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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):
DECEMBER 22, 1999
TOREADOR ROYALTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-2517 75-0991164
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
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4809 COLE AVENUE, SUITE 108
DALLAS, TEXAS 75205
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 559-3933
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 22, 1999, Toreador Exploration & Production, Inc.
("Toreador E&P"), a wholly-owned subsidiary of Toreador Royalty Corporation
("Toreador"), purchased certain oil and gas working interests (the "Assets")
from Lario Oil & Gas Company ("Lario"), pursuant to a Purchase and Sale
Agreement dated as of November 24, 1999, by and between Lario and Toreador E&P
(the "Lario Agreement"). The purchase price for the Assets was $5,500,000,
consisting of $5,000,000 cash and an agreement to pay the amount of $500,000 on
an installment basis. Half of this amount ($250,000) is to be repaid by Toreador
on a monthly basis, plus interest at prime plus 1%, amortized over 13 months.
The remaining $250,000 is to be repaid by Toreador on January 23, 2001, plus
interest at prime plus 1% (which is currently 9.5% per annum).
Toreador E&P purchased 50% of Lario's working interests in designated
oil and gas leases and properties located in Finney County, Kansas. As a result
of the acquisition, Toreador believes that there will be reserve additions of
approximately 1,000,000 BOE (equivalent barrels of oil on one Bbl of oil per six
Mcf basis), resulting in an estimated acquisition cost of approximately $5.50
per BOE. The purchase was accounted for as if it occurred on October 1, 1999.
The purchase price for the Assets was funded with Toreador's available
cash ($1,000,000), a loan from Compass Bank, Dallas ($4,000,000) and the
$500,000 to be paid by Toreador to Lario on an installment basis.
In connection with the borrowings to finance the acquisition of the
Assets, Toreador, Toreador E&P and Tormin, Inc., a wholly-owned subsidiary of
Toreador ("Tormin"), entered into an amendment to its existing Credit Agreement
with Compass Bank, which Credit Agreement was effective September 30, 1999. The
amendment to the Credit Agreement increased the borrowing base to $12,500,000
from the previous borrowing base of $10,500,000, and provided $2,000,000 of the
acquisition price of the Assets.
Toreador, Toreador E&P and Tormin also executed a Term Promissory Note
(the "Note") with Compass Bank, which provided an additional $2,000,000 of the
cash portion of the purchase price for the Assets. The Note bears interest equal
to the variable prime rate published in The Wall Street Journal's "Money Rates"
table (the "Prime Rate"), which is currently 8.5% per annum. The amendment to
the Credit Agreement and the Note are secured by a pledge of Toreador's assets,
including all of the properties within the Assets.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
(a) It is impractical to provide the required financial statements of the
acquired properties at this time. Toreador plans to file such information by
amendment to this Form 8-K within sixty days of January 6, 2000.
(b) It is impractical to provide the required pro forma financial information at
this time. Toreador plans to file such information by amendment to this Form 8-K
within sixty days of January 6, 2000.
Exhibits
10.1 Purchase and Sale Agreement, effective November 24, 1999, between Lario Oil
& Gas Company and Toreador Exploration & Production, Inc.
10.2 First Amendment To Credit Agreement, effective December 17, 1999, between
Compass Bank, as Lender, and Toreador Royalty Corporation, Toreador Exploration
& Production, Inc., and Tormin, Inc., as Borrowers, and Toreador Acquisition
Corporation, as Guarantor.
10.3 Term Promissory Note, effective December 17, 1999, between Compass Bank, as
Lender, and Toreador Royalty Corporation, Toreador Exploration & Production,
Inc., and Tormin, Inc., as Borrowers, and Toreador Acquisition Corporation, as
Guarantor.
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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.
TOREADOR ROYALTY CORPORATION
Date: January 6, 2000 By: /S/ G. THOMAS GRAVES III
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Name: G. Thomas Graves III
Title:President and Chief Executive Officer
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INDEX TO EXHIBITS
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Exhibit No. Description
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10.1 Purchase and Sale Agreement, effective November 24, 1999, between
Lario Oil & Gas Company and Toreador Exploration & Production Inc.
10.2 First Amendment To Credit Agreement, effective December 17, 1999,
between Compass Bank, as Lender, and Toreador Royalty
Corporation, Toreador Exploration & Production, Inc., and Tormin,
Inc., as Borrowers, and Toreador Acquisition Corporation, as
Guarantor.
10.3 Term Promissory Note, effective December 17, 1999, between Compass
Bank, as Lender, and Toreador Royalty Corporation, Toreador
Exploration & Production, Inc., and Tormin, Inc., as Borrowers,
and Toreador Acquisition Corporation, as Guarantor.
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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is made and entered into on this the 24th day
of November, 1999, by and between LARIO OIL & GAS COMPANY, a Delaware
corporation ("hereinafter referred to as Seller"); and TOREADOR EXPLORATION &
PRODUCTION INC., a Texas corporation, and (hereinafter referred to as "Buyer").
1. SALE AND PURCHASE OF THE PROPERTIES. Subject to the terms and
conditions herein set forth, Seller agrees to sell, assign, convey and deliver
to Buyer and Buyer agrees to purchase and acquire from Seller at the Closing
(defined in Article 11 below) but effective as of 7:00 a.m., Central Time, on
October 1, 1999 (the Effective Date), an undivided fifty percent (50.00%) of
Seller's right, title and interest in each property as set forth on Exhibit A
(Wells), Exhibit B (Leases, Rights-of-Way and Easements), all other interest, if
any, owned by Seller, in, to and under the Units, Wells, Leases, Rights-of-Way
and Easements and all contracts relating thereto; and as of the Closing Date, an
undivided fifty percent (50.00%) of Seller's right, title and interest as set
forth on Exhibit "A" in the equipment located on or appurtenant to a Lease and
used exclusively in connection with the operation of a Well, as well as the
items listed on Exhibit C (Pipelines and Other Personal Property) (collectively,
"the Properties"). Buyer understands and acknowledges that is the intent of this
Agreement that Buyer acquire an undivided fifty percent (50.00%) of the interest
acquired by Seller in those Wells, Leases, Royalty Interests, Rights-of-Way,
Easements, and other properties set forth on the attached Exhibits acquired by
Seller under that certain Purchase and Sale Agreement dated August 13, 1998 by
and between Sonat Exploration Company, as Seller, and McCoy Petroleum
Corporation and Lario Oil & Gas Company, as Buyers, insofar as said interests
are described on the attached Exhibits.
2. PURCHASE PRICE. The purchase price for the Properties shall be Five
Million and Five Hundred Thousand Dollars ($5,500,000.00) ("Purchase Price"),
subject to any applicable adjustments as are hereinafter provided. Such Purchase
Price shall be payable as follows:
(a) At closing, Buyer shall pay to Seller an amount of Five Million Dollars
($5,000,000.00) in cash. The remaining Five Hundred Thousand Dollars
($500,000.00) shall be paid to Seller as follows:
i) Toreador shall pay to Lario the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) plus interest at prime plus 1%,
amortized over 13 months, all payments to be made on a monthly
basis; plus
ii) Toreador shall pay to Lario the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) plus interest at prime plus 1%
on a date 13 months from the date of closing. The Interest on
such sum shall be payable quarterly.
All payments shall be made by Certified Check or by wire transfer.
As evidence of good faith, with the signing of this Agreement, Buyer has
deposited ten percent (10%) of the Purchase Price in cash with Seller
("Performance Deposit"). The Performance Deposit will not bear interest and is
not refundable, except as specifically provided in this Agreement. Any
forfeiture of the Performance Deposit as provided in this Agreement will be in
addition to, and not in lieu of, any right or remedies that Seller has under law
or in equity for Buyer's failure to perform under this Agreement.
3. ADJUSTMENTS TO PURCHASE PRICE; FINAL PURCHASE PRICE. The Purchase Price
shall be adjusted as follows and the resulting amount shall be referred to
herein as the Final Purchase Price.
3.1 INCREASES IN PURCHASE PRICE. The Purchase Price shall be increased
by an amount equal to the sum of Buyer's share of the following
amounts:
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3.1.1 The amount of costs and expenses, including,
without limitation, such capital
expenditures as are permitted by Section
6.1.1. below, incurred by Seller in the
ordinary course of Seller's business and
overhead charges as provided in Exhibit "E",
related to the Properties from the Effective
Date to the Closing Date.
3.1.2 The amount of all prepaid expenses,
including, without limitation, ad valorem,
property and similar taxes and assessments
based upon or measured by ownership of the
Properties and attributable to periods of
time after the Effective Date.
3.1.3 As to Wells in which Seller's Net Revenue
Interest (as defined in Article 10.1.2
below) is determined to be greater than the
decimal interest noted in Exhibit A, an
amount determined by multiplying the
Allocated Value (as hereinafter defined) for
Buyer's share of the interest in the Well in
question by a fraction, the numerator of
which shall be the decimal increase in
Seller's Net Revenue Interest in such Well
from the percentage shown for such Well in
Exhibit A and the denominator of which shall
be the Net Revenue Interest shown for such
Well on such Exhibit.
3.2 DECREASES IN PURCHASE PRICE. The Purchase Price shall be decreased
by an amount equal to the sum of Buyer's share of the following
amounts:
3.2.1 The amount of all proceeds received by
Seller, net of all applicable taxes and
royalties attributable to production from
the Properties for periods of time after the
Effective Date, excluding, however, proceeds
from all production prior to the Effective
Date, which proceeds shall be for the
account of Seller.
3.2.2 An amount equal to all ad valorem, property,
and similar taxes and assessments based upon
or measured by Seller's ownership of the
Properties that are unpaid as of the Closing
Date and attributable to periods of time
prior to the Effective Date.
3.2.3 Any amount determined in connection with
uncured Title Defects as provided for in
Article 10 below.
3.2.4 Any amount determined in connection with
Adverse Environmental Conditions as provided
for in Article 18 below.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that:
4.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is qualified to do business in and in good standing under the laws
of the state of Kansas where the Properties are located.
4.2 AUTHORITY. Seller has full power and authority and has taken all
requisite action, corporate or otherwise, to authorize it to carry on
its business as currently conducted, to enter into this Agreement and
to perform its obligations under this Agreement.
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4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
on behalf of Seller and constitutes the legal, valid and binding
obligation of Seller enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered
by Seller shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Seller enforceable
in accordance with their respective terms.
4.4 CONTRACTS. To the best of Seller's knowledge, all material leases,
operating agreements, production sales contracts, farmout agreements
and other contracts or agreements respecting the Properties are
reflected in Exhibit D and can be found either of record in the
counties in which the Properties are located or are reflected or
referenced in Seller's files.
4.5 PREFERENTIAL PURCHASE RIGHTS/CONSENTS. To the best of Seller's
knowledge, Exhibit F sets forth all consents and approvals required to
be obtained for, and all preferential purchase rights exercisable in
connection with, the assignment of the Properties to Buyer.
4.6 LITIGATION AND CLAIMS. To the best of Seller's knowledge, except as
set forth in Exhibit F, no claim, demand, filing, cause of action,
administrative proceeding, lawsuit or other litigation is pending or
threatened that could now or hereafter materially and adversely affect
Buyers ownership, operation or value of any of the Properties.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller that:
5.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and
is qualified to do business in and in good standing under the laws of
the state of Kansas where the Properties are located.
5.2 AUTHORITY. Buyer has full power and authority and has taken all
requisite action, corporate or otherwise, to authorize it to carry on
its business as currently conducted, to enter into this Agreement, to
purchase the Properties on the terms described in this Agreement and to
perform its other obligations under this Agreement.
5.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
on behalf of Buyer, and constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered
by Buyer shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their respective terms.
5.4 DUE DILIGENCE. Buyer represents that it has performed, or will
perform before Closing, sufficient review and due diligence with
respect to the Properties, including, without limitation, reviewing
well data and other files and performing all on site and other
necessary evaluations, assessments and other tasks relating to the
Properties, so as to enable Buyer to acquire the Properties under the
terms of this Agreement.
5.5 BASIS OF BUYER'S DECISION. Buyer represents that by reason of its
knowledge and experience in the evaluation, acquisition, and operation
of oil and gas properties, Buyer has evaluated the merits and risks of
purchasing the Properties from Seller and has formed an opinion based
solely on Buyer's knowledge and experience and not on any
representations or warranties by Seller. ANY AND ALL INFORMATION, DATA
OR OTHER MATERIALS FURNISHED TO BUYER BY SELLER CONCERNING THE
PROPERTIES, AND THE OPERATIONS THEREOF, HAS BEEN OR SHALL BE FURNISHED
SOLELY FOR BUYER'S CONVENIENCE, AND SHALL NOT CONSTITUTE A
REPRESENTATION OR
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WARRANTY OF ANY KIND BY SELLER. ANY RELIANCE ON OR USE OF SUCH
INFORMATION, DATA OR OTHER MATERIALS SHALL BE AT BUYER'S SOLE RISK.
6. COVENANTS OF SELLER.
6.1 CONDUCT OF BUSINESS PENDING CLOSING. Seller covenants that from the
date hereof to the Closing Date, except (a) as provided herein, (b) as
required by any obligation, agreement, lease, contract, or instrument
referred to in any exhibit hereto, or (c) as otherwise consented to in
writing by Buyer, Seller will:
6.1.1 Not (a) act in any manner with respect to
the Properties other than in the normal,
usual and customary manner, consistent with
prior practice; (b) dispose of, encumber or
relinquish any of the Properties (other than
relinquishments resulting from the
expiration of leases that Seller has no
right or option to renew); (c) conduct
capital or workover projects with respect to
the Properties in excess of $25,000.00,
except those previously discussed with and
approved in a separate writing by Buyer or
when required by an emergency and except as
may be required to meet Seller's contractual
obligations.
6.1.2 Use its best efforts to preserve
relationships with all third parties having
business dealings with respect to the
Properties.
6.1.3 Notify Buyer of the discovery by Seller that
any representation or warranty of Seller
contained in this Agreement is or becomes
materially untrue or will be materially
untrue on the Closing Date.
6.2 ACCESS. Seller shall afford to Buyer and its authorized
representatives reasonable access, at Buyer's sole risk and expense and
during normal business hours, from the date hereof until the Closing
Date, to (a) the Properties operated by Seller; PROVIDED, HOWEVER, THAT
BUYER SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER FROM
AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, OBLIGATIONS, CLAIMS,
LIABILITIES, EXPENSES AND CAUSES OF ACTION ARISING FROM BUYER'S
INSPECTION OF THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, CLAIMS FOR
PERSONAL INJURIES OR DEATH, PROPERTY DAMAGE, COURT COSTS AND REASONABLE
ATTORNEYS' FEES, and (b) Seller's operating, accounting, contract,
corporate and legal files, records, materials, data and information
regarding the Properties ("Data"); provided, however, that Data shall
not include (a) any legal materials the disclosure of which Seller
determines would jeopardize the assertion of a privilege in ongoing or
anticipated litigation with third parties, (b) information not included
in files specifically identified to the Properties in accordance with
Seller's existing filing and data management system, or (c)
information, the disclosure of which would violate any confidentiality
agreement to which Seller is bound.
6.3 RELEASE OF GEOLOGIC AND GEOPHYSICAL INFORMATION. Prior to and
following Closing, Buyer shall be allowed to review and copy geologic
and geophysical information, maps, and data in Seller's files
attributable to the Properties to the extent Seller may disclose to
Buyer such materials without violating any confidentiality agreements
or licenses. Buyer agrees that it will obtain and use such materials at
its own risk and expense, and further, Buyer releases Seller from any
and all liability and agrees to release, defend, indemnify and hold
harmless Seller from all claims, demands, judgments, costs, and
expenses (including courts costs and reasonable attorneys'
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fees) brought by Buyer and/or all other parties arising from the use,
possession or transfer of such information without limit as to time.
6.4 CLOSING CONDITIONS. Seller shall cause all the representations and
warranties of Seller contained in this Agreement to be true and correct
in all material respects on and as of the Closing Date. To the extent
the conditions precedent to the obligations of Buyer are within the
control of Seller, Seller shall cause such conditions to be satisfied
on or prior to the Closing Date and, to the extent the conditions
precedent to the obligations of Buyer are not within the control of
Seller, Seller shall use commercially reasonable efforts to cause such
conditions to be satisfied on or prior to the Closing Date.
7. COVENANTS OF BUYER.
7.1 CLOSING CONDITIONS. Buyer shall cause all the representations and
warranties of Buyer contained in this Agreement to be true and correct
on and as of the Closing Date. To the extent the conditions precedent
to the obligations of Seller are within the control of Buyer, Buyer
shall cause such conditions to be satisfied on or prior to the Closing
Date and, to the extent the conditions precedent to the obligations of
Seller are not within the control of Buyer, Buyer shall use
commercially reasonable efforts to cause such conditions to be
satisfied on or prior to the Closing Date.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of
Seller to be performed at Closing are subject to the fulfillment (or waiver by
Seller in its sole discretion) before or at Closing, of each of the following
conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
by Buyer set forth in this Agreement shall be true and correct in all
material respects at and as of the Closing as though made at and as of
the Closing; and Buyer shall have performed and complied with, in all
material respects, all covenants and agreements required to be
performed and satisfied by Buyer at or prior to the Closing. If, at
Closing, Seller has knowledge that Buyer is in breach of any part of
this Section 8.1, it shall disclose such to Buyer in order to afford
Buyer an opportunity to correct same.
8.2 NO LITIGATION. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the
transactions contemplated by this Agreement or seeking substantial
damages against Seller in connection therewith.
8.3 APPROVALS. All known approvals required to be obtained for the
assignment of the Properties to Buyer shall have been obtained or
waived or shall have expired without being exercised, except for those
approvals which are customarily obtained after closing.
8.4 CLOSING OBLIGATIONS. Buyer shall contemporaneously perform its
closing obligations under Section 11.2.
8.5 ANTITRUST LAWS. Seller and Buyer shall have fully complied with
Title 11 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and rules and regulations promulgated pursuant thereto, to the extent
that said Act, rules and regulations are applicable to the transactions
contemplated by this Agreement. Any required approvals or
authorizations pursuant to the Act shall have been received, and any
required waiting period shall have expired.
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9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of
Buyer to be performed at Closing are subject to the fulfillment (or waiver by
Buyer in its sole discretion) before or at Closing, of each of the following
conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
by Seller set forth in this Agreement shall be true and correct in all
material respects at and as of the Closing as though made at and as of
the Closing; and Seller shall have performed and complied with, in all
material respects, all covenants and agreements required to be
performed and satisfied by Seller at or prior to the Closing. If, at
Closing, Buyer has knowledge that Seller is in breach of any part of
this Section 9.1, it shall disclose such to Seller in order to afford
Seller an opportunity to correct same.
9.2 NO LITIGATION. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the
transactions contemplated by this Agreement or seeking substantial
damages against Buyer in connection therewith.
9.3 CONSENTS. All known approvals required to be obtained for the
assignment of the Properties to Buyer shall have been obtained or
waived or shall have expired without being exercised, except for those
approvals which are customarily obtained after closing.
9.4 CLOSING OBLIGATIONS. Seller shall contemporaneously perform its
closing obligations under Section 11.2.
9.5 ANTITRUST LAWS. Seller and Buyer shall have fully complied with
Title 11 of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and rules and regulations promulgated pursuant thereto, to the extent
that said Act, rules and regulations are applicable to the transactions
contemplated by this Agreement. Any required approvals or
authorizations pursuant to the Act shall have been received, and any
required waiting period shall have expired.
10. TITLE MATTERS.
10.1 TITLE ADJUSTMENT. There shall not exist at Closing any uncured
Title Defects which exceed the Title Basket Value (as defined in
Section 10.3(b) below) unless adjustments therefor have been made
pursuant to the further terms of this Agreement or Buyer has elected to
waive any such Title Defects. Buyer shall notify Seller in writing of
any claimed Title Defects not less than ten (10) business days prior to
Closing ("Title Defects Notice"). The Title Defects Notice shall (a)
set forth in reasonable detail the Well and/or Lease with respect to
which a claimed Title Defect is made, (b)the nature of such claimed
Title Defect, and (c) Buyer's proposed calculation of the Defect Value
of each claimed Title Defect. Any Title Defect that is not identified
in the Title Defects Notice shall thereafter be deemed a Permitted
Encumbrance and be forever waived and expressly assumed by Buyer. As
used in this Agreement, the term:
10.1.1 "Title Defect" shall mean, with respect to
Seller's interest in the Leases and Wells as
set forth on the attached Exhibits, any
lien, mortgage, pledge, claim, charge,
option, defect, requirement for consent to
assignment and other encumbrance which would
apply to the transaction contemplated
hereby, other than Permitted Encumbrances,
and entitle the owner thereof to receive a
percentage of all proceeds of production
therefrom less than the Net Revenue Interest
of Seller set forth on Exhibit A for such
Well. For purposes of this Agreement, in
evaluating the significance of a fact,
circumstance or condition to determine
whether the same constitutes a Title Defect,
due consideration shall be given to the
length of time that the
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particular Property has been producing
hydrocarbon substances and whether such
fact, circumstance or condition is of the
type expected to be encountered in the area
involved and is usual and customarily
acceptable to reasonable and prudent
operators, interest owners, and purchasers
engaged in the business of the ownership,
development and operation of oil and gas
properties. The Wells and Leases are subject
to various limitations of depth, formation
and/or hydrocarbon substance which shall not
be considered Title Defects unless such
limitations adversely impact Buyer's
obligation for operating expenses or Buyer's
ability to receive its share of the
percentage of production proceeds depicted
in Exhibit A.
10.1.2 "Net Revenue Interest" shall mean Seller's
interest in and to all production of oil,
gas and other minerals saved, produced and
sold from the Leases and Wells noted on
Exhibits A and B after giving effect to all
valid lessor's royalties, overriding
royalties, production payments, carried
interests, liens and other encumbrances or
charges against production therefrom.
10.1.3 "Working Interest" shall mean, Seller's
interest in and to the full and entire
leasehold estate created under and by virtue
of the Leases and all rights and obligations
of every kind and character appurtenant
thereto or arising therefrom, without regard
to any valid lessor's royalty, overriding
royalties, production payments, carried
interests, liens, or other encumbrances or
charges against production therefrom insofar
as such interest in said leasehold estate is
burdened with the obligation to bear and pay
costs of operations.
10.1.4 "Permitted Encumbrances" shall mean:
(a) Lessors' royalties, overriding royalties,
reversionary interests and similar burdens if the net
cumulative effect of the burdens does not operate to
reduce the interest of Seller with respect to all oil
and gas produced from any Well below the Net Revenue
Interest for such Well set forth in Exhibit A;
(b) Division orders and sales contracts terminable
without penalty upon no more than six months notice
to the purchaser;
(c) Preferential rights to purchase and required
third party consents to assignment and similar
agreements with respect to which waivers or consents
are obtained from the appropriate parties, or the
appropriate time period for asserting any such right
has expired without an exercise of the right;
(d) Materialman's, mechanic's, repairman's,
employee's, contractor's, operators, tax, and other
similar liens or charges arising in the ordinary
course of business for obligations that are not
delinquent or that will be paid and discharged in the
ordinary course of business or if delinquent, that
are being contested in good faith by appropriate
action of which Buyer is notified in writing before
Closing;
(e) All rights to consent by, required notices to,
filings with, or other actions by governmental
entities in connection with the sale or conveyance of
oil and gas leases or interests therein if they are
routinely obtained subsequent to the sale or
conveyance;
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(f) Easements, rights-of-way, servitudes, permits,
surface leases and other rights in respect of surface
operations that do not materially interfere with the
oil and gas operations to be conducted on any Well or
Lease;
(g) All operating agreements, unit agreements, unit
operating agreements, pooling agreements and pooling
designations affecting the Properties that are set
forth in Exhibit D and are either of record in
Seller's chain of title or reflected or referenced in
Seller's files;
(h) Conventional rights of reassignment prior to
release or surrender requiting notice to the holders
of the rights;
(i) All rights reserved to or vested in any
governmental, statutory or public authority to
control or regulate any of the Properties in any
manner, and all applicable laws, rules and orders of
governmental authority;
(j) The terms and conditions of the Leases, and of
all agreements that are set forth in Exhibit D and
are of record in Seller's chain of title or reflected
or referenced in Seller's files;
(k) All other liens, charges, encumbrances,
contracts, agreements, instruments, obligations,
defects and irregularities affecting the Properties
which individually or in the aggregate are not such
as to interfere materially with the operation, value
or use of any of the Properties, do not prevent Buyer
from receiving the proceeds of production from any of
the Wells, do not reduce the interest of Seller with
respect to all oil and gas produced from any Well
below the Net Revenue Interest set forth in Exhibit A
for such Well, and/or do not materially increase the
portion of the costs and expenses relating to any
Well that Seller is obligated to pay above the
Working Interest set forth in Exhibit A for such
Well;
(l) Any Title Defect relating to a Well or Lease that
has existed for a period of at least five years
immediately prior to the Effective Date (simply by
virtue of its existence and not upon the occurrence
of a certain event) of giving a third party the right
to take any action or assert any claim that could
affect Seller's right to receive income or revenues
from the Well to which such defect relates, and with
respect to which Seller has been receiving income
from the affected Well without contest or under
notice of adverse claim for a period of at least five
years immediately prior to the Effective Date; and
(m) Any Title Defects Buyer may have expressly waived
in writing or which are deemed to have become
Permitted Encumbrances under Section 10.1.
10.1.5 "Defect Value" shall mean the amount by
which the Allocated Value of any Well is
reduced as a result of each Title Defect
which is accepted by Seller or determined to
be a Title Defect pursuant to Section 10.2.
10.1.6 "Allocated Value" shall mean, with respect
to any Well, the value specified therefor on
Exhibit A attached hereto.
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10.2 DETERMINATION OF TITLE DEFECTS AND DEFECT VALUES. Within five (5)
business days after Sellers receipt of the Title Defects Notice, Seller
shall notify Buyer whether Seller agrees with Buyer's claimed Title
Defects and/or the proposed Defect Values therefor ("Seller's
Response"). If Seller does not agree with any claimed Title Defect
and/or the proposed Defect Value therefor, then the parties shall enter
into good faith negotiations and shall attempt to agree on such
matters. If the parties cannot reach agreement concerning either the
existence of a Title Defect or a Defect Value within ten (10) business
days after Buyer's receipt of Seller's Response, upon either party's
request, the parties shall mutually agree on and employ an attorney
experienced in title examination in the state where the Properties are
located ("Title Consultant") to resolve all points of disagreement
relating to Title Defects and Defect Values; provided, however, that if
at any time the Title Consultant so chosen fails or refuses to perform
hereunder, a new Title Consultant shall be chosen by the parties. The
cost of any such Title Consultant shall be borne 50% by Seller and 50%
by Buyer. Each party shall present a written statement of its position
on the Title Defect and/or Defect Value in question to the Title
Consultant within five (5) business days after the Title Consultant is
selected, and the Title Consultant shall make a determination of all
points of disagreement in accordance with the terms and conditions of
this Agreement within ten (10) business days of receipt of such
position statements. The determination by the Title Consultant shall be
conclusive and binding on the parties, and shall be enforceable against
any party in any court of competent jurisdiction. If necessary, the
Closing Date shall be deferred only as to those Properties affected by
any unresolved disputes regarding the existence of a Title Defect
and/or the Defect Value until the consultant has made a determination
of the disputed issues with respect thereto and all subsequent dates
and required activities with respect to any such Properties having
reference to the Closing Date shall be correspondingly deferred;
provided, however, that, unless Seller and Buyer mutually agree to the
contrary, the Closing Date shall not be deferred in any event for more
than sixty (60) days beyond the original Closing Date. All Properties
as to which no such dispute(s) exist shall be conveyed to Buyer subject
to the terms of this Agreement at Closing. Once the Title Consultant's
determination has been expressed to both parties, Seller shall have
five (5) business days in which to advise Buyer in writing which of the
options available to Seller under Section 10.3 below Seller elects
regarding each of the Properties as to which the Title Consultant has
made a determination.
10.3 REMEDIES FOR TITLE DEFECT. Seller shall have the right, but not
the obligation, to cure any Title Defect accepted by Seller or
determined to be a Title Defect pursuant to Section 10.2 above. With
respect to any Title Defect that Seller elects not to cure or that
Seller fails to cure at or prior to the Closing, Seller shall have the
option to:
10.3.1 exclude the Property including pipelines and
other personal property necessary to operate
the particular well(s) subject to the Title
Defect from this Agreement, in which event
the Purchase Price shall be reduced by the
Allocated Value of such Property, or
10.3.2 sell the Property subject to such Title
Defect to Buyer and the Purchase Price shall
be reduced by the Defect Value for such
Title Defect. Any deductions shall first
come from the deferred payments
10.3.3 No downward adjustment of the Purchase Price
on account of Title Defects shall occur
unless:
(a) the Defect Value determined in accordance with
this Article 10 of an individual Title Defect exceeds
$2,500.00, and
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(b) the aggregate amount of the Defect Values
determined in accordance with this Article 10 exceeds
three percent (3%) of the Purchase Price ("Title
Basket Value").
The amount of any such downward adjustment shall be the difference
between the aggregate amount of Defect Values and the Title Basket
Value. Should the aggregate Defect Values and/or the Allocated Values
of excluded Properties exceed six percent (6%) of the Purchase Price,
then Seller or Buyer shall have the option to terminate this Agreement,
in which case neither party shall have any further liability or
obligation to the other hereunder except as regards obligations imposed
by any confidentiality agreement, which shall survive such termination
and be enforceable in accordance with the terms thereof,'and Seller
will promptly refund the Performance Deposit.
10.4 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGN. Seller shall
make a good faith effort to insure that all preferential purchase
rights and consents to assign arising in connection with the assignment
of the Properties to Buyer shall have been waived or obtained or shall
have expired before or by the time of Closing; except those which are
customarily obtained or received after Closing.
11. CLOSING.
11.1 THE CLOSING. The sale and purchase of the Properties pursuant to
this Agreement shall be consummated (the "Closing") in Wichita, Kansas
at the offices of Lario Oil & Gas Company on or before December 24,
1999 (the Closing Date).
11.2 CLOSING OBLIGATIONS. At the Closing, the following events shall
occur, each event under the control of one party hereto being a
condition precedent to the events under the control of the other party,
and each event being deemed to have occurred simultaneously with the
other events:
11.2.1 Seller shall execute and deliver to Buyer
one or more instruments of assignment, in
substantially the form of the Assignment,
Bill of Sale and Conveyance set forth as
Exhibit F hereto. Buyer shall record the
Assignment as soon as reasonably practicable
after the Closing and furnish Seller with a
recorded copy thereof within thirty (30)
days of such recordation.
11.2.2 Buyer shall deliver to Seller in immediately
available funds (wire transfer), the
Preliminary Amount. The "Preliminary Amount"
shall be that amount to be determined by
Seller prior to the Closing Date as an
estimate of the final computation of the
Final Purchase Price less the Performance
Deposit. Seller shall provide Buyer a
closing statement reflecting the Preliminary
Amount at least two (2) business days prior
to the Closing.
11.2.3 Seller and Buyer shall execute, acknowledge
and deliver division orders, transfer orders
or letters in lieu thereof directing all
payors of the proceeds of production from
the Properties to make payment of proceeds
attributable to such production occurring on
or after the Effective Date to Buyer.
11.2.4 Seller shall deliver to the Buyer possession
of the Properties at the Closing.
12. POST-CLOSING ADJUSTMENTS.
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12.1 FINAL SETTLEMENT STATEMENT. After the Closing Date, Seller shall
prepare, in accordance with this Agreement and with generally accepted
accounting principles consistently applied, a statement ("Final
Settlement Statement"), a copy of which shall be delivered by Seller to
Buyer no later than ninety (90) days after the Closing Date, setting
forth each adjustment to the Purchase Price necessary to determine the
Final Purchase Price and showing the calculation of such adjustments in
accordance with Article 3. Buyer shall have forty-five (45) days after
receipt of the Final Settlement Statement to review such statement and
to provide written notice to Seller of Buyer's objection to any item on
the statement. Buyer's notice shall clearly identify the item(s)
objected to and the reasons and support for the objection(s). If Buyer
does not provide written objection(s) within the 45-day period, the
Final Settlement Statement shall be deemed correct and shall not be
subject to further adjustment. If Buyer provides written objection(s)
within the 45-day period, the Final Settlement Statement shall be
deemed correct with respect to the items not objected to. Buyer and
Seller shall meet to negotiate and resolve the objections within
fifteen (15) days of Seller's receipt of Buyer's objections. If Buyer
and Seller agree on all objections, the adjusted Final Settlement
Statement shall be deemed correct and shall not be subject to Further
adjustment. Any items not agreed to at the end of the 15-day period
may, at either party's request, be resolved by arbitration in
accordance with Section 12.2 below.
12.2 ARBITRATION. If Seller and Buyer cannot agree upon the Final
Settlement Statement, the firm of KPMG Peat Marwick LLP shall act as an
arbitrator and decide all points of disagreement with respect to the
Final Settlement Statement. The decision of KPMG Peat Marwick LLP on
all such points shall be binding upon the parties. The costs and
expenses of KPMG Peat Marwick LLP shall be borne fifty percent (50%) by
Seller and fifty percent (50%) by Buyer.
12.3 PAYMENT OF FINAL PURCHASE PRICE. If the Final Purchase Price is
more than the Preliminary Amount, Buyer shall pay such difference to
Seller in immediately available funds within five (5) business days
after the parties have agreed upon the Final Settlement Statement. If
the Final Purchase Price is less than the Preliminary Amount, Seller
shall pay such difference to Buyer in immediately available funds
within five (5) business days after the parties have agreed upon the
Final Settlement Statement.
13. ASSUMPTION OF CERTAIN OBLIGATIONS. Except as provided for in Section
18.6.1(a), at Closing, Buyer shall assume its share of all costs and liabilities
and discharge its share of all obligations of Seller under all leases, operating
agreements, production sales contracts, farmout agreements and other contracts
or agreements respecting the Properties or relating to the ownership or
operation of the Properties from and after the Effective Date.
14. LIMITATION OF WARRANTIES. Anything in this Agreement to the contrary
notwithstanding, the Properties are being sold by Seller to Buyer without
recourse, Covenant, or warranty of any kind, express, implied, or statutory,
WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
SELLER CONVEYS THE PROPERTIES AS-IS, WHERE-IS AND WITH ALL FAULTS AND EXPRESSLY
DISCLAIMS AND NEGATES:
(a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
(b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, AND
(c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS,
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SELLER ALSO EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY AT
COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE ACCURACY OF ANY OF THE
INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES OR THE
VALUE OF THE PROPERTIES BASED THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY
OF THE PROPERTIES. THIS DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO ANY
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE VOLUMES AND PRICES BUYER
AND SELLER ARE OR WILL BE ENTITLED TO RECEIVE FROM PRODUCTION OF OIL, GAS OR
OTHER SUBSTANCES FROM THE PROPERTIES, IT BEING UNDERSTOOD THAT ALL RESERVE,
PRICE AND VALUE ESTIMATES UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN
DERIVED BY INDIVIDUAL EVALUATION OF BUYER.
THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER AND BUYER IN ARTICLES 4 AND 5
SHALL NOT SURVIVE CLOSING. AFTER CLOSING, NEITHER PARTY SHALL HAVE ANY RIGHTS OR
CLAIMS AGAINST THE OTHER PARTY BASED UPON THE BREACH OF ANY SUCH REPRESENTATIONS
OR WARRANTIES.
15. CROSS-INDEMNIFICATION. Except as expressly limited elsewhere in this
Agreement:
15.1 Buyer agrees to indemnify and hold Seller harmless from and
against any and all liability, loss, cost and expense (including,
without limitation, court costs and reasonable attorneys' fees) that
are attributable to the interest in the Properties conveyed to Buyer
and are attributable to periods of time on or after the Effective Date
or that are attributable to a breach by Buyer of any of its surviving
representations, warranties or covenants hereunder, and
15.2 Seller agrees to indemnify and hold Buyer harmless from and
against any and all liability, loss, cost and expense (including,
without limitation, court costs and reasonable attorneys' fees) that
are attributable to the interest in the Properties conveyed to Buyer
and are attributable to periods of time before the Effective Date or
that are attributable to a breach by Seller of any of its surviving
representations, warranties or covenants hereunder.
16. CASUALTY LOSS. Prior to Closing, Seller shall promptly notify Buyer of
any Casualty Loss of which Seller becomes aware. "Casualty Loss" shall mean,
with respect to all or any material portion of a Property, any destruction by
fire, blowout or other casualty (above or below the ground) or any taking, or
pending or threatened taking, in condemnation or under the right to eminent
domain of any Property or portion thereof occurring between the time this
Agreement is executed and the Closing Date. If any Casualty Loss occurs, Seller
shall transfer to Buyer its interest in such Property notwithstanding such
Casualty Loss and transfer to Buyer its interest in such Property insurance
proceeds, claims, awards and other payments arising out of such Casualty Loss.
Seller shall not voluntarily compromise, settle or adjust any amounts payable by
reason of any Casualty Loss without first obtaining the written consent of
Buyer.
17. TERMINATION AND REMEDIES.
17.1 TERMINATION. Without limiting any other legal or equitable
remedies available to Seller, if the Closing has not occurred on or
prior to December 24, 1999, and Seller is not responsible for the delay
in closing, Seller may terminate this Agreement, in which case it shall
give written notice of the termination to Buyer and Seller shall retain
the Performance Deposit.
17.2 SOLE REMEDY OF BUYER PRIOR TO CLOSING. If at any time prior to
Closing, a material representation or warranty made herein by Seller is
incorrect or if Seller fails to fully and timely comply with any of
Seller's obligations as set forth herein or as required by applicable
law, Buyer's
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sole and exclusive remedy against Seller shall be to terminate this
Agreement (unless an alternative remedy shall be mutually agreed upon
between Buyer and Seller); provided, however, if such a breach consists
of Seller intentionally refusing to execute and deliver the documents
referred to in Section 11.2, Buyer may seek injunctive relief requiring
Seller to execute and deliver such documents in accordance with the
terms of this Agreement. In the event this Agreement is terminated in
accordance with this Section 17.2, Seller will promptly refund the
Performance Deposit.
18. ENVIRONMENTAL MATTERS.
18.1 PRESENCE OF WASTES, NORM, HAZARDOUS SUBSTANCES, AND ASBESTOS.
Buyer acknowledges that the Properties have been used to explore for,
develop and produce oil and gas, and that spills of wastes, crude oil,
produced water, hazardous substances, and other materials may have
occurred thereon. Additionally, the Properties, including production
equipment, may contain asbestos, hazardous substances, or Naturally
Occurring Radioactive Material ("NORM"). NORM may affix or attach
itself to the inside of wells, materials, and equipment as scale or in
other forms, and NORM-containing material may have been buried or
otherwise disposed of on the Properties. Special procedures may be
required for remediating, removing, transporting, and disposing of
asbestos, NORM, hazardous substances, and other materials from the
Property, and Buyer assumes its share of all liability for the
assessment, remediation, removal, transportation, and disposal of these
materials and associated activities in accordance with the applicable
rules, regulations, and requirements of governmental agencies.
18.2 ADVERSE ENVIRONMENTAL CONDITION. As used in the following
Sections, "Adverse Environmental Condition" means:
(a) any contamination (exclusive of NORM present in or on
any Property) or condition exceeding
currently-allowed regulatory limits and not otherwise
permanently authorized by permit or law, resulting
from any discharge, release, disposal, production,
storage, treatment, or any other activities on, in or
from any Property, or the migration or transportation
from other lands to any Property, prior to the
Effective Date, of any wastes, pollutants,
contaminants, hazardous materials or other materials
or substances subject to regulation relating to the
protection of the environment, including, but not
limited to, the Clean Air Act, the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the Federal Water Pollution
Control Act, the Safe Drinking Water Act, the Toxic
Substance Control Act, The Hazardous and Solid Waste
Amendments Act of 1954, the Superfund Amendments and
Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, the Clean Water Act, the National
Environmental Policy Act, the Endangered Species Act,
the Fish and Wildlife Coordination Act, the National
Historic Preservation Act, and the Oil Pollution Act
of 1990, as well as any state and local regulation or
law governing the same, similar or related matters,
and
(b) any such contamination or condition temporarily
authorized by permit fee agreement or other
arrangement.
18.3 ENVIRONMENTAL ASSESSMENT. After the execution of this Agreement,
Buyer shall have the opportunity to conduct at its sole risk and
expense an environmental assessment of the Properties. Seller will
provide reasonable access for this purpose to Properties operated by
Seller; for any Property not operated by Seller, however, Buyer must
contact the operator of any such non- operated Property directly. Buyer
or any of its representatives and agents must comply with Seller's
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environmental and safety rules and policies while on Seller's
Properties. Buyer agrees it will not disclose any information obtained
in its environmental assessment to third parties unless agreed to in
writing by Seller or unless such disclosure is expressly required by
applicable law or regulation or is compelled pursuant to legal process
of any court or governmental authority. Buyer will notify Seller in
advance of any such disclosure and will furnish Seller copies of all
materials to be disclosed prior to any disclosure thereof to third
parties. As soon as possible after Buyer's receipt thereof, Buyer shall
forward to Seller copies of all reports, data, analysis, test results,
remediation cost estimates, and recommended remediation procedures or
other information concerning or derived from Buyer's environmental
assessment.
18.4 NOTICE OF ADVERSE ENVIRONMENTAL CONDITIONS. Buyer shall notify
Seller in writing of any claimed Adverse Environmental Condition not
less than ten (10) business days prior to Closing ("Environmental
Defects Notice"). The Environmental Defects Notice shall (a) set forth
in reasonable detail the Well and/or Lease with respect to which a
claimed Adverse Environmental Condition is made, (b) the nature of such
claimed Adverse Environmental Condition, and (c) Buyer's proposed
calculation of the cost to remediate each claimed Adverse Environmental
Condition ("Remediation Value") Buyer shall absolutely and forever
waive its right to assert any claim or liability against Seller arising
out of or in any way related to any Adverse Environmental Condition not
set forth in the Environmental Defects Notice.
18.5 DETERMINATION OF ADVERSE ENVIRONMENTAL CONDITIONS AND REMEDIATION
VALUES. Within five (5) business days after Seller's receipt of the
Environmental Defects Notice, Seller shall notify Buyer whether Seller
agrees with Buyer's claimed Adverse Environmental Conditions and/or the
Remediation Value ("Seller's Environmental Response"). If Seller does
not agree with any claimed Adverse Environmental Condition and/or the
Remediation Value, then the parties shall enter into good faith
negotiations and shall attempt to agree on such matters. If the parties
cannot reach agreement concerning either the existence of an Adverse
Environmental Condition or the Remediation Value within ten (10)
business days after Buyers receipt of Seller's Environmental Response,
upon either party's request, the parties shall mutually agree on a
consultant experienced in environmental matters in the state where the
Properties are located ("Environmental Consultant") to resolve all
points of disagreement with respect to such matters. If at any time any
Environmental Consultant so chosen fails or refuses to perform
hereunder, a new Environmental Consultant shall be chosen by the
parties. The cost of any such consultant shall be borne 50% by Seller
and 50% by Buyer. Each Party shall present a written statement of its
position on the Adverse Environmental Condition and/or the Remediation
Value in question to the consultant within five (5) business days after
the Environmental Consultant is selected, and the Environmental
Consultant shall make a determination of all points of disagreement in
accordance with the terms and conditions of this Agreement within ten
(10) business days of receipt of such position statements. The
determination by the Environmental Consultant shall be conclusive and
binding on the parties, and shall be enforceable against any party in
any court of competent jurisdiction. If necessary, the Closing Date
shall be deferred only as to those Properties affected by any
unresolved disputes regarding the existence of a Adverse Environmental
Condition and/or the Remediation Value until the Environmental
Consultant has made a determination of the disputed issues with respect
thereto and all subsequent dates and required activities with respect
to any such Properties having reference to the Closing Date shall be
correspondingly deferred; provided, however, that, unless Seller and
Buyer mutually agree to the contrary, the Closing Date shall not be
deferred in any event for more than sixty (60) days beyond the original
Closing Date. All Properties as to which no such dispute(s) exist shall
be conveyed to Buyer subject to the terms of this Agreement at Closing.
Once the Environmental Consultant's determination has been expressed to
both parties, Seller shall have five (5) business days in which to
advise Buyer in writing which of the options available to Seller under
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Section 19.6 below Seller elects regarding each of the Properties as to
which the consultant has made a determination.
18.6 REMEDIES FOR ADVERSE ENVIRONMENTAL CONDITIONS.
18.6.1 As to any Adverse Environmental Condition
accepted by Seller or determined to be an
Adverse Environmental Condition, Seller
shall have the election to:
(a) remediate such Adverse Environmental Condition at
Seller's sole cost in accordance with applicable
environmental laws, and there shall be no adjustment
to the Purchase Price in respect of such Adverse
Environmental Condition and the provisions of Section
18.7 shall thereafter apply in all respects;
(b) reduce the Purchase Price by the applicable
remediation Value, which in no event shall exceed the
Allocated Value of the Unit and/or Well affected by
such Adverse Environmental Condition, in which event
Seller shall have no other or further obligation or
liability in respect of such Adverse Environmental
Condition and the provisions of Section 18.7 shall
thereafter apply in all respects; or
(c) delete from this Agreement the Property that
contains the Adverse Environmental Condition and
adjust the Purchase Price by the Allocated Value of
such Property.
18.6.2 No downward adjustment of the Purchase Price
on account of Adverse Environmental
Conditions shall occur unless:
(a) the Remediation Value determined in accordance
with this Article 19 of an individual Adverse
Environmental Condition exceeds $5,000.00, and
(b) unless the aggregate sum of all Remediation
Values exceeds three percent (3%) of the Purchase
Price (Environmental Basket Value) and the amount of
downward adjustment shall be the difference between
the aggregate sum of all Remediation Values and the
Environmental Basket Value.
Should the aggregate sum of the Remediation Values
exceed six percent (6%) of the Purchase Price, then
Seller or Buyer shall have the option to terminate
this Agreement, in which case neither party shall
have any further liability or obligation to the other
hereunder except as regards obligations imposed by
any confidentiality agreement, which shall survive
such termination and be enforceable in accordance
with the terms thereof, and Seller will promptly
refund the Performance Deposit.
18.6.3 If Seller elects 18.6.1(a) above, Seller
will exercise all reasonable efforts and
diligence to complete the remediation work
within six (6) months of the Closing Date,
but any failure by Seller to complete such
remediation efforts by such time shall not
relieve Seller of its duty to satisfy its
obligation hereunder. During such
remediation work, Seller shall hold the
Remediation Value in escrow.
18.7 BUYER'S INDEMNIFICATION OF ADVERSE ENVIRONMENTAL CONDITIONS.
Notwithstanding anything contained in Article 16, except for the costs
associated with Seller's
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remediation of any Adverse Environmental Conditions pursuant to Section
18.6.1(a) above, Buyer and Seller, as to their respective interests,
shall release, defend, indemnify, and hold harmless the other party
from and against any and all claims, demands, fines/penalties, causes
of action, liabilities and obligations, and all costs and expenses
(including, without limitation, reasonable attorneys' fees and court
costs) associated with all Adverse Environmental Conditions, including,
without limitation, any such conditions arising out of or relating to
any discharge, release, disposal, production, storage, treatment or any
activities on, in or from its interest in the Properties, or the
migration or transportation from any other lands to the Properties,
whether before or after the Effective Date, of materials or substances
that are at present, or become in the future, subject to regulation
under federal, state or local laws or regulations, whether such laws or
regulations now exist or are hereafter enacted, INCLUDING, WITHOUT
LIMITATION, ANY CLAIMS, DEMANDS, CAUSES OF ACTION, LIABILITIES, OR
OBLIGATIONS ARISING IN WHOLE OR IN PART FROM THE SOLE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF SELLER. BUYER HEREBY RELEASES SELLER
FORM AND AGAINST ANY AND ALL CLAIMS FOR CONTRIBUTION UNDER CERCLA
AND/OR ANY OTHER ENVIRONMENTAL LAW OR REGULATION.
19. SELLER'S ELECTION TO EFFECT IRC SECTION 1031 EXCHANGE. In the event Seller
so elects, Buyer agrees to accommodate Seller in effecting a tax-deferred
exchange under Internal Revenue code Section 1031, as amended. Seller shall have
the right to elect this tax-deferred exchange, Buyer agrees to execute
additional escrow instructions, documents, agreements, or instruments to effect
the exchange, provided that Buyer shall incur no additional costs, expenses,
fees or liabilities as a result of or connected with the exchange.
20. OPERATING AGREEMENT. Attached hereto as Exhibit "E" is an Operating
Agreement that shall govern and control operations of all Wells listed on
Exhibit "A" that are operated by Seller. This Operating Agreement shall become
effective upon the effective date. Buyer hereby acknowledges this Operating
Agreement and agrees to be bound accordingly.
21. FURTHER ASSURANCES. After the Closing, Seller and Buyer shall execute,
acknowledge, and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be reasonably necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document, certificate or other instrument required by or necessary for
the transactions contemplated by this Agreement that are customarily obtained
after Closing, provided that Seller shall not be required to expend any funds to
obtain such approvals and consents.
22. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be delivered personally or by telecopier as follows:
SELLER: Lario Oil & Gas Company
301 South Market Street
Wichita, Kansas 67202
Telephone: (316) 265-561 Fax: (316) 265-5610
Attention: E. D. Stinson
Vice President - Land & Legal
BUYER: Toreador Exploration & Production Inc.
4809 Cole Avenue, Suite 108
Dallas, TX 75205
Telephone: (214) 559-3933 Fax: (214) 559-3945
Attention: Edward C. Marhanka
Vice President - Operations
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or to such other place within the United States of America as either Seller or
Buyer may designate as to themselves by written notice to the other. All notices
given by personal delivery or mail shall be deemed received upon the date of
actual receipt at the appropriate address. Notice given by fax shall be
effective upon actual receipt if received prior to 5 p.m. during normal business
days or at the beginning of the next business day after receipt if received
after 5 p.m. All notices by fax shall be confirmed promptly after transmission,
by certified mail or personal delivery.
23. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas.
24. ASSIGNMENT. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto; it shall not, however, be assignable by Buyer
without Seller's prior written consent.
25. ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
superseding all prior negotiations, discussions, agreements and understandings,
whether oral or written, relating to such subject matter. This Agreement may not
be amended and no rights hereunder may be waived except by a written document
signed by the party to be charged with such amendment or waiver. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereto (whether or not similar) nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
26. HEADINGS. The headings of the articles and sections of this Agreement and
any listing of its contents are for guidance and convenience of reference only
and shall not limit or otherwise affect any of the terms or provisions of this
Agreement. Where the context so admits, words importing the singular number only
shall include the plural, and likewise words importing a gender shall include
any other gender
27. EXPENSES, FEES AND TAXES. Each of the parties hereto shall pay its own fees
and expenses incident to the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby, including broker fees.
Buyer shall be responsible for the cost of all fees for the recording of
transfer documents. All other costs shall be borne by the party incurring them.
Notwithstanding anything to the contrary herein, it is acknowledged and agreed
by and between Seller and Buyer that the Purchase Price excludes any sales taxes
or other taxes in connection with the sale of property pursuant to this
Agreement. If a determination is ever made that a sales tax or other transfer
tax applies, Buyer shall be liable for such tax as well as any applicable
conveyance, transfer and recording fees, and real estate transfer stamps or
taxes imposed on any transfer of property pursuant to this Agreement Buyer shall
release, defend, indemnify and hold harmless Seller with respect to the payment
of any of such taxes, including any interest or penalties assessed thereon.
28. LAWS AND REGULATIONS. From and after the Closing:
28.1 Buyer shall comply with all applicable laws, ordinances, rules and
regulations and shall properly obtain and maintain all permits required
by public authorities with regard to the Properties, and shall provide
and maintain with all applicable regulatory agencies all required
bonds, and
28.2 Buyer shall assume it's share of Seller's obligations with regard
to abandonment of all existing unplugged wells, whether producing or
nonproducing, and abandonment of the leasehold property including,
where applicable, the plugging of wells and the restoration of the
surface as completely as practicable and/or in compliance with all
applicable laws, rules, regulations and in
17
<PAGE> 18
compliance with all leases and other agreements affecting the
Properties, and shall release, defend, indemnify and hold harmless
Seller with respect to any and all of these its share of such
obligations.
The obligations set forth hereinabove shall survive the Closing and Buyer
shall remain liable therefor as regards Seller even if Buyer shall assign,
sell or transfer the Properties to a third party.
32. EXHIBITS. The following Exhibits are incorporated herein and are a part
hereof.
Exhibit A - Wells
Exhibit B - Leases, Right-of-Way, and Easements
Exhibit C - Pipelines and Other Personal Property
Exhibit D - Key Contracts
Exhibit E - Operating Agreement
Exhibit F - Preferential Purchase Rights/Consents
Exhibit G - Litigation and Claims
Exhibit H - Form of Assignment, Bill of Sale and Conveyance
18
<PAGE> 19
Executed as of the date set forth above.
SELLER
Lario Oil & Gas Company
By: /s/ E.D. STINSON
-----------------------------------
E. D. Stinson
Vice President - Land & Legal
BUYER
Toreador Exploration & Production Inc.
By: /s/ G. T. GRAVES
-----------------------------------
G. T. Graves
President
19
<PAGE> 20
EXHIBIT A - WELLS
Attached to and made a part of that certain Purchase and Sale Agreement dated
November 24, 1999, By and Between Seller and Buyer
<TABLE>
<CAPTION>
KNOWN
WELL NAME LIMITS LOCATION COUNTY ST
- ------------------------ ------ ------------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Baker # 15-6 4 15 23 S 34 W Finney KS
Baker # 15-8 4 15 23 S 34 W Finney KS
Barrett # 1 SWD 1 20 22 S 34 W Finney KS
Barrett # 2-20 1 20 22 S 34 W Finney KS
Barrett # 3-20 1,3 20 22 S 34 W Finney KS
Barrett # 4-20 1 20 22 S 34 W Finney KS
Barrett # 6-20 (PUD) 1 20 22 S 34 W Finney KS
Burg # 20-1 1,6 20 22 S 34 W Finney KS
Burg # 20-2 1,6 20 22 S 34 W Finney KS
Burg # 20-3 1,6 20 22 S 34 W Finney KS
Burg # 20-4 1,6 20 22 S 34 W Finney KS
Burg # 20-5 1,6 20 22 S 34 W Finney KS
Burg # 20-6 (PUD) 1,6 20 22 S 34 W Finney KS
Burg, KL # 2-20 2 20 22 S 34 W Finney KS
Burg, KL # 1 2 20 22 S 34 W Finney KS
Burg, KL # 3 2 20 22 S 34 W Finney KS
Burg, KL # 4 2 20 22 S 34 W Finney KS
Joss # 2-36 1 36 23 S 34 W Finney KS
Ruby Jean # 1-34 1,5 34 22 S 34 W Finney KS
Ruby Jean # 2-34 1,5 34 22 S 34 W Finney KS
Ruby Jean # 3-34 1,5 22 S 34 W Fitiney KS
Six M Farms # 23-1 1 23 22 S 34 W Finney KS
Tate # 1 1,6 19 22 S 34 W Finney KS
<CAPTION>
WORKING NET REVENUE ALLOCATED
WELL NAME PRODUCING ZONES INTEREST INTEREST VALUE (M$)
- -------------------- --------------------------- ----- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Baker # 15-6 Morrow/Mississippi 0.75000000 0.65625000 $ 52.457
Baker # 15-8 Mississippi/Morrow 1.00000000 0.79687500 $ 13.978
Barrett # 1 SWD Arbuckle 1.00000000 0.00000000 -0-
Barrett # 2-20 St. Louis/Lansing G 1.00000000 0.74942717 $ 195.883
Barrett # 3-20 Marmalon/Fort Scott 1.00000000 0.81250000 $ 112.407
Barrett # 4-20 St. Louis 1.00000000 0.74942717 $ 429.490
Barrett # 6-20 (PUD) BPO 1.00000000 0.80411475 $ 407.294
APO 1.00000000 0.74942717
Burg # 20-1 Lansing G 1.00000000 0.75255227 $ 146.669
Burg # 20-2 Marmalon/Lansing G 1.00000000 0.75198919 $ 537.047
Burg # 20-3 Miss/Marm/Pwn/Ft Sc/Atoka 1.00000000 0.76875000 $ 166.003
Burg # 20-4 Marrnalon/Morrow/Fort Scott 1.00000000 0.76875002 $ 246.077
Burg # 20-5 Marm/Lnsg H/Pwn/Ft S/Chrk BPO 1.00000000 0.80608278 $ 592.891
APO 1.00000000 0.75255317
Burg # 20-6 (PUD) BPO 1.00000000 0.80608278 $ 161.487
APO 1.00000000 0.75255317
Burg, KL # 2-20 Marm/Lans D/Lans G 0.00000000 0.00312500 $ .496
Burg, KL # 1 Marm/Lans H/Lans G 0.00000000 0.00312500 $ .496
Burg, KL # 3 Lans H/Lans G/Lans D 0.00000000 0.00312500 -0-
Burg, KL # 4 Marm/KC/Lans H/Lans G 0.00000000 0.00312500 $ .496
Joss # 2-36 Council Grove 0.49750000 0.38089844 $ 36.720
Ruby Jean # 1-34 St. Louis/Marmaton/Ft Scott 0.40000000 0.30376090 $ 67.574
Ruby Jean # 2-34 Lansing 0.40000000 0.30376093 $ 51.737
Ruby Jean # 3-34 St. Louis/Fort Scott/Marm 0.40000000 0.30376093 $ 66.006
Six M Farms # 23-1 Morrow 1.00000000 0.83333333 $ 2.018
Tate # 1 Lansing H 1.00000000 0.75255225 $ 57.323
</TABLE>
EXHIBIT A: PAGE 1 OF 2
<PAGE> 21
<TABLE>
<CAPTION>
Known
Well Name Limits Location County ST
- ------------------------ ------- ------------------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
Tate # 19-2 1,6 19 22 S .34 W Finney KS
Tate # 19-3 1,6 19 22 S 34 W Finney KS
Tate A # 1 1,7 19 22 S 34 W Finney KS
Tate A # 2 1,7 19 22 S 34 W Finney KS
Tate A # 19-3 1,7 19 22 S 34 W Finney KS
Tate A # 19-4 (PUD) 1,7 19 22 S 34 W Finney KS
Turrentine # 19-3 2 19 22 S 34 W Finney KS
Turrentine # 19-4 2 19 22 S 34 W Finney KS
Webdell #28-1 1 28 22 S 34 W Finney KS
<CAPTION>
Working Net Revenue Allocated
Well Name Producing Zones Interest Interest Value (M$)
- --------------------- ------------------------- ----- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Tate # 19-2 Lansing/Marm/Miss 1.00000000 0.75255224 $ 450.073
Tate # 19-3 Atoka/Lansing D 1.00000000 0.75255224 $ 602.488
Tate A # 1 Lansing/Marm/Miss 1.00000000 0.76718750 $ 145.020
Tate A # 2 Marmaton/Lansing G 1.00000000 0.76718750 $ 237.434
Tate A # 19-3 Lansing D 1.00000000 0.76718750 $ 71.371
Tate A # 19-4 (PUD) Marmaton/Lansing/KC 1.00000000 0.76718750 $ 68.294
Turrentine # 19-3 Lansing B,D,G, H/St Louis 1.00000000 0.75000000 $ 215.902
Turrentine # 19-4 St. Louis/Atoka/Lans 1.00000000 0.75000000 $ 358.404
Webdell #28-1 St. Louis/Marmaton BPO 1.00000000 0.76562500 $ 6.465
APO 1.00000000 0.71093750
</TABLE>
(PUD) = Proved Undeveloped. Subject to fulfillment of obligations under
applicable agreement(s).
Known Limits definitions:
1 = All rights below 3,000 feet only.
2 = Royalty Interest
3 = As to Oil and Casinghead Gas only - all depths.
4 = Below the base of the Heebner Shale to total depth of the Baker # 15-6.
5 = Lario owns additional interest not subject to this sale.
6 = NRI includes Royalty interest of .0031250
7 = NRI includes Royalty interest of .0015625
EXHIBIT A: PAGE 2 OF 2
<PAGE> 22
EXHIBIT B - LEASES, RIGHTS OF WAY AND EASEMENTS
Attached to and made a part of that certain Purchase and Sale Agreement
dated November 24, 1999, By and Between Seller and Buyer
<TABLE>
<CAPTION>
INT
LEASE NUMBER TYPE LESSOR/LESSEE DESCRIPTION
- ----------------------------------------------------------------------------------------------------
ALL IN FINNEY COUNTY, KANSAS
<S> <C> <C> <C> <C>
KS6063-03-A OG J R Bosworth & Hettie H Bosworth 22S-34W: Sec 27 - W/2NE/4
Ben F Brack
KS6251-01-A OG Clara L Cormack & F.D. Cormack 22S-34W: Sec 34 - W/23W/4
Champlin Refining Company
KS7949-01-A OG Myrtipse Dixit Ltd Partnership 22S-34W: Sec 12 - NW/4
Sonat Exploration Company
KS7949-01-B OG Diaden Energy Resources 22S-34W: Sec 12 - NW/4
Sonat Exploration Company
KS7949-01-C OG Eltrude Elliott Hall 22S-34W: Sec 12 - NW/4
Sonat Exploration Company
KS7950-01-A OG Janet M Barlow Et Al 22S-34W: Sec 13 - SE/4
J Fred Hambright
KS7951-01-A OG William Easton Hutchinson 22S-34W: Sec 19 - W/2SE/4
Cities Service Oil Company
KS7951-01-B OG William M Turrentine Et Ux 22S-34W: Sec 19 - NW/4SE/4 & SW/4SE/4
J Carson Rockhill
KS7951-01-C OG Evelyn T Vaughn Et Vir 22S-34W: Sec 19 - NW/4SE/4 & SW/4SE/4
J Carson Rockhill
KS7952-01-A OG A C Maddux & Christabelle Maddux 22S-34W: Sec 19 - NE/4NE/4
J D Long
KS7953-01-A OG Lenora V Tate & George H Tate 22S-34W: Sec 19 - SE/4NE/4
J D Long
<CAPTION>
LEASE EXPIRATION RECORDED
LEASE NUMBER DATE DATE BOOK PAGE
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
KS6063-03-A 21-Mar-46 3-Mar-66 15 333
KS6251-01-A 31-Jul-49 1-Jan-54 19 323
KS7949-01-A 29-Jan-97 29-Jan-00 206 108
KS7949-01-B 29-Jan-97 29-Jan-00 206 106
KS7949-01-C 29-Jan-97 29-Jan-00 206 107
KS7950-01-A 20-Jan-97 20-Jan-00 205 96
KS7951-01-A 24-Aug-43 24-Aug-53 12 596
KS7951-01-B 29-Nov-84 57 472
KS7951-01-C 29-Nov-84 57 475
KS7952-01-A 24-Feb-44 24-Feb-54 13 138
KS7953-01-A 12-Apr-44 12-Apr-54 13 363
</TABLE>
EXHIBIT B: PAGE 1 OF 4
<PAGE> 23
<TABLE>
<CAPTION>
INT
LEASE NUMBER TYPE LESSOR/LESSEE DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KS7953-02-A OG Lenora V Tate & George H Tate 22S-34W: Sec 19 - E/2SE/4
J D Long
KS7955-01-A OG Mildred Ardis Cole & Tommy R. Cole 22S-34W: Sec 19 - NW/4
Wint Harris
KS7955-01-B OG Donald D Eskelund & Patricia A Eskelund 22S-34W: Sec 19 - NW/4
Wint Harris
KS7955-01-C OG LaRue A Horton & Dick Horton 22S-34W: Sec 19 - NW/4
Wint Harris
KS7956-01-A OG George F Burg 22S-34W: Sec 20 - E/2NE/4 & E/2NW/4
J D Long
KS7957-01-A OG Emeline Barrett & James E Barrett 22S-34W: Sec 20 - W/2SW/4
R J Rhynalds
KS7958-01-A OG Larry M Barrett, Testementary Trust 22S-34W: Sec 20 - E/2SE/4
KS7959-01-A OG The Kearney County Farms Irriga 22S-34W: Sec 19 - Lots 3 & 4 of SW/4
Wint Harris
KS7960-01-A OG Six M Farms Inc 22S-34W: Sec 22 - W/2NW/4
J Fred Hambright
KS7962-01-A OG Esther L Nellans 22S-34W: Sec 22 - SE/4
J Fred Hambright
KS7963-01-A OG Esther L Nellans 22S-34W: Sec 22 - NE/4
J Fred Hambright
KS7970-01-A OG Six M Farms Inc 22S-34W: Sec 23 - E/2NW/4
J Fred Hambright
KS7973-01-A OG Mae Anderson 22S-34W: Sec 28 - E/2SE/4
R J Rhynalds
<CAPTION>
LEASE EXPIRATION RECORDED
LEASE NUMBER DATE DATE BOOK PAGE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
KS7953-02-A 12-Apr-44 12-Apr-54 13 363
KS7955-01-A 11-Sep-90 11 -Sep-92 88 656
KS7955-01-B 11-Sep-90 11 -Sep-92 88 655
KS7955-01-C 11-Sep-90 11 -Sep-92 88 654
KS7956-01-A 22-Feb-44 22-Feb-54 13 146
KS7957-01-A 4-Apr-44 4-Apr-54 13 269
KS7958-01-A 17-Feb-96 1 -Mar-97 184 197
KS7959-01-A 13-Oct-90 88 652
KS7960-01-A 12-Oct-95 12-Oct-98 IT7 362
KS7962-01-A 21-Jan-97 21-Jan-00 204 112
KS7963-01-A 21-Jan-97 21-Jan-00 204 113
KS7970-01-A 12-Oct-95 12-Oct-98 177 370
KS7973-01-A 28-Feb-44 28-Feb-54 13 161
</TABLE>
EXHIBIT B: PAGE 2 OF 4
<PAGE> 24
<TABLE>
<CAPTION>
INT
LEASE NUMBER TYPE LESSOR/LESSEE DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KS7974-01-A OG Mae Anderson 22S-34W: Sec 28 - E/2SW/4
R J Rhynalds
KS7975-01-A OG G H Forney & Carolyn Forney 22S-34W: Sec 29 - NW/4
J D Long
KS7976-01-A OG Pauline S Hope & Clifford R Hope Et Al 22S-34W: Sec 33 - E/2SW/4
R J Rhynalds
KS7976-01-B OG Magnolia Petroleum Co 22S-34W: Sec 33 - E/2SW/4
Warren Petroleum Corporation
KS7977-01-A OG Margaret Vollmers Et Al 22S-34W: Sec 33 - W/2NE/4, W/2NW/4;
R J Rhynalds E/2SE/4
KS7979-01-A OG The Garden City Company 23S-34W: Sec 15 - N/2NE/4
J E O'Donnell
KS7979-02-A OG The Garden City Company 23S-34W: Sec 15 - E/2NW/4
J E O'Donnell
KS7980-01-A OG The Garden City Company 23S-34W: Sec 25 - W/2SE/4; W/2SW/4
Cities Service Oil Co
KS7981-01-A OG John Burgardt & Barbara Burgardt 23S-34W: Sec 36 - E/2NW/4
J E O'Donnell
KS7982-01-A OG Nellie Upshaw & J F Upshaw 23S-34W: Sec 36 - E/2NE/4
J E O'Donnell
KS7983-01-A OG L E Joss & Izetta H Joss 23S-34W: Sec 36 - W/2SE/4
KS7984-01-A OG Mutual Building and Loan Association 23S-34W: Sec 26 - NW/4SW/4
Champlin Refining Co
KS7985-01-A OG Lawrence C Halbleib & Maxine Halbleib 23S-34W: Sec 36 - SW/4SW/4
Joe E Denham
<CAPTION>
LEASE EXPIRATION RECORDED
LEASE NUMBER DATE DATE BOOK PAGE
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
KS7974-01-A 28-Feb-44 28-Feb-54 13 160
KS7975-01-A 24-Feb-44 24-Feb-54 13 164
KS7976-01-A 3-Apr-44 3-Apr-54 13 364
KS7976-01-B 15-May-50 21 111
KS7977-01-A 4-Apr-44 13 395
KS7979-01-A 23-Sep-41 23-Sep-56 611 382
KS7979-02-A 23-Sep--41 23-Sep-56 611 382
KS7980-01-A 31-Mar-46 12 167
KS7981-01-A 2-Sep-42 2-Sep-57 11 640
KS7982-01-A 3-Sep-42 3-Sep-57 11 642
KS7983-01-A 12-Sep-42 12-Sep-57 12 21
KS7984-01-A 24-Sep-42 24-Sep-57 12 22
KS7985-01-A 24-Sep-44 24-Sep-54 13 324
</TABLE>
EXHIBIT B: PAGE 3 OF 4
<PAGE> 25
<TABLE>
<CAPTION>
INT
LEASE NUMBER TYPE LESSOR/LESSEE DESCRIPTION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ROYALTY INTEREST
KS0087-01-L OG Ballou Royalty 22S-34W: Sec 19 - SE/4NE/4; E/2SE/2
Horizon Oil & Gas Co of Texas
KS0090-01-L OG Ballou Royalty 22S-34W: Sec 20 - N/2
Horizon Oil & Gas Co of Texas
<CAPTION>
LEASE EXPIRATION RECORDED
LEASE NUMBER DATE DATE BOOK PAGE
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
ROYALTY INTEREST
KS0087-01-L 12-May-72 56 172
KS0090-01-L 12-May-72 56 172
</TABLE>
EXHIBIT B: PAGE 4 OF 4
<PAGE> 26
EXHIBIT C
Attached to and made part of that certain Purchase and Sale Agreement
dated November 24, 1999 by and between Seller and Buyer.
PIPELINES AND OTHER PERSONAL PROPERTY
BURG 5-20
Pumping unit Lufkin 456
1 pump off controller
1 chemical pump
3 - 300 BBL water tank fiberglass
3 - 300 BBL oil tank steel
1 - 300 BBL oil tank fiberglass
1 - 400 BBL knockout fiberglass gun barrel
1 water pump in horse tank
1 water meter
BURG 3-20
Pumping unit Hercules 160 1212
Pump off controller
Chemical pump
BURG 4-20
Pumping unit Lufkin 228 C33427D319997
Pump off controller
Chemical Pump 1 - 16" x 10' Horizontal gas/fluid separator
1 - 210 BBL steel stock tank
BURG 3-20 & 4-20 COMMON TANK BATTERY
5 - 300 BBL oil tanks steel
1 - 300 BBL water tank steel
1 - 105 BBL knockout steel
TATE 19 A1
Pumping unit Lufkin 114 726U
1 pump off controller
TATE 19 A2
Pumping unit Cabot 80 D801639
1 pump off controller
1 chemical pump
TATE 19 A1 & TATE 19 A2 COMMON TANK BATTERY
2 - 300 BBL oil tanks steel
1 - 210 BBL water tank fiberglass
1 - 105 BBL knockout fiberglass
1 water meter
1 water pump in horse tank
EXHIBIT C: PAGE 1 OF 4
<PAGE> 27
BARRETT SWD
4 - 400 BBL water tanks fiberglass
1 dog house 8x12
1 water meter
BURG 1-20
Pumping unit Cabot 80 133133
Pump off controller
BURG 2-20
Pumping Unit Lufkin 114 F6901OJ412316
Pump off controller
Chemical Pump
BURG 1-20 & 2-20 COMMON TANK BATTERY
2 - 300 BBL oil tanks steel
1 - 120 BBL water tank fiberglass
1 water meter
1 water pump in horse tank
TATE 1-19
Pumping unit National 160 6584
Chemical pump
Pump off controller
2 - 300 BBL oil tank steel
1 - 300 BBL water tank fiberglass
1 - 105 BBL knockout steel
1 circulating pump (share with Tate 2-19 & Tate 3-19)
1 water meter (share with Tate 2-19 & Tate 3-19)
1 cascade system (share with Tate 2-19 & Tate 3-19)
1 water pump in horse tank (share with Tate 2-19 & Tate 3-19)
TATE 2-19
Pumping unit National 160 17646
Chemical pump
Pump off controller
TATE 19 A-3
Pumping unit Lufkin 320 C39108J-345456
1 Pump off controller
1 chemical pump
1 water meter
1 water pump in horse tank
2 - 300 BBL water tanks fiberglass
2 - 300 BBL oil tanks fiberglass
1 - 200 BBL knockout fiberglass
TATE 2-19 & TATE 3-19 COMMON TANK BATTERY
3 - 300 BBL oil tanks steel
1 - 300 BBL water tank fiberglass
1 - 105 BBL knockout steel
EXHIBIT C: PAGE 2 OF 4
<PAGE> 28
I circulating pump (shared with Tate 1-19)
1 water meter (shared with Tate 1-19)
1 cascade system (shared with Tate 1-19)
1 water pump in horse tank (shared with Tate 1-19)
TATE 3-19
Pumping unit Lufkin Mark 160 C31378ID316668
Chemical pump
Pump off controller
SIX M FARMS
Pumping Unit American 160 T15F74154040
Chemical Pump Pump off controller
2 - 300 BBL oil tanks fiberglass
1 - 300 BBL water tank
1 - 105 BBL knockout fiberglass
TURRENTINE 3-19
Pumping unit Lufkin 228 033429D14260
Chemical pump
1 pump off controller
TURRENTINE 4-19
Pumping unit Lufkin 640 air balance
Chemical Pump
1 pump off controller
TURRENTINE 3-19 & 4-19 COMMON TANK BATTERY
4 - 300 BBL oil tanks fiberglass
4 - 300 BBL water tanks fiberglass
1 - 180 BBL gun barrel fiberglass
1 - 40 BBL free water knockout steel
1 circulating pump
1 water meter
1 cascade system
1 water pump in horse tank
BAKER 15-6
Pumping unit American 160-173-74
1 chemical pump
BAKER 15-8
Pumping unit American 160 TI7F743A5079
1 chemical pump
BAKER 15-6 & 15-8 COMMON TANK BATTERY
1 pump off controller
2 - 300 BBL oil tanks fiberglass
1 - 300 BBL water tank fiberglass
1 - 200 BBL knockout fiberglass
EXHIBIT C: PAGE 3 OF 4
<PAGE> 29
WEBDELL 28-1
PUMPING UNIT AMERICAN 160 D 1606617
1 chemical pump
1 pump off controller
1 - 300 BBL oil tank steel
1 - 300 BBL water tank steel
1 - 105 BBL knockout steel
BARRETT 20-3
Pumping unit American 160-173-4
Pumpoff switch
Chemical pump
3 - 300 BBL oil tanks fiberglass
1 - 300 BBL water tank fiberglass
1 - 210 BBL steel heated gun barrel
BARRETT 20-2
Pumping Unit American 160 D160G3598
Pump off controller
Chemical pump
BARRETT 20-4
Pumping Unit American 160 T17F7431824
Pump off controller
Chemical pump
BARRETT 20-2 & 20-4 COMMON BATTERY
4 - 300 BBL oil tanks fiberglass
1 - 300 BBL water tank fiberglass
1 - 6x20 Gun Barrel - fiberglass
1 water meter
1 water pump in horse tank
1 circulating pump
EXHIBIT C: PAGE 4 OF 4
<PAGE> 30
EXHIBIT D
Attached to and made part of that certain Purchase and Sale Agreement
dated November 24, 1999 by and between Seller and Buyer.
CERTAIN KEY CONTRACTS
SALT WATER DISPOSAL WELL LEASE AGREEMENT DATED MARCH 6TH, 1997 BY AND BETWEEN
MARY F. BARRETT TRUST AND LARIO OIL & GAS COMPANY (SONAT EXPLORATION)
This Salt Water Disposal Lease is for a term for so long as the lands are used
for the purpose specified. It requires an annual payment of $10,000.
SURFACE USE AGREEMENT DATED (PENDING) BY AND BETWEEN MARY F. BARRETT TRUST AND
LARIO OIL & GAS COMPANY
This proposed Surface Use Agreement extends the surface area under the above
lease that Lario is entitled to use and is for a term of 5 years. It requires an
annual payment of $300.
JOSS WELL
This well is covered by a Declaration of Unitization dated November 8, 1950
(Recorded Volume 21, Page 466)
RUBY JEAN WELLS
These wells are covered by an Option Farmout Agreement covering the E/2SW/4 Sec
34-22S-34W dated August 6, 1991, with an Operating Agreement attached.
BAKER WELLS
These wells are covered by an Exploration and Farmout Agreement covering in part
lands in Sec 15-23S-34W dated April 11, 1997, with an Operating Agreement
attached.
EXHIBIT D: PAGE 1
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement ("Amendment") is entered into
between Compass Bank, an Alabama state bank ("Lender") and Toreador Royalty
Corporation, a Delaware corporation, Toreador Exploration & Production, Inc., a
Texas corporation, and Tormin, Inc., a Delaware corporation (the "Borrowers")
and Toreador Acquisition Corporation, a Texas corporation (the "Guarantor") and
is dated as of December 17, 1999. Terms defined in the Credit Agreement between
the Lender and the Borrowers and the Guarantor dated September 30, 1999, as
amended (the "Credit Agreement"), are used herein as therein defined, unless
otherwise defined herein or the context otherwise requires.
R E C I T A L S:
WHEREAS, Toreador Exploration & Production, Inc. ("Toreador
Exploration") has entered into a Purchase and Sale Agreement ("Purchase
Agreement") dated November 24, 1999, with Lario Oil & Gas Company ("Lario") for
the purchase by Toreador Exploration of certain oil and gas properties located
in Finney County, Kansas for $5,000,000 in cash at the closing of such purchase
and $500,000 in installments (the "Lario Installment Debt"), as described in the
Purchase Agreement;
WHEREAS, the Borrowers have requested that the Lender increase the
Borrowing Base under the Credit Agreement to $12,500,000 and provide a term loan
in the amount of $2,000,000, the proceeds of which will be utilized to make such
purchase described in the Purchase Agreement;
WHEREAS, the Borrowers anticipate repaying the Term Loan (hereinafter
defined) and repaying the Lario Installment Debt from the proceeds of the
Subordinated Debt;
WHEREAS, the Lender is willing to amend the Credit Agreement to permit
the above described transactions under the terms and conditions set forth
herein;
NOW, THEREFORE, the Borrowers, the Guarantor and the Lender hereby
agree as follows:
1. The following definitions are hereby added to Section 1.1 of the
Credit Agreement as follows:
"First Amendment to Credit Agreement" means the First
Amendment to Credit Agreement dated December 17, 1999, between the
Lenders, the Borrowers and the Guarantor.
"Subordinated Debt" shall mean Debt of the Parent evidenced by
a promissory note or notes issued by the Parent after February 29,
2000, and before March 1, 2001, in the aggregate principal amount not
to exceed $15,000,000, which Debt shall be subordinated in payment and
liquidation to the Note and the Term Loan and shall contain provisions
and restrictions effecting the following so long as the Note or Term
Loan remain outstanding: (i)
First Amend. To Credit Agmt.- Toreador, et. al. 1
<PAGE> 2
No interest or principal payments shall be required or accepted on the
Subordinated Debt after a Default or if any such payment would cause a
Default to occur; (ii) upon the occurrence of an Event of Default, the
holders of the Subordinated Debt shall not be entitled to make demand
for payment of interest or principal on the Subordinated Debt, to
accelerate the time for payment of the principal of the Subordinated
Debt or to take any other collection action against any of the
Borrowers or the Guarantor for a period of 365 days following such
Event of Default; (iii) the per annum interest rate payable on the
Subordinated Debt shall not exceed 7-1/2% without the Lender's prior
written consent; (iv) the holders of the Subordinated Debt shall not be
entitled to require the prepayment of the Subordinated Debt prior to
maturity of the Subordinated Debt or a redemption of the Subordinated
Debt prior to maturity of the Subordinated Debt; (v) the Subordinated
Debt shall at all times be and remain unsecured; and (vi) the maturity
date of Subordinated Debt must be no earlier than March 31, 2010,
unless the Lender otherwise consents in writing.
"Term Loan" shall mean the $2,000,000 term loan being made
concurrently herewith by the Lender to the Borrowers pursuant to a term
loan note in the form of Attachment One hereto.
2. The following definitions contained in Section 1.1 of the Credit
Agreement are hereby amended and restated in their entireties as follows:
"Compliance Certificate" means a certificate, substantially in
the form attached to the First Amendment to Credit Agreement entitled
"Form of Compliance Certificate", executed by a Responsible Officer of
the Parent and furnished to the Lender from time to time in accordance
with Section 7.2(a).
"Floating Rate" means the greater of (i) a per annum interest
rate equal to the difference of the CBIR Rate from time to time in
effect minus three-fourths of one percent (minus 3/4 of 1.0%), or (ii)
at any time the outstanding principal of the Note plus the outstanding
principal of the Term Loan plus the L/C Exposure equals or exceeds 80%
of the Borrowing Base in effect at such time, a per annum interest rate
equal to the CBIR Rate from time to time in effect minus one-fourth of
one percent (minus 1/4 of 1.0%) or (iii) at any time the daily average
for the prior calendar month of the outstanding principal of the Note
plus the outstanding principal of the Term Loan plus the L/C Exposure
equals or exceeds 80% of the daily average for such prior calendar
month of the Borrowing Base in effect during such month, a per annum
interest rate equal to the CBIR Rate from time to time in effect minus
one-fourth of one percent (minus 1/4 of 1.0%); but in no event
exceeding in any case the Highest Lawful Rate.
"Permitted Indebtedness" means (i) the Obligations, (ii)
unsecured accounts payable incurred in the ordinary course of business,
which are not unpaid in excess of 120 days beyond the due date thereof
or are being contested in good faith and as to which such reserve as is
required by GAAP has been made and on which interest charges are not
paid or accrued,
First Amend. To Credit Agmt.- Toreador, et. al. 2
<PAGE> 3
(iii) accrued taxes and unsecured accounts payable owed to insurance
companies for insurance contracts maintained by Borrower in its
ordinary course of business, (iv) endorsements of negotiable
instruments in the ordinary course of business, (v) amounts owed by one
of the Borrowers or the Guarantor to another Borrower or the Guarantor,
(vi) the Subordinated Debt and (vii) the Term Loan.
3. The Borrowing Base shall be $12,500,000 as of December 17, 1999, and
the amount by which the Borrowing Base shall automatically be reduced on the
first day of each month shall be $0.00 per month until January 1, 2000. On
January 1, 2000, and on the first day of each month thereafter, the amount by
which the Borrowing Base shall automatically be reduced shall be $115,000 per
month until redetermined in accordance with the Credit Agreement.
4. On the date hereof, the Borrowers shall pay to the Lender a facility
fee of $10,000 as required under Section 2.6(c) of the Credit Agreement.
5. Section 2.8(f) is hereby added to the Credit Agreement as follows:
(f) In addition to and notwithstanding the provisions of
Section 2.8(a) above, the Lender shall have the right to redetermine the
Borrowing Base at any time or times that Subordinated Debt is issued by the
Parent exceeding, when aggregated with all Subordinated Debt previously issued,
the amount of $4,000,000, and any such redeterminations of the Borrowing Base
shall be treated as a scheduled or Borrower requested redeterminations of the
Borrowing Base for the purposes of Section 2.6(b).
6. The Borrowers shall pay to the Lender an engineering fee in the
amount of $7,500 on the date hereof.
7. Section 7.15(a) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
(a) EBITDA to Debt Service Ratio. The Borrowers will not permit the
ratio of EBITDA to Debt Service for the Parent determined on a consolidated
basis, to be less than 1.25 to 1.0, determined as of the end of each fiscal
quarter of the Parent ending on or after December 31, 1999.
"EBITDA" means, for any fiscal quarter of the Parent, the net
income from operations of the Parent and its consolidated
subsidiaries for such quarter plus interest, taxes,
depreciation, amortization, depletion, and other non-cash
expenses of the Parent and its consolidated subsidiaries for
such quarter less gains on sales of assets and other non-cash
income for such quarter included in the determination of net
income from operations of the Parent and its consolidated
subsidiaries. EBITDA is a quarter-by-quarter calculation.
"Debt Service" means with respect to any fiscal quarter of the
Parent, the actual principal and interest payments on the Debt
of the Parent and its consolidated
First Amend. To Credit Agmt.- Toreador, et. al. 3
<PAGE> 4
subsidiaries during such quarter other than for the Note plus
required principal and interest payments on the Note during
such quarter.
8. The proceeds of the Subordinated Debt shall be applied, upon
receipt, as follows and in the following order:
(a) to accrued, unpaid interest on the Term Loan,
(b) to the outstanding principal of the Term Loan, whether as
a payment or a prepayment, until fully paid,
(c) to the Lario Installment Debt, whether as a payment or a
prepayment, until fully paid, and
(d) for general corporate purposes, except that such proceeds
shall not be used to pay dividends on the common stock of the Parent.
9. Title. The Lender shall have no obligation to fund any additional
amounts due to the increase in the Borrowing Base as referred to in the recitals
hereof, or to fund the Term Loan described herein, unless all matters related to
title of the properties being acquired from Lario are satisfactory to the Lender
and its counsel in their sole discretion. In this connection, the review of
title information related to the properties being acquired from Lario has not
been completed by counsel to the Lender as of the date of execution of this
Amendment.
10. GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 346 OF THE
FINANCE CODE (WHICH REGULATES CERTAIN CREDIT LOAN ACCOUNTS AND TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THE NOTE.
11. JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN DALLAS, DALLAS
COUNTY, TEXAS. EACH BORROWER AND THE GUARANTOR HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN DALLAS, DALLAS
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN
ACCORDANCE WITH THIS SECTION.
12. WAIVER OF RIGHTS TO JURY TRIAL. EACH BORROWER, THE GUARANTOR AND
THE LENDER HEREBY KNOWINGLY, VOLUNTARILY,
First Amend. To Credit Agmt.- Toreador, et. al. 4
<PAGE> 5
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH
RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AGREEMENT.
13. Counterparts. For the convenience of the parties, this Amendment
may be executed in multiple counterparts, each of which for all purposes shall
be deemed to be an original, and all such counterparts shall together constitute
but one and the same agreement.
14. Effect. Except as amended hereby, the Credit Agreement shall remain
unchanged and in full force and effect.
15. ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF. FURTHERMORE, IN
THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
First Amend. To Credit Agmt.- Toreador, et. al. 5
<PAGE> 6
IN WITNESS WHEREOF, this Amendment is deemed executed effective as of
the date first above written.
BORROWERS:
TOREADOR ROYALTY CORPORATION,
TOREADOR EXPLORATION & PRODUCTION,
INC. and TORMIN, INC.
4809 Cole Avenue
Suite 108
Dallas, Texas 75205 By: /s/ G. THOMAS GRAVES, III
Telecopy: 214/521-3774 ------------------------------
Name: G. Thomas Graves, III
Title: President of each Borrower
GUARANTOR:
TOREADOR ACQUISITION CORPORATION
4809 Cole Avenue
Suite 108
Dallas, Texas 75205 By: /s/ G. THOMAS GRAVES, III
Telecopy: 214/521-3774 ------------------------------
Name: G. Thomas Graves, III
Title: President
LENDER:
COMPASS BANK
8080 N. Central Expressway
Suite 370
Dallas, Texas 75206 By: /s/ CHRIS D. COWAN
Attention: Energy Group ------------------------------
Telecopy: 214/706-8054 Name: Chris D. Cowan
Title: Assistant Vice President
First Amend. To Credit Agmt.- Toreador, et. al. 6
<PAGE> 7
ATTACHMENT ONE
Term Loan Note
First Amend. To Credit Agmt.- Toreador, et. al. 7
<PAGE> 8
FORM OF COMPLIANCE CERTIFICATE
_______________,_____
Compass Bank
8080 N. Central Expressway, Suite 370
Dallas, Texas 75206
Attention: Energy Group
Re: Credit Agreement dated September 30, 1999, by and between
Compass Bank (the "Lender") and Toreador Royalty Corporation,
Toreador Exploration & Production, Inc. and Tormin, Inc. ( the
"Borrowers") and Toreador Acquisition Corporation, as
Guarantor (as amended, restated, or supplemented from time to
time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of each Borrower hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
[1. TO THE BEST OF THE KNOWLEDGE OF THE UNDERSIGNED, NO DEFAULT EXISTS
AS OF THE DATE HEREOF OR HAS OCCURRED SINCE THE DATE OF OUR PREVIOUS
CERTIFICATION TO YOU, IF ANY.]
[1. TO THE BEST OF THE KNOWLEDGE OF THE UNDERSIGNED, THE FOLLOWING
DEFAULTS EXIST AS OF THE DATE HEREOF OR HAVE OCCURRED SINCE THE DATE OF
OUR PREVIOUS CERTIFICATION TO YOU, IF ANY, AND THE ACTIONS SET FORTH
BELOW ARE BEING TAKEN TO REMEDY SUCH CIRCUMSTANCES:]
2. The compliance of the Borrowers with certain financial covenants of
the Credit Agreement, as of the close of business on___________ , is
evidenced by the following:
(a) Section 7.15(a): EBITDA to Debt Service.
Required Actual
---------- --------
Not less than 1.25 to 1.00 _____ to 1.00
(b) Section 7.15(b): Current Ratio.
Required Actual
----------- --------
Not less than 1.00 to 1.00 ____ to 1.00
First Amend. To Credit Agmt.- Toreador, et. al. 8
<PAGE> 9
3. The financial statements being delivered to the Lender concurrently
herewith pursuant to the Credit Agreement fairly and accurately reflect
the financial condition and results of operation of the Borrowers for
the periods and as of the dates set forth therein, and the undersigned
has reviewed the terms of the Credit Agreement and the other Loan
Papers, and has made, or caused to be made under my supervision, a
review of the transactions and financial condition of the Borrowers
during the fiscal period covered by such financial statements.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
-------------------------------------
[----------------------------]
[_____________] of Toreador Royalty Corporation,
Toreador Exploration & Production, Inc. and Tormin,
Inc.
First Amend. To Credit Agmt.- Toreador, et. al. 9
<PAGE> 1
EXHIBIT 10.3
TERM PROMISSORY NOTE
$2,000,000 Dallas, Texas December 17, 1999
FOR VALUE RECEIVED, TOREADOR ROYALTY CORPORATION, a Delaware
corporation, TOREADOR EXPLORATION & PRODUCTION, INC., a Texas corporation, and
TORMIN, INC., a Delaware corporation (collectively the "Makers"), hereby jointly
and severally promise to pay to the order of COMPASS BANK, an Alabama state bank
("Payee"), and its assigns, at its principal place of business located at 8080
N. Central Expressway, Suite 370, Dallas, Texas 75206 (or such other place the
holder hereof may designate from time to time), the principal sum of TWO MILLION
DOLLARS ($2,000,000), on or before the Maturity Date (as hereinafter defined),
together with interest on the unpaid principal balance of this Note from day to
day outstanding, as hereinafter provided.
This Note is secured by the Collateral (hereinafter defined) and the
Guaranty (hereinafter defined), and the holder hereof shall be entitled to all
the benefits thereof.
Section 1. Definitions. In addition to other terms defined herein, as
used herein the following terms shall have the respective meanings set forth
below:
"Applicable Rate" means a per annum rate equal to the CBIR Rate from
time to time in effect.
"Business Day" means a day other than a Saturday, Sunday or other day
on which national banks in Dallas, Texas are closed.
"CBIR Rate" means, on any day, the prime rate as published in The Wall
Street Journal's "Money Rates" table for such day. If multiple prime rates are
quoted in such table, then the highest prime rate quoted therein shall be the
CBIR Rate. In the event that a prime rate is not published in The Wall Street
Journal's "Money Rates" table, the Lender will choose a substitute CBIR Rate,
for purposes of calculating the interest rate applicable hereunder, which is
based on comparable information, until such time as a prime rate is published in
The Wall Street Journal's "Money Rates" table. Each change in the CBIR Rate
shall become effective without notice to the Borrowers on the effective date of
each such change.
"Collateral" means the real and personal property pledged to secure
this Term Promissory Note.
"Credit Agreement" means the Credit Agreement dated September 30, 1999,
between the Lender, the Borrowers and the Guarantor, and all supplements,
modifications, amendments and restatements thereof.
"Default Rate" means a per annum rate equal to five percent (5%) above
the Applicable Rate, subject to the limitations of the Highest Lawful Rate.
"Guaranty" means the guaranty of Toreador Acquisition Corporation dated
December 17, 1999.
"Highest Lawful Rate" means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest which, at
the time in question would not cause the interest charged on this Note at such
time to exceed the maximum amount that Payee would be allowed to contract for,
charge, take, reserve, or receive under applicable federal or state law after
taking into account, to the extent required by applicable law, any and all
relevant payments, fees or charges under the Credit Documents. If and to the
extent the laws of the State of Texas are applicable for purposes of determining
the "Highest Lawful Rate", such term shall mean the "weekly ceiling" from time
to time in effect under Chapter 303 of the Texas Finance Code or any applicable
successor statute, as amended (the "Act"), or, if permitted by applicable law
and effective upon the giving of the notices required by the Act or successor
statute (or effective upon any other date otherwise specified by applicable
law), the "monthly", "quarterly" or "annualized" ceiling from time to time in
effect under the Act, whichever Payee shall elect to substitute for the "weekly
ceiling," and vice versa, each such substitution to have the effect provided in
such applicable statute, and Payee shall be entitled to make
TERM PROMISSORY NOTE - TOREADOR ET AL PAGE 1
<PAGE> 2
such election from time to time and one or more times and, without notice to
Makers, to leave any such substitute rate in effect for subsequent periods in
accordance with the Act. If under federal or applicable state law there is no
legal limitation on the amount or rate of interest that may be charged on
amounts outstanding under this Note, there shall be no Highest Lawful Rate,
notwithstanding any reference thereto herein or in any of the other Credit
Documents.
"Maturity Date" means March 1, 2000.
"Person" means an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political subdivision of
any government, or any other form of entity.
Section 2. Interest Rate and Payments; Facility Fee.
(a) Commencing on the date of this Note and continuing until the
indebtedness hereunder is paid in full, interest on the outstanding principal
balance of the Note shall accrue at a rate per annum equal to the lesser of (i)
the Applicable Rate or (ii) the Highest Lawful Rate. Interest on this Note shall
be calculated at a daily rate equal to 1/360 of the annual percentage rate which
this Note bears, subject to the provisions hereof limiting interest to the
maximum permitted by applicable law. All overdue principal and, to the extent
permitted by law, overdue interest shall bear interest at the Default Rate until
paid.
(b) The entire unpaid principal balance of this Note, together with all
accrued unpaid interest hereon and any other fees or amounts owing hereon, shall
be due and payable in full on the Maturity Date.
(c) Upon execution of this Note, the Makers agree to pay to Payee a
facility fee of $20,000.
Section 3. Representations and Warranties.
(a) Capacity. Each of the Makers is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation.
(b) Authorization. The execution, delivery and performance of this Note
by the Maker has been duly authorized by all requisite corporate action.
(c) Binding Obligations. This Note is legal, valid and binding upon the
Makers, enforceable in accordance with its terms, subject only to principles of
equity and laws applicable to creditors generally, including bankruptcy laws.
(d) No Conflicting Law or Agreement. The execution, delivery and
performance of this Note by the Makers does not constitute a breach of or
default under, and will not violate or conflict with, any provisions of the
organizational documents or other constituent documents of any of the Makers.
(e) No Consent Required. The execution, delivery, and performance of
this Note by the Makers do not require the consent or approval of or the giving
of notice to any person except for those consents which have been duly obtained
and are in full force and effect on the date hereof.
Section 4. General Provisions.
Whenever any payment shall be due under this Note on a day which is not
a Business Day, the date on which such payment is due shall be extended to the
next succeeding Business Day, and, if the date for any payment of principal is
extended for any reason, interest thereon shall be payable for such extended
period.
All principal, interest and other sums payable under this Note shall be
paid, not later than 1:00 p.m. , Dallas, Texas time, on the day when due, in
immediately available funds in lawful money of the United States of America or
by check drawn on a banking institution located in the United States of America,
except that payments of principal of
TERM PROMISSORY NOTE - TOREADOR ET AL PAGE 2
<PAGE> 3
this Note must be in immediately available funds. Any payment under this Note
other than as specified in the foregoing shall not constitute payment until the
required amount is actually received by the holder hereof in good funds and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting bank
or banks.
Makers shall be entitled to prepay this Note in whole or in part
without premium or penalty at any time after February 15, 2000, if the funds
used to make such prepayment are from sources other than the proceeds of the
Subordinated Debt (as defined in the Credit Agreement and herein so called) and
at any time if the funds used to make such prepayment are from the proceeds of
the Subordinated Debt. Any partial prepayment shall be applied first against any
sums due and owing to Payee for expenses and fees hereunder, then to accrued but
unpaid interest, and then against the outstanding principal balance of this
Note.
The occurrence of any one of the following shall be an "Event of
Default":
(a) Any principal, interest or other amount of money due under this
Note is not paid in full when due, regardless of how such amount may have become
due; or
(b) The making of any representation or warranty by the Makers in this
Note that was false or incorrect in any material respect when made; or
(c) The occurrence of an "Event of Default" under and as defined in the
Credit Agreement.
Upon the occurrence of an Event of Default, the holder hereof shall have the
right, at its option, to declare the unpaid principal balance and all accrued
unpaid interest on this Note at once due and payable (and upon such declaration,
the same shall be at once due and payable), to foreclose any liens and security
interests securing payment hereof and to exercise any of its other rights,
powers and remedies under this Note or at law or in equity.
Neither the failure by the holder hereof to exercise, nor delay by the
holder hereof in exercising, the right to accelerate the maturity of this Note
or any other right, power or remedy upon any default shall be construed as a
waiver of such default or as a waiver of the right to exercise any such right,
power or remedy at any time. No single or partial exercise by the holder hereof
of any right, power or remedy shall exhaust the same or shall preclude any other
or further exercise thereof, and every such right, power or remedy may be
exercised at any time and from time to time. All rights and remedies provided
for in this Note are cumulative of each other and of any and all other rights
and remedies existing at law or in equity, and the holder hereof shall, in
addition to the rights and remedies provided herein, be entitled to avail itself
of all such other rights and remedies as may now or hereafter exist at law or in
equity for the collection of the indebtedness owing hereunder, and the resort to
any right or remedy provided for hereunder or provided for by law or in equity
shall not prevent the concurrent or subsequent employment of any other
appropriate rights or remedies. Without limiting the generality of the foregoing
provisions, the acceptance by the holder hereof from time to time of any payment
under this Note which is past due or which is less than the payment in full of
all amounts due and payable at the time of such payment, shall not (i)
constitute a waiver of or impair or extinguish the rights of the holder hereof
to accelerate the maturity of this Note or to exercise any other right, power or
remedy at the time or at any subsequent time, or nullify any prior exercise of
any such right, power or remedy, or (ii) constitute a waiver of the requirement
of punctual payment and performance, or a novation in any respect.
If the holder of this Note retains an attorney in connection with any
default or at maturity or to collect, enforce or defend this Note in any lawsuit
or in any probate, reorganization, bankruptcy or other proceeding, or if any of
the Makers sues the holder in connection with this Note and does not prevail,
then the Makers jointly and severally agree to pay to holder, in addition to
principal and interest, all reasonable costs and expenses incurred by such
holder in trying to collect this Note or in any such suit or proceeding,
including reasonable attorneys' fees.
It is the intent of Payee and Makers to conform to and contract in
strict compliance with applicable usury law from time to time in effect. All
agreements between Payee or any other holder hereof and Makers are hereby
limited by the provisions of this paragraph which shall override and control all
such agreements, whether now existing or
TERM PROMISSORY NOTE - TOREADOR ET AL PAGE 3
<PAGE> 4
hereafter arising and whether written or oral. In no way, nor in any event or
contingency (including but not limited to prepayment, default, demand for
payment, or acceleration of the maturity of any obligation), shall the interest
taken, reserved, contracted for, charged or received under this Note or
otherwise, exceed the maximum nonusurious amount permissible under applicable
law. If, from any possible construction of any document, interest would
otherwise be payable in excess of the maximum nonusurious amount, any such
construction shall be subject to the provisions of this paragraph and such
document shall be automatically reformed and the interest payable shall be
automatically reduced to the maximum nonusurious amount permitted under
applicable law, without the necessity of execution of any amendment or new
document. If the holder hereof shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the maximum lawful amount, an amount equal to the
amount which would have been excessive interest shall, without penalty, be
applied to the reduction of the principal amount owing on the indebtedness
evidenced hereby in the inverse order of its maturity and not to the payment of
interest, or refunded to Makers if and to the extent such amount which would
have been excessive exceeds such unpaid principal. The right to accelerate
maturity of this Note or any other indebtedness does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and the holder hereof does not intend to charge or receive any
unearned interest in the event of acceleration. All interest paid or agreed to
be paid to the holder hereof shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread throughout the full stated term
(including any renewal or extension) of the indebtedness under this Note so that
the amount of interest on account of such indebtedness does not exceed the
maximum nonusurious amount permitted by applicable law. As used in this
paragraph, the term "applicable law" shall mean the laws of the State of Texas
or the federal laws of the United States, whichever laws allow the greater
interest, as such laws now exist or may be changed or amended or come into
effect in the future.
Each of the Makers and all sureties, endorsers, guarantors and any
other party now or hereafter liable for the payment of this Note in whole or in
part, hereby severally (i) waive demand, presentment for payment, notice of
dishonor and of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notice (except only for any
notices which are specifically required by this Note), filing of suit and
diligence in collecting this Note or enforcing any of the security herefor; (ii)
agree to any substitution, subordination, exchange or release of any such
security or the release of any party primarily or secondarily liable hereon;
(iii) agree that the holder hereof shall not be required first to institute suit
or exhaust its remedies hereon against Makers or others liable or to become
liable hereon or to enforce its rights against them or any security herefor;
(iv) consent to any extension or postponement of time of payment of this Note
for any period or periods of time and to any partial payments, before or after
maturity, and to any other indulgences with respect hereto, without notice
thereof to any of them; and (v) submit (and waive all rights to object) to
personal jurisdiction of any Texas state court, or any United States federal
court, sitting in the City or County of Dallas, Texas, and venue in Dallas
County, Texas, for the enforcement of any and all obligations under the Credit
Documents.
This Note may not be changed, amended or modified except in a writing
expressly intended for such purpose and executed by the party against whom
enforcement of the change, amendment or modification is sought.
All notices, requests, and communications hereunder shall be in
writing. Unless otherwise expressly provided herein, any such notice, request,
demand, or other communication shall be deemed to have been duly given or made
when delivered by hand, or, in the case of delivery by mail, when deposited in
the mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
1. if to the Makers, to:
TOREADOR ROYALTY CORPORATION,
TOREADOR EXPLORATION & PRODUCTION, INC.
TORMIN, INC.
4809 Cole Avenue, Suite 108
Dallas, Texas 75205
Attention: Mr. G. Thomas Graves, III
TERM PROMISSORY NOTE - TOREADOR ET AL PAGE 4
<PAGE> 5
2. if to the Payee, to:
COMPASS BANK
8080 N. Central Expressway, Suite 370
Dallas, Texas 75206
Attention: Mr. Chris D. Cowan
Any party may, by proper written notice hereunder to the others, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
Time shall be of the essence in this Note with respect to Makers'
obligations hereunder.
AS A MATERIAL INDUCEMENT FOR PAYEE TO ENTER INTO THE COMMERCIAL
TRANSACTION EVIDENCED HEREBY, MAKER AND PAYEE HEREBY WAIVE ANY RIGHT TO A TRIAL
BY JURY OF ANY OR ALL ISSUES ARISING IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BETWEEN MAKERS AND PAYEE OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IN RESPECT OF
ANY MATTER ARISING OUT OF, UNDER OR CONNECTED IN ANY MANNER WHATSOEVER WITH THIS
NOTE.
THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE
GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND
APPLICABLE UNITED STATES FEDERAL LAW.
THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Makers have duly executed this Note as of the
date first above written.
MAKERS:
TOREADOR ROYALTY CORPORATION, TOREADOR
EXPLORATION & PRODUCTION, INC. and TORMIN, INC.
By: /s/ G. THOMAS GRAVES, III
-----------------------------------------
Name: G. Thomas Graves, III
Title: President of each corporation
TERM PROMISSORY NOTE - TOREADOR ET AL PAGE 5
