
Attention: Commercial Loan Department
Fax: 918-591-8472
or such other address that Borrower or the Lender may, by written notice,
designate, and any notice so given shall be deemed sufficient.
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2. Marshalling. Borrower waives any right it may have to require
marshalling of assets or Collateral for repayment of the Indebtedness in the
event of the occurrence of any Default or Event of Default hereunder or under
any of the other Loan Documents. Upon any default or Event of Default under this
Loan Agreement or any of the Loan Documents, the Lender may, at its option,
realize or foreclose upon any of the Collateral or any portion as part of the
Collateral in any order including but not limited to the property encumbered by
the Mortgage. The terms of this paragraph shall survive any release of the
Mortgage and shall remain in effect between Lender and Borrower as long as any
Indebtedness exists in any form.
3. Survival of Agreements. All covenants, agreements, representations and
warranties made herein shall survive the execution and the delivery of the Loan
Documents. All statements contained in any certificate or other instrument
delivered by the Borrower hereunder shall be deemed to constitute
representations and warranties by the Borrower.
4. Parties in Interest. All covenants, agreements and obligations contained
in this Agreement shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, except that the Borrower may not
assign its rights or obligations hereunder without the prior written consent of
the Lender.
5. Governing Law and Jurisdiction; Venue. This Agreement and the Notes
shall be deemed to have been made or incurred under the Laws of the State of
Oklahoma and shall be construed and enforced in accordance with and governed by
the Laws of Oklahoma. For purposes of enforcing and/or interpreting the
provisions of this Agreement and all other Loan Documents, or resolving any
dispute arising out of the execution, delivery or performance of this Agreement
or any of the Loan Documents, the Borrower hereby submits itself to the
jurisdiction of the Courts of the State of Oklahoma, the Borrower waives all
objections to service of process therefrom and the Borrower waives all
objections to venue of any state or federal court sitting in Tulsa County,
Oklahoma.
6. Maximum Interest Rate. Regardless of any provision herein, the Lender
shall never be entitled to receive, collect or apply, as interest on the
Indebtedness, any amount in excess of the maximum rate of interest permitted to
be charged by the Lender by applicable Law, and, in the event the Lender shall
ever receive, collect or apply, as interest, any such excess, such amount which
would be excessive interest shall be applied to other Indebtedness and then to
the reduction of principal; and, if all other Indebtedness and principal are
paid in full, then any remaining excess shall forthwith be paid to the Borrower.
7. No Waiver; Cumulative Remedies. No failure to exercise, and no delay in
exercising on the part of the Lender, any right, power or privilege hereunder or
under any other Loan Document or applicable Law shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
of the Lender. The rights and remedies herein provided are cumulative and not
exclusive of any other rights or remedies provided by any other instrument or by
law. No amendment, modification or waiver of any provision of this Agreement or
any other Loan Document shall be effective unless the same shall be in writing
and signed by the Lender. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.
8. Costs. The Borrower agrees to pay to the Lender on demand all costs,
fees and expenses (including without limitation attorneys' fees and legal
expenses) incurred or accrued by the Lender in connection with the preparation,
execution, delivery, filing, recording and administration of this Agreement, the
Security Instruments and the other Loan Documents, or any amendment, waiver,
consent or modification thereto or thereof, or any enforcement thereof,
including without limitation the Lender's attorneys' fees and expenses. The
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Borrower further agrees that all such fees and expenses shall be paid regardless
of whether or not the transactions provided for in this Agreement are eventually
closed and regardless of whether or not any sums are advanced to the Borrower by
the Lender.
9. Participation. The Borrower recognizes and acknowledges that the Lender
may sell participating interests in one or more of the Notes to one or more
financial institutions (the "Participants"). Upon receipt of notice of the
identity and address of each Participant, the Borrower shall thereafter supply
each Participant with the same information and reports communicated to the
Lender, whether written or oral. Each Participant shall own an undivided
interest in the applicable Note and shall have the same rights and remedies as
granted to the Lender hereunder with respect to said Participant's participating
interest in said Note. The Borrower hereby acknowledges that each Participant
shall be deemed a holder of the applicable Note to the extent of its
participation, and the Borrower hereby waives its right, if any, to offset any
amounts owing to the Borrower from the Lender against any Participant's portion
of the applicable Note.
10. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ANY OTHER LOAN DOCUMENTS OR ANY RELATED
INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING
FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE
WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE
LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL
DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S.") AND THE
"SPECIAL RULES" SET FORTH BELOW, IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATIONS OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
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DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTIES
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
11. Full Agreement. This Agreement and the other Loan Documents contain the
full agreement of the parties and supersede all negotiations and agreements
prior to the date hereof.
12. Headings. The article and section headings of this Agreement are for
convenience of reference only and shall not constitute a part of the text hereof
nor alter or otherwise affect the meaning hereof.
13. Severability. The unenforceability or invalidity as determined by a
Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
14. Exceptions to Covenants. The Borrower shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
15. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
16. Good Faith. The Lender and the Borrower agree with each other that they
will exercise good faith in their dealings with each other under this Agreement
and the transactions provided for herein.
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EXECUTED as of the date and year first above written.
THE HOME-STAKE OIL & GAS COMPANY,
an Oklahoma corporation
By: /s/ Chris K. Corcoran
-------------------------------------------
Chris K. Corcoran, Executive Vice-President
NATIONSBANK, N.A.,
a national banking association
By: /s/ Robert O Laird
-------------------------------------------
Robert O. Laird, Vice President
EXHIBIT LIST:
Exhibit A - Amendments and Supplemental Agreements to Mortgages *
Exhibit B - Mortgages (new properties) *
Exhibit C - Revolving Note
Exhibit D - Loan Request form
Exhibit E - Term Note
Exhibit F - NRI listing *
Exhibit G - Borrowing resolutions *
- -----------------------------
*Omitted. The Registrant agrees to furnish supplementally a copy of any such
omitted Exhibits to the Securities and Exchange Commission upon its request.
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EXHIBIT "C"
PROMISSORY NOTE
$5,000,000.00 March 31, 1998
1. FOR VALUE RECEIVED the undersigned, THE HOME-STAKE OIL & GAS COMPANY, an
Oklahoma corporation, promises to pay to the order of NATIONSBANK, N.A., an
Oklahoma corporation ("Payee") the principal amount of this Note or such amount
thereof as shall be advanced and outstanding, together with interest on the
unpaid balance of such amount at the rate hereinafter set forth. This Note is
issued pursuant to that certain Amended and Restated Loan Agreement (the
"Agreement") of even date herewith, by and between Payee, as Lender, and Maker
as Borrower, and is subject to the provisions therein set forth. The obligations
represented by this Note are secured by the Loan Documents described in the
Agreement.
2. Principal Amount. FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00)
3. Payments. All accrued interest on the unpaid balance of this Note is due
and payable on the first day of each calendar month, commencing May 1, 1998 and
continuing on the first day of each month thereafter until May 1, 1999, at which
time all principal and accrued and unpaid interest shall be due and payable to
Payee in full. Interest on this Note shall accrue from the date of the first
advance under this Note and any payment shall be applied first to the payment of
interest then due and second to the reduction of unpaid principal.
4. Interest Rate. Interest shall accrue on the outstanding principal
balance at the "Prime Rate" minus one percent (1.00%) per annum. . The term
"Prime Rate" means that rate of interest computed as an average of corporate
loan rates quoted by a certain number of the nation's largest banks, as
announced from time to time in the Wall Street Journal, Southwest Edition as the
"prime rate". The Prime Rate shall be adjusted daily as announced, calculated on
the basis of a year of 360 days and a month of 30 days. Changes in the rate
charged on this Note are effective, without notice, on the same day as the
effective change in the Prime Rate as established from time to time. In any case
where a payment of principal and/or interest on this Note, or any part thereof,
is due on a day on which the Bank is not open for normal banking business, the
undersigned shall be entitled to delay such payments until the next succeeding
business day, but interest shall continue to accrue until the payment is in fact
made.
5. Interest Rate After Maturity. Matured and unpaid principal, whether by
acceleration or otherwise, shall bear interest at the Prime Rate plus five
percent (5%) per annum.
6. Prepayment Penalties. This Note may be prepaid, in whole or in part, at
any time, without premium or penalty.
7. Default. If the principal or any installment of interest due upon this
Note is not paid as and when the same becomes due and payable (whether by
demand, extension, acceleration or otherwise), or any party now or hereafter
liable (directly or indirectly) for payment of this Note makes an assignment for
benefit of creditors, has an order for relief entered under the United States
Bankruptcy Code, as amended, seeks the benefits of any other bankruptcy,
insolvency or reorganization law, or becomes insolvent, or any receiver, trustee
or like officer is appointed to take custody, possession or control of any
property of any such party, or upon the occurrence of any event of default under
the Agreement or any other Loan Documents, the holder hereof may, after the
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expiration of any grace or notice period as provided in the Loan Agreement,
without further notice and without presentment or demand for payment, declare
all of the unpaid balance hereof to be immediately due and payable. Such right
of acceleration is cumulative and in addition to any other right or rights of
acceleration under the Agreement and any other writing now or hereafter
evidencing or securing payment of any of the indebtedness evidenced hereby.
8. Costs and Attorneys' Fees. If this Note is placed in the hands of an
attorney for collection, or suit is brought on same, or the same is collected
through Probate, Bankruptcy or other judicial proceeding, or Payee is required
to defend the priority of the security, then the undersigned shall pay all of
Payee's reasonable costs and expenses including but not limited to a reasonable
amount as attorneys' fees.
9. Waivers. Maker and any party which may be or become liable for the
payment of any sums of money payable on this Note (including any surety,
endorser or guarantor) severally waive presentment and demand for payment,
protest, notice of protest and nonpayment, and notice of the intention to
accelerate, and agree that their liability on this note shall not be affected by
any renewal or extension in the time of payment hereof, by any indulgences or by
any release or change in any security for the payment of this note, regardless
of the number of such renewals, extensions, indulgences, releases or changes.
10. Right of Offset. Any indebtedness due from holder hereof to the
undersigned or any party hereto including, but without limitation, any deposits
or credit balances due from holder, is pledged to secure payment of this Note
and any other obligation to holder of the undersigned or any party hereto, and
may at any time while the whole or any part of such obligation remains unpaid,
either before or after maturity hereof, be appropriated, held or applied toward
the payment of this Note or any other obligation to holder of the undersigned or
any party hereto.
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ANY OTHER LOAN DOCUMENTS OR ANY RELATED
INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING
FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE
WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE
LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL
DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S.") AND THE
"SPECIAL RULES" SET FORTH BELOW, IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
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<PAGE>
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATIONS OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTIES
COLLATERAL, OR (C) OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS
(BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF
A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
12. Governing Law. This Note has been executed and delivered in Tulsa
County, Oklahoma and shall be governed by and construed according to the laws of
the State of Oklahoma.
THE HOME-STAKE OIL & GAS COMPANY,
an Oklahoma corporation
By:
-------------------------------------------
Chris K. Corcoran, Executive Vice President
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EXHIBIT "D"
REQUEST FOR ADVANCE UNDER REVOLVING LOAN
TO: NationsBank, N.A.
515 South Boulder
Tulsa, Oklahoma 74119
Attn: Mr. Rob Laird
Fax No. 918-591-8472
Pursuant to the terms and conditions of that certain Amended and
Restated Loan Agreement dated as of March 31, 1998 (the "Loan Agreement") by and
between NationsBank, N.A. a national banking association (the "Bank") and THE
HOME-STAKE OIL & GAS COMPANY, an Oklahoma corporation (the "Borrower"), the
undersigned hereby requests that an advance be made under the Revolving Loan (as
that term is defined in the Loan Agreement) as evidenced by that certain
Promissory Note (the "Revolving Note") dated as of March 31, 1998 made, executed
and delivered by the Borrower to the Bank in the original principal amount of
$5,000,000.00 and in connection therewith, certifies, represents and warrants as
follows:
1. The principal amount outstanding under the Revolving Note, prior to
this request is $_________________.
2. The amount of the requested advance is $___________________________;
3. All representations and warranties of Borrower set forth in the Loan
Agreement are true and correct on and as of the date hereof (except to
the extent that the facts on which such representation and warranties
are based have been changed by the transactions contemplated by the
Loan Agreement) with the same effect as though such representations
and warranties had been made on and as of the date hereof; and
4. There does not exist on the date hereof any condition or event which
constitutes a default or an Event of Default under the Loan Agreement
or any of the Loan Documents executed in connection therewith.
EXECUTED as of the ____ day of ________________, 199___.
THE HOME-STAKE OIL & GAS COMPANY,
an Oklahoma corporation
By:
---------------------------------------
President
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EXHIBIT "E"
PROMISSORY NOTE
$6,600,000.00 March 31, 1998
1. FOR VALUE RECEIVED the undersigned, THE HOME-STAKE OIL & GAS COMPANY, an
Oklahoma corporation, promises to pay to the order of NATIONSBANK, N.A. an
Oklahoma corporation ("Payee") the principal amount of this Note or such amount
thereof as shall be advanced and outstanding, together with interest on the
unpaid balance of such amount at the rate hereinafter set forth. This Note is
issued pursuant to that certain Amended and Restated Loan Agreement (the
"Agreement") of even date herewith, by and between Payee, as Lender, and Maker
as Borrower, and is subject to the provisions therein set forth. The obligations
represented by this Note are secured by the Loan Documents described in the
Agreement.
2. Principal Amount. SIX MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS
($6,600,000.00).
3. Payments. Principal shall be due and payable in monthly installments
each in the amount of One Hundred Ten Thousand and no/100 Dollars ($110,000.00)
plus a payment of all unpaid interest accrued hereunder, said principal and
interest to be due and payable monthly, commencing May 1, 1998 and continuing on
the first (1st) day of each month thereafter until May 1, 2000 at which time all
principal and accrued and unpaid interest shall be due and payable to Payee in
full. Interest on this Note shall accrue from the date of the first advance
under this Note and any payment shall be applied first to the payment of
interest then due and second to the reduction of unpaid principal.
4. Interest Rate. Interest shall accrue on the outstanding principal
balance at the "Prime Rate" minus one half of one percent (.50%) per annum.. The
term "Prime Rate" means that rate of interest computed as an average of
corporate loan rates quoted by a certain number of the nation's largest banks,
as announced from time to time in the Wall Street Journal, Southwest Edition as
the "prime rate". The Prime Rate shall be adjusted daily as announced,
calculated on the basis of a year of 360 days and a month of 30 days. Changes in
the rate charged on this Note are effective, without notice, on the same day as
the effective change in the Prime Rate as established from time to time. In any
case where a payment of principal and/or interest on this Note, or any part
thereof, is due on a day on which the Bank is not open for normal banking
business, the undersigned shall be entitled to delay such payments until the
next succeeding business day, but interest shall continue to accrue until the
payment is in fact made.
5. Interest Rate After Maturity. Matured and unpaid principal, whether by
acceleration or otherwise, shall bear interest at the rate of eighteen percent
(18%) per annum.
6. Prepayment Penalties. This Note may be prepaid, in whole or in part, at
any time, without premium or penalty.
7. Default. If the principal or any installment of interest due upon this
Note is not paid as and when the same becomes due and payable (whether by
demand, extension, acceleration or otherwise), or any party now or hereafter
liable (directly or indirectly) for payment of this Note makes an assignment for
benefit of creditors, has an order for relief entered under the United States
Bankruptcy Code, as amended, seeks the benefits of any other bankruptcy,
insolvency or reorganization law, or becomes insolvent, or any receiver, trustee
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<PAGE>
or like officer is appointed to take custody, possession or control of any
property of any such party, or upon the occurrence of any event of default under
the Agreement or any other Loan Documents, the holder hereof may, without notice
and without presentment or demand for payment, declare all of the unpaid balance
hereof to be immediately due and payable. Such right of acceleration is
cumulative and in addition to any other right or rights of acceleration under
the Agreement and any other writing now or hereafter evidencing or securing
payment of any of the indebtedness evidenced hereby.
8. Costs and Attorneys' Fees. If this Note is placed in the hands of an
attorney for collection, or suit is brought on same, or the same is collected
through Probate, Bankruptcy or other judicial proceeding, or Payee is required
to defend the priority of the security, then the undersigned shall pay all of
Payee's reasonable costs and expenses including but not limited to a reasonable
amount as attorneys' fees.
9. Waivers. Maker and any party which may be or become liable for the
payment of any sums of money payable on this Note (including any surety,
endorser or guarantor) severally waive presentment and demand for payment,
protest, notice of protest and nonpayment, and notice of the intention to
accelerate, and agree that their liability on this note shall not be affected by
any renewal or extension in the time of payment hereof, by any indulgences or by
any release or change in any security for the payment of this note, regardless
of the number of such renewals, extensions, indulgences, releases or changes.
10. Right of Offset. Any indebtedness due from holder hereof to the
undersigned or any party hereto including, but without limitation, any deposits
or credit balances due from holder, is pledged to secure payment of this Note
and any other obligation to holder of the undersigned or any party hereto, and
may at any time while the whole or any part of such obligation remains unpaid,
either before or after maturity hereof, be appropriated, held or applied toward
the payment of this Note or any other obligation to holder of the undersigned or
any party hereto.
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ANY OTHER LOAN DOCUMENTS OR ANY RELATED
INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING
FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE
WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE
LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL
DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S.") AND THE
"SPECIAL RULES" SET FORTH BELOW, IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
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J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATIONS OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTIES
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
12. Governing Law. This Note has been executed and delivered in Tulsa
County, Oklahoma and shall be governed by and construed according to the laws of
the State of Oklahoma.
THE HOME-STAKE OIL & GAS COMPANY,
an Oklahoma corporation
By:
-------------------------------------------
Chris K. Corcoran, Executive Vice President
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