SPECIAL LOAN AGREEMENT
This Agreement is made and entered into as of November 8, 1999, between
HOME-STAKE OIL & GAS COMPANY, an Oklahoma corporation (the "Borrower"), and BANK
OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association (the "Bank");
WHEREAS, the Borrower has applied to the Bank to obtain two separate loans
described as follows:
a) a "Term Loan" in the principal sum of $3,400,000.00 to be evidenced by the
promissory note of the Borrower in such amount to be payable to the order
of the Bank in 33 consecutive monthly installments of principal, each in
the amount of $100,000.00, due and payable on the last day of each month,
commencing December 31, 1999, and a final installment due September 30,
2002, in the amount of all remaining unpaid principal, together with
interest on the unpaid balances of principal at an annual rate of interest
equal from day to day to three-fourths of one percent per annum less than
that annual rate of interest from time to time established and announced by
Chase Manhattan Bank of New York, New York ("Chase Bank") as its prime rate
of interest (the "Chase Prime Rate");
b) a "Revolving Credit Loan" to be evidenced by the promissory note of the
Borrower in the principal amount of Five Million Dollars ($5,000,000.00)
payable to the order of the Bank on November 30, 2000, and bearing
interest, payable monthly on the last day of each month, commencing
December 31, 1999, and at maturity on November 30, 2000, at an annual rate
of interest equal from day to day to one percent per annum less than the
Chase Bank Prime Rate; and
c) the promissory note evidencing the Term Loan is referred to herein as the
"Term Note" and the promissory note evidencing the Revolving Credit Loan is
referred to herein as the "Revolving Credit Note." Each reference herein to
the Term Loan, the Revolving Credit Loan, the Term Note or the Revolving
Credit Note shall include a reference to each renewal, extension, deferral,
rearrangement, substitution and change in form thereof or in the terms
thereof which may be from time to time and for and upon any term or terms
effected by agreement between the Borrower and the Bank; and
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WHEREAS, the Borrower and the Bank have agreed upon the above described
terms of each Note and each Loan and additional representations, covenants,
warranties and agreements set forth herein.
NOW, THEREFORE, in consideration of the mutual representations, covenants
and undertakings stated herein the Borrower and the Bank represent, warrant,
covenant and agree to and with each other as more fully hereinafter stated.
I. Representations of the Borrower
1.1 Due Organization and Corporate Capacity. The Borrower is a corporation
duly organized and existing under and by virtue of the laws of the State of
Oklahoma and its corporate charter and franchise is in good standing and
unimpaired in the State of Oklahoma. The governing documents of the Borrower
authorize the Borrower to conduct all the business and transactions currently
conducted and transacted by it and the execution by the Borrower of this
Agreement, the above described promissory notes and all other documents to be
executed by the Borrower in connection with the Loans do not and will not
violate, contravene or be otherwise prohibited by any term or provision of the
Articles or Certificate of Incorporation or By-laws of the Corporation.
1.2 Due Authorization. The execution of this Agreement and the Notes, when
executed on behalf of the Borrower by its Chairman of the Board, President and
Chief Executive Officer are and shall be, when executed, within authority
clearly established by the governing body of the Borrower and the execution of
such documents (collectively the "Loan Documents") on behalf of the Borrower and
its due observance of, compliance with and performance of the terms, provisions
and undertakings stated and to be stated therein do not and will not violate or
contravene any term or provisions of any of the Borrower's governing documents
or constitute a breach of or default under any term or provision of any
indenture, encumbrance or other undertaking by which the Borrower or any of its
properties are bound.
1.3 Financial Statements. All of the financial statements of the Borrower
furnished by it to the Bank in connection with its application for the Loans
are, as of the respective dates thereof and in respect of the periods covered
thereby, substantially true and correct and were prepared in accordance with
generally accepted principles of accounting. Such statements do not contain any
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materially false or misleading information nor omit or fail to state any
material fact(s) required to be stated in order to make any of such statements
not materially false or misleading.
II. Use of Loan Proceeds
2.1 Term Loan Proceeds. The proceeds of the Term Loan are intended to be
applied by having the Bank purchase from Bank of America, N.A. the loans
heretofore made by it and its predecessors to the Borrower and secured by
mortgage and deed of trust indentures and security interests covering oil and
gas properties of the Borrower. Such loans will be purchased by the Bank from
Bank of America, N.A. for the amount of unpaid principal and accrued interest
and unpaid charges, if any, in respect thereof, and will be without recourse
upon Bank of America, N.A. which shall assign to the Bank all promissory notes
of the Borrower presently payable to that Bank and all mortgages, deeds of trust
and other documents creating or evidencing any security interests created by the
Borrower. The Borrower agrees with the Bank that upon acquisition of such
documents by the Bank from Bank of America, N.A. that the Notes of the Borrower
evidencing the Term Loan and the Revolving Credit Loan shall be deemed to be
fully secured by such liens and security interests created or purportedly
created by the loan documents to be obtained by the Bank from Bank of America,
N.A.
Subsequent to the acquisition by the Bank of the above referenced loan
documents held by Bank of America, N.A. the Borrower will execute appropriate
documents with the Bank to confirm to the Bank that the Notes became secured by
such Bank of America, N.A. loan documents as and when the same were acquired by
the Bank. This may be deemed necessary or appropriate by counsel for the Bank to
require the recording and filing of supplemental mortgage, deed of trust and
related documents at the expense of the Borrower, in which event the Borrower
shall execute and deliver to the Bank such documents and agreements as may be
reasonably required as hereinafter provided.
2.2 The Revolving Credit Loan. The Loan evidenced by the Revolving Credit
Note is primarily intended to provide funding for the Borrower to acquire
additional oil and gas properties and for general working capital purposes.
a) In addition to the interest required to be paid upon the Revolving
Credit Note the Borrower hereby agrees to pay to the Bank a "standby
fee" computed upon the amounts to which the Borrower has not utilized
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this credit at an annual rate of interest equal to three-eighths
(3/8ths) of one percent per annum. Within ten days following the close
of each quarter-annual period the Bank will invoice the Borrower for
the amount of such fee which shall be based upon the average daily
amount of the available Revolving Credit not utilized by the Borrower
over each day of the quarter-annual period.
b) The Borrower shall not be entitled to receive any advance of funds
under the Revolving Credit at any time if, at such time there shall
have occurred and remained unremedied any event which would, of itself
or but for the giving of any notice or lapse of any time, constitute a
default or event of default under the terms of the Term Loan Note, the
Revolving Credit Note, this Loan Agreement or any supplement hereto or
expressed in any extension, deferral, modification, substitution or
replacement of either or both of the Notes.
c) During the term of the Revolving Credit Loan the Borrower shall be
entitled to obtain letters of credit to be issued by the Bank for the
account of the Borrower as advances under the Revolving Credit Loan
and for each such letter of credit the Borrower shall pay to the Bank,
at the time of issue, a fee in an amount equal to two percent of the
maximum amount of credit stated in the letter of credit. The amount of
each letter of credit, when issued, shall reduce the amount of the
Revolving Credit available under the Revolving Credit Loan so long as
such letter of credit is outstanding and, for purposes of the 3/8th of
one percent stand-by fee applicable to the utilized portion of the
Revolving Credit Loan, such fee shall not be applicable to the
outstanding amount of each letter of credit.
III. Bank of America Loan Documents
3.1 It is understood and agreed between the Borrower and the Bank that in
purchasing the obligations of the Borrower to Bank of America, N.A. by the Bank
the purpose of such procedure is to capture the lien and security interest
priorities to which the mortgages, deeds of trust and security agreements
(herein the "BA Indentures") are entitled and to consolidate, amend and
supplement such indentures to substitute the obligations and indebtedness of the
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Borrower to the Bank in respect of the Term Loan and the Revolving Credit Loan
and any related obligations of the Borrower in respect thereof. The documents to
be executed for such purpose may substitute different events and occurrences
which may constitute events of default under the BA Indentures. Notwithstanding
any delay in the execution of such documents the Borrower agrees that the Term
Loan and Revolving Credit Loan shall be secured by the liens and security
interests of the BA Indentures immediately upon the purchase by the Bank of
indebtedness secured by such indentures.
IV. Affirmative Covenants of Borrower
The Borrower covenants and agrees with the Bank that for so long as any
indebtedness of the Borrower in respect of the Term Loan or the Revolving Credit
Loan or any extension, renewal, rearrangement or other form of any such
indebtedness shall remain outstanding and unpaid:
4.1 The Borrower will promptly advise the Bank in writing of the occurrence
of any material adverse change in the financial condition of the Borrower, and
any proposals or program to be effected by the Borrower in respect thereof.
4.2 The Borrower will promptly advise the Bank in writing of any pending or
threatened claim or litigation asserted against the Borrower which, if
successfully prosecuted, would have a material adverse effect upon the financial
condition of the Borrower materially and adversely affecting the anticipated
operations of the Borrower.
4.3 Within forty-five days following the close of each quarter-annual
fiscal year of the Borrower the Borrower will furnish to the Bank the following
financial statements concerning the financial conditions of the Borrower, as of
the close of such fiscal period and the results of its operations for such
period, in each case certified by a senior financial officer of the Borrower to
have been prepared in accordance with generally accepted principles of
accounting:
a) a Balance Sheet or Statement of assets and liabilities as of the close
of such period;
b) a Statement of Profit and Loss or of Income and Expense for such
period;
c) a statement of changes in capital accounts as a result of operations
during such period; and
d) any other similar or relevant financial statements customarily
prepared for the Borrower pertaining to its operations and
transactions during such fiscal period.
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4.4 The Borrower will at all times maintain a net worth, determined in
accordance with generally accepted principles of accounting, of not less than
fourteen million dollars.
4.5 Within ninety days following the close of each fiscal year of the
Borrower the Borrower will furnish to the Bank financial statements of the
Borrower equivalent to those specified in Section 4.3 each of which shall be
certified by a reputable and independent certified public accountant or firm of
such accountants to have been prepared in accordance with generally accepted
principles of accounting.
V. Negative Covenants of Borrower
The Borrower covenants and agrees that for so long as any indebtedness of
the Borrower in respect of the Term Loan or the Revolving Credit Loan or any
extension, renewal, rearrangement or other form of any such indebtedness shall
remain outstanding and unpaid:
5.1 The Borrower will not create or suffer to be created or to exist any
mortgage, deed of trust, security agreement or like encumbrance to become
effective upon any oil or gas properties of the Borrower not theretofore and at
the time thereof subject to mortgages, deeds of trust and security agreements
granted to the Bank to secure the payment of any indebtedness evidencing the
Term Loan, Revolving Credit Loan or any extension, renewal, continuation or
rearrangement thereof unless the Borrower shall have advised the Bank in writing
of the intention of the Borrower to create or suffer to exist such mortgage,
deed of trust, security agreement or like encumbrance and the Bank shall have
consented thereto in writing.
5.2 Except as provided in the Shareholders' Rights Agreement of the Bank,
as amended through February 10, 1995 (copies of which have been delivered to the
Bank and which have not been modified or amended, as of the date hereof) the
Borrower will not declare, pay (except as provided below) or become obligated to
declare or pay any dividend on any class of its capital stock now or hereafter
outstanding, make any distribution of cash or property to holders of any shares
of such stock, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of any class of its capital stock now or hereafter
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outstanding; provided, however, that if no Event of Default or Default shall
then exist, notwithstanding the above, the Borrower may declare and pay
dividends upon its outstanding shares of capital stock not in any fiscal year to
exceed fifteen percent (15%) of its net cash from operations, less scheduled
payments upon indebtedness to the Bank. For purposes of this Agreement "net cash
from operations" shall mean gross income (net of production taxes) paid minus
cash paid to suppliers in the normal course of business.
5.3 Except with prior written approval of the Bank the Borrower will not
incur, or become obligated to incur, any Funded Indebtedness in excess of
$500,000.00. For the purpose of this Agreement "Funded Indebtedness" shall mean
indebtedness evidenced by any bond(s), debenture(s) or promissory note(s) or
like or similar undertakings but shall not include indebtedness for operating
expenses incurred in the ordinary course of business and payable according to
customary trade terms or income, ad valorem, excise or similar taxes paid prior
to becoming delinquent. Funded Indebtedness shall not include the Term Loan,
Revolving Credit Loan or any other indebtedness which may become due to the
Bank.
5.4 The Borrower shall provide to the Bank on or before March 15 of each
year an engineering report prepared by an engineer or firm of engineers
acceptable to the Bank and in form and content acceptable to the Bank, on all
major producing oil and gas leases, royalties and minerals owned by the
Borrower, including but not limited to all of the Mortgaged Properties. Such
engineering report shall evaluate the proved producing oil and gas reserves
attributable to the Borrower's interest in the Mortgaged Property and other oil
and gas properties owned by Borrower, together with a forecast of the rates of
production therefrom and expenses attributable thereto and the estimated cash
flow to the Borrower from such production for the estimated economic life of
such property.
VI. Events of Default, Remedies
If at any time when any indebtedness evidenced by the Term Note or the
Revolving Credit Note shall remain outstanding and unpaid any one or more of the
following events shall occur:
a) The Borrower should fail to make any payment of principal or interest
upon any indebtedness evidenced by the Term Note or the Revolving
Credit Note as and when the same shall become due and payable.
b) Any representation of the Borrower stated in this Loan Agreement
should prove or be determined to be materially false and misleading or
to have omitted any statement of fact necessary to be stated in order
to make any representation not materially false or misleading and such
matter should not be remedied within thirty days after the Bank shall
have notified the Borrower in writing of such misrepresentation.
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c) The Borrower shall have failed to keep, observe or comply with any
term or provision of this Agreement, including any amendment and
supplement hereto, and such default shall continue unremedied for a
period of thirty days after the Bank shall have notified the Borrower
in writing of such default. This provision shall not be interpreted to
require any opportunity to remedy any default under paragraph 6.1
hereinabove or paragraphs 6.4 or 6.5 hereof.
d) The Borrower should make any assignment for the benefit of creditors
or to institute any proceeding under the Bankruptcy Code seeking or
consenting to any relief afforded by such Code or any chapter or
provision thereof or should fail to consent to the filing of any
involuntary petition under the Bankruptcy Code or any chapter thereof.
e) Any involuntary proceeding should be filed against the Borrower by any
person or entity under the Bankruptcy Code seeking any relief in
respect of any claim or claims against the Borrower and such
proceeding should not be stayed or dismissed within thirty days
thereafter.
f) Any judgment in excess of $250,000.00 should be obtained by any person
or entity against the Borrower in any court of competent jurisdiction
and should not be stayed or released within thirty days thereafter or
should become final and no longer appealable.
g) Any event should occur which would, of itself or with lapse of any
time or giving of any notice, authorize any person or entity to
accelerate the payment of any indebtedness of the Borrower in excess
of $250,000.00 or to exercise any remedy for collection of any such
indebtedness or claim in respect thereof and such default should not
be remedied within thirty days after the Bank shall have notified the
Borrower of such occurrence. This paragraph shall apply to any default
or right of acceleration which would authorize Bank of America, N.A.
to exercise any remedy under any BA Indenture prior to the time such
indenture and the indebtedness secured thereby is transferred to the
Bank.
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h) If the Borrower should fail to reimburse the Bank the amount of any
drawing honored by it under any letter of credit issued by it for the
account of the Borrower. Notwithstanding this provision the Bank shall
be entitled, at its option, to charge the amount of any such drawing
as an amount drawn by the Borrower as an advance of loan funds under
the Revolving Credit Loan.
i) Upon the occurrence of any default or event of default specified in
the foregoing subparagraphs, the Bank shall be entitled to accelerate
the maturity of the indebtedness referred to in this Agreement and to
exercise any right(s) and remedy(ies) available at law or in equity to
collect such indebtedness.
VII. Miscellaneous
7.1 Governing Law. This Agreement, each of the Notes and any further loan
documents which may or shall be executed by the Borrower and the Bank in
connection with the Term Note and the Revolving Credit Note shall be interpreted
in accordance with and governed by the laws of the State of Oklahoma.
7.2 Bank Loan Expenses. The Borrower will promptly reimburse the Bank for
the reasonable attorney fees of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, in
connection with the preparation of this Loan Agreement and any Supplements or
amendments to be executed with the acquisition by the Bank of the BA Indentures
and any amendments or supplements thereto and hereto to adopt such indentures to
secure the indebtedness of the Borrower to the Bank identified in this Loan
Agreement. If it shall be deemed necessary or otherwise required to so adopt
such indentures that any documents be prepared and filed or recorded in any
public filing office or recording office the Borrower will promptly reimburse
the Bank for all reasonable expenses incurred by it for such purpose.
7.3 The terms, provisions, agreements on the part of the Borrower and the
Bank under this Agreement, the notes and any documents supplementary thereto
shall be binding upon and shall inure to the benefit of each party hereto and
their respective successors and assigns.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Agreement
as of the date and year first hereinabove mentioned in multiple counterparts,
each of which shall constitute an original copy hereof.
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HOME-STAKE OIL & GAS COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By /s/ ▇. ▇. ▇▇▇▇▇▇
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▇.▇. ▇▇▇▇▇▇, Vice President
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