COMPROMISE AND SETTLEMENT AGREEMENT
This Agreement is made effective as of the 31st day of July,
1991, by and between Lyric Energy, Inc., a Colorado corporation
authorized to do business in Texas, and Amarillo National Bank, a
national banking corporation.
WHEREAS, Lyric Energy, Inc. ("Lyric#) is indebted to
Amarillo National Bank ("Bank") by virtue of those certain
promissory notes one dated December 17, 1990, in the original
principal amount of $1,815,868.78 due and payable on or before
120 days from the date thereof, which note is given in renewal
and extension of certain promissory notes set forth therein, one
dated December 17, 1990, in the original principal amount of
$967,368.85 due on demand, and one dated April 17, 1986, in the
original principal amount of $206,989.02 (the "Notes");
WHEREAS, the Notes are now in default;
WHEREAS, Lyric proposes to transfer and assign various
properties, both real and personal, to Bank in full and final
settlement of all amounts due under the Notes, both principal and
interest; and
WHEREAS, Bank is willing to accept the transfer and
assignment of such properties in satisfaction of all amounts due
under the Notes pursuant to the terms set forth in this
Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
do hereby agree as follows:
1. Lyric currently owes $2,990,226.50 to Bank, being
$1,815,868.78, $967,368.85, and $206,989.02 of principal on the
Notes, plus interest accrued on such Notes. In addition, various
fees, expenses and attorney's fees have been incurred by the
Bank. All sums due under the Notes are herein referred to as the
"Indebtedness."
2. The note in the original principal amount of
$1,815,868.78 is secured by various deeds of trust covering
properties located in Okmulgee, Oklahoma; Xxxxx County, Oklahoma;
Xxxxx County, Texas; Xxxx County, Texas; Xxxxx County, Texas;
Xxxxx County, Texas; Xxxxxxx County, Texas; Xxxxxxx County,
Texas; LaPlatta, Colorado; and Xxxxxxxx County, Montana.
3. In consideration of the representations and agreements
contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Lyric agrees to convey to Bank the following
described property (the "Property"):
a. All of the property more particularly described on
Exhibit A attached hereto and made a part hereof for all
purposes, subject to the terms and conditions set forth herein;
b. An overriding royalty interest of 2.3% of 8/8ths
of all the oil, gas and liquid hydrocarbons that may be produced,
saved and marketed from the lands described as the Lyric/Xxxxxxxx
Property located in Xxxxx County, Texas, more particularly
described on Exhibit B attached hereto and made a part hereof for
all purposes, subject to the terms and conditions set forth
herein;
c. An overriding royalty interest of 3.0% of 8/8ths
of all of the oil, gas and liquid hydrocarbons that may be
produced, saved and marketed from any new xxxxx, either oil or
gas, drilled on any of the acreage known as the Xxxxxx Xxxxx
located in Xxxxx County, Texas, whether such acreage is currently
leased to Lyric or is acquired hereafter, subject to the terms
and conditions set forth herein;
d. 3.8 million shares of the authorized and unissued
shares of the common stock of Lyric Energy, Inc. representing
8.9976% of all of the issued and outstanding common shares of
Lyric, subject to the terms and conditions set forth herein;
e. Proceeds from the sale of the properties known as
the Creek Indian, Oklahoma, Properties or, in the alternative, a
production payment covering the Creek Indian, Oklahoma,
Properties in the amount of $100,000.00 as more particularly set
forth herein.
The parties stipulate and agree that the present value
of the properties listed on Exhibit A, as determined by the
engineering firm of Grace, Shursen & Xxxxx as of May 1, 1991,
total $302,440.00.
4. In consideration of the representations and agreements
contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and effective upon the transfer and assignment of
all of the Property, Bank agrees to release Lyric from all
further liability or obligation on the Indebtedness and agrees to
execute such releases of the collateral currently securing the
Notes as Lyric may reasonably request, such releases to be in the
form authorized and approved by Bank.
5. Effective as of the 31st day of July, 1991, Lyric
hereby releases the Bank and the Bank's agents, employees,
successors and assigns, including its attorneys, from all claims
and liabilities of any kind associated with or in connection with
the Notes or the Indebtedness.
6. Lyric represents and warrants that it owns the Property
free and clear of any and all liens or encumbrances of any kind
whatsoever other than the liens and encumbrances in favor of Bank
and that the Property will be transferred and assigned to Bank at
Closing, as that term is defined herein, free and clear of all
liens and encumbrances. Lyric further represents and warrants
that, with respect to each property described, it owns not less
than the working interest, net revenue interest, or overriding
royalty interest set forth on Exhibit A, attached hereto and made
a part hereof for all purposes. At Closing, Lyric agrees to
provide to Bank such title opinions, title insurance policies,
and other records with respect to the Property as may then be
within the possession of Lyric. Prior to Closing, Lyric agrees
that Bank may have access to Lyric's files and books and records
during regular business hours for the purpose of conducting such
examination of the title to the Property as the Bank may, in its
sole discretion, deem necessary and for the purpose of inspecting
and copying (at Lyric's expense) such books and records of Lyric
with respect to such title as the Bank in its sole discretion
deems necessary. Following the Closing, Lyric agrees to cooperate
with Bank in the event additional information or copies of
additional documents are reasonably required.
7. The Closing of the transaction contemplated by this
Agreement shall occur on July 31, 1991, at the offices of
Amarillo National Bank, 5th and Xxxxxx, Amarillo, Potter County,
Texas, at 10:00 a.m., or on such earlier date and at such time as
may be agreed upon between the parties. Time is of the essence in
this Agreement. At Closing, the properties shall be transferred
from Lyric to Bank by such Bills of Sale, Assignments, Deeds,
Endorsements, Stock Transfer Powers, and other documents in the
form and substance reasonably required by Bank. In addition, at
Closing Lyric shall provide to Bank such corporate resolutions
and other documents relating to corporate existence, good
standing, and authority as Bank may reasonably require including,
but not necessarily limited to, a certificate of existence and
certificate of good standing issued by the State of Colorado and
a certificate of authority to do business and certificate of good
standing in the State of Texas. Bank shall obtain such
certificates of existence and good standing as it deems
necessary. Taxes on the Property shall be prorated equally
between the parties.
8. In the event title to a significant portion of the
Property is found to be defective at any time prior to closing,
Bank may, at its sole option, declare this Agreement to be null
and void. What constitutes a significant portion of the property
shall be in the sole determination of Bank. Lyric agrees to cure
such title objections as Bank may reasonably require. In
addition, if Closing occurs prior to the time good title is
confirmed by Bank, Bank shall have a period of thirty days within
which to reject some or all of the title. At that time, Bank
shall reconvey such rejected properties to Lyric.
9. For a period of six months from and after the Closing,
Lyric shall have the option to repurchase the properties set
forth on Exhibit A attached hereto for a purchase price of
$302,440.00 cash. If that right to repurchase is not exercised
by giving written notice to Bank within such six month period, it
shall become null and void. The closing of such repurchase shall
occur not more than thirty days following the receipt of such
written notice. Failure to close timely shall cause the option
to repurchase to expire. In addition, for a period of one year
following the Closing, Lyric shall have a right of first refusal
to purchase the properties set forth on Exhibit A. Upon receipt
of an offer to purchase some or all of such properties that is
acceptable to Bank, Bank shall notify Lyric of the terms and
conditions of such sale. Lyric shall have a period of thirty days
following receipt of such notice to notify Bank of its intention
to exercise its right of first refusal. In the event Lyric fails
to notify Bank within such thirty day period, its right of first
refusal shall expire and Bank shall have the right to sell the
properties to a third party upon the terms and conditions set
forth in the notice. In the event Lyric exercises its right to
purchase the properties, the closing of such transaction shall
occur in accordance with the terms set forth in the notice.
10. With respect to the 3.8 million shares of Lyric Energy,
Inc. common stock to be transferred to Bank pursuant to paragraph
3 hereof (the "Shares"), the following terms shall apply:
a. The Shares shall be issued out of authorized but
unissued common stock, and after issuance will constitute 8.9976%
of the total issued and outstanding common stock of Lyric.
b. The shares shall be subject to adjustment on a
semiannual basis to ensure that the Shares continue to represent
8.9976% of all issued and outstanding shares of common stock of
Lyric. If Lyric shall at any time subdivide the outstanding
shares of common stock, or shall issue a stock dividend on its
outstanding common stock, the Shares shall be proportionately
increased, and if Lyric shall at any time combine the outstanding
shares of common stock, the Shares shall be proportionately
decreased, effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be. In
either case, the adjustment shall be such that the Shares shall
continue to constitute 8.9976% of the issued and outstanding
shares of common stock of Lyric. The Shares shall be adjusted for
dividends or distributions on common stock payable in Lyric
stock; subdivisions, combinations or reclassifications of common
stock; distributions to all holders of common stock of rights to
purchase common stock at less that the current market price at
the time; distributions to such holders of assets or debt
securities of Lyric or rights to purchase securities of Lyric
(excluding cash dividends or distributions from current or
retained earnings). The required adjustment shall be such that
the holder of the Shares continues to hold 8.9976% of the
issued and outstanding common stock of Lyric and receives in such
distribution at least 8.9976% of the property or rights received
by all holders of common stock of Lyric.
If at any time Lyric offers to its shareholders the
right to subscribe for and purchase a proportionate number of
additional shares of the common stock of Lyric, which
subscription price shall be paid to Lyric in cash in full by each
such subscribing shareholder, and Bank declines to exercise its
right to purchase such shares, or elects to purchase less than
the number of shares attributable to its proportionate share of
the total number of shares being offered, then subsequent to the
exercise of such rights by the shareholders of Lyric, Bank's
percentage of the common stock of Lyric shall be determined by
dividing the number of shares then owned by Bank by the total
issued and outstanding shares of the corporation. From and after
the date of determining the new percentage owned by Bank, the
provisions of this paragraph 10 shall continue to apply with the
new percentage being inserted in place of the 8.9976% currently
reflected in the Agreement.
Subject to any required action by its shareholders, if
Lyric is the surviving corporation in any reorganization, merger
or consolidation, the aggregate number and class of shares with
respect to the Shares shall be proportionately adjusted so as to
reflect the securities to which the holder of the Shares would be
entitled in such a way as to assure that the holder of the Shares
receives at least 8.9976% of the consideration received by all
holders of common stock of Lyric. If Lyric is a party to a
consolidation or merger or a transfer or lease of all or
substantially all of its assets, and the security holders of
Lyric are to receive some consideration other than Lyric shares,
the holder of the Shares shall have a right, at its option, to
convert such consideration into securities of Lyric, property, or
other assets, including shares of another company, as may be
agreed between the holder of the Shares and Lyric or its
successor, or if no such agreement is reached, a right to receive
cash in an amount equal to the value of the consideration other
than Lyric shares which such holder would have otherwise
received.
c. Lyric represents and warrants to Bank that the
Shares are shares that are subject to Rule 144 of the Securities
and Exchange Commission (#SEC"). As such, Lyric is responsible
for complying with certain rules and regulations required under
the Securities Act and the Securities Exchange Act. Lyric
represents and warrants to Bank that at the time of Closing all
filings required to be made by Lyric with the SEC or with any
other governmental agency are current except as set forth below.
In addition, from and after the Closing, and so long as Bank owns
any of the shares of Lyric, Lyric agrees to:
(1) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all
times;
(2) use its best efforts to file with the SEC in
a timely manner all reports and other documents required of the
corporation under the Securities Act and the Securities Exchange
Act;
(3) furnish to Bank upon its request a written
statement executed by the President of Lyric as to its compliance
with the reporting requirements of said Rule 144 and of the
Securities Act and the Securities Exchange Act of which Lyric is
aware, a copy of the most recent annual or quarterly report of
Lyric, and such other reports and documents so filed by Lyric as
Bank may reasonably request.
It is understood among the parties that the form 10K
covering the period ending April 30, 1991, which is due to be
filed with the Securities and Exchange Commission on or before
July 31, 1991, has not been made. Lyric represents and warrants
to Bank that the SEC has been notified that the filing of such
form 10K has been delayed, that the form 10K report is currently
being prepared, and that Lyric agrees to complete and file such
report as quickly as possible. In addition, Lyric agrees to
furnish to Bank a copy of the form 10K and the letter
transmitting same to the SEC.
d. For a period of six months following the Closing,
Lyric shall have the option to repurchase all of the Shares at a
price of $1.00 per share payable in cash by giving written notice
to Bank. The closing of such repurchase shall take place within
thirty days following the exercise of such option. Failure to
close timely shall cause the repurchase option to become null and
void. If the option is not exercised within such six month
period it shall become null and void. In addition, for a period
of one year following the Closing, Lyric shall have a right of
first refusal to purchase any or all of the Shares contemplated
to be sold by Bank. Following the receipt by Bank of an offer to
purchase some or all of the Shares that is acceptable to Bank,
Bank shall notify Lyric of the terms and conditions of such sale.
Lyric shall have a period of thirty days following receipt of
such notice to notify Bank of its intention to exercise its right
of first refusal. In the event Lyric fails to notify Bank within
such thirty day period, its right of first refusal shall expire
and Bank shall have the right to sell the Shares to a third party
upon the terms and conditions set forth in the notice. In the
event Lyric exercises its right to purchase the Shares, the
closing of such transaction shall occur in accordance with the
terms set forth in the notice.
11. If at any time or from time to time, Lyric shall
determine to register any of its securities, either for its own
account or the account of a security holder or holders, Lyric
will (a) promptly give Bank written notice thereof (which shall
include a list of the jurisdictions in which Lyric intends to
attempt to qualify such securities under the applicable blue sky
or other state securities laws); and (b) include in such
registration (and any related qualification under blue sky laws
or other compliance) and in any underwriting involved therein, at
Bank's option, all of the Shares specified by Bank in a written
request or requests made within thirty days after receipt of such
written notice from Lyric, except as set forth below. As used
herein, the terms "register" or "registration" shall mean
registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, and the
declaration or ordering of the effectiveness of such registration
statement.
The right of Bank to registration pursuant to this
paragraph shall be conditioned upon Bank's participation in the
underwriting and the inclusion of Bank's Shares in the
underwriting. If Bank proposes to distribute some or all of the
Shares through such underwriting, Bank shall (together with Lyric
and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting by Lyric. If Bank disapproves of the terms of any
such underwriting, it may elect to withdraw therefrom by written
notice to Lyric and the underwriter. Any Shares excluded or
withdrawn from such underwriting shall, unless Bank requests
otherwise, be included in such registration but shall not be
transferred in a public distribution prior to ninety days after
the effective date of the registration statement relating
thereto.
All expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Agreement, including, without limitation, all registration,
filing, and qualification fees, printing expenses, fees and
disbursements of counsel for Lyric and for Bank, and expenses of
any special audits incidental to or required by such
registration, shall be borne by Lyric. In the case of each
registration, qualification, or compliance effected by Lyric
pursuant to this Agreement, Lyric will keep Bank advised in
writing as to the initiation of each registration, qualification
and compliance and as to the completion thereof. At its expense
Lyric will use its best efforts to:
a. Keep such registration, qualification or
compliance pursuant to this paragraph effective for a period of
180 days or until Bank has completed the distribution described
in the registration statement relating thereto, whichever first
occurs; and
b. Furnish such number of prospectuses and other
documents incident thereto as Bank from time to time may
reasonably request.
Lyric will indemnify Bank, each of Bank's officers and
directors, and each person controlling Bank, and their assigns,
with respect to such registration, qualification, or compliance
effected pursuant to this Agreement, and each underwriter, if
any, and each person who controls any underwriter of the Shares
held by or issuable to Bank or its assignees, against all claims,
losses, damages, and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related
registration statement, notification or the like) incident to any
such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by Lyric of any rule or
regulation promulgated under the Securities Act applicable to
Lyric and relating to action or inaction required of Lyric in
connection with any such registration, qualification, or
compliance, and will reimburse Bank, each of Bank's officers and
directors, and each person controlling Bank, and their assigns,
each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigation or defending any such
claim, loss, damage, liability or action, provided that Lyric
will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on any
untrue statement or omission based upon written information
furnished to Lyric by an instrument duly executed by Bank or
underwriter specifically for use therein.
12. With respect to the overriding royalties to be conveyed
to the Bank under Paragraphs 3.b. and 3.c. of this Agreement, the
following terms and conditions shall apply:
a. The overriding royalties shall be delivered or
paid free and clear of all costs and expenses of development or
operations, except that the overriding royalty interests shall
bear their proportionate part of any ad valorem, gross
production, severance and other taxes levied upon such overriding
royalties or measured by the production of oil or gas
attributable thereto and shall bear their proportionate part of
the costs of treating, compressing, gathering, transporting and
dehydrating such production or rendering the same merchantable.
b. If any of the leases which are to be burdened
with the overriding royalties covers less than the entire and
undivided mineral interest in the land described therein,
nevertheless, the overriding royalty interests to be conveyed to
the Bank shall not be proportionately reduced or diluted.
c. Oil or gas used in operations upon the leased
premises shall be deducted before computing the overriding
royalties.
d. Lyric, or its successors or assigns, is authorized
to pool or unitize the overriding royalties in the same manner
and to the same extent as provided in the leases with respect to
the royalty interest. In the event of such pooling or
unitization, in lieu of the overriding royalties to be conveyed
to the Bank, the Bank shall receive only such proportion of the
overriding royalties as the amount of the acreage covered by the
lease and placed in the unit bears to the total acreage in the
unit.
e. Any development of the leased premises and the
continuation of the leases shall be solely in the discretion of
Lyric and no obligation, other than to act as a reasonably
prudent operator, with regard thereto shall exist by reason of
the overriding royalties to be conveyed to the Bank.
f. The overriding royalties to be conveyed to the
Bank are in addition to and shall not be proportionately reduced
by any other overriding royalties or similar burdens on
production now or hereafter existing.
13. With respect to the Creek Indian, Oklahoma, Properties,
Lyric believes that additional production may be obtained by the
use of certain recovery procedures involving microbes. Bank wants
the property to be sold as quickly as possible with the proceeds
of sale being paid directly to Bank. As a compromise, the parties
agree that Lyric shall have the period of six months from the
date of this Agreement within which to determine if additional
production can be obtained. In the event that additional
production is not obtained within such six month period, Lyric
shall use its best efforts to sell the properties and the
proceeds of sale shall be paid directly to Bank. Bank shall have
the right to approve of any such sale; and shall be notified in
writing by Lyric of any proposed sale. Provided, however, the
Bank shall not unreasonably withhold its approval of any proposed
sale. Until such time as Lyric is able to sell such properties,
it may continue to operate the properties in a reasonably prudent
manner. In the event that it becomes uneconomic to continue to
operate such properties, Lyric, after first notifying Bank in
writing and receiving its approval, may shut-in one or more of
the xxxxx located upon the property or may plug and abandon such
well or xxxxx. In the event one or more of such xxxxx are
plugged and abandoned, the equipment from such well or xxxxx
shall be sold and the net proceeds of sale paid directly to Bank.
As used herein, the term "net proceeds" shall mean the gross
sales price from the sale of the equipment less the cost of
salvaging the equipment. In the event additional production is
acquired, Lyric shall grant, sell, and convey to Bank a
production payment of $100,000.00, which production payment shall
bear no interest. The assignment of this production payment shall
be in the form attached hereto as Exhibit C and expressly made a
part hereof.
14. All of the representations and warranties set forth in
this Agreement shall survive the Closing.
15. All notices, requests, demands, and other
communications required or permitted under this Agreement shall
be in writing and shall be deemed to have been delivered if in
person, to the party entitled thereto against receipt, or if
deposited in the United States Mail, postage prepaid, certified
mail, return receipt requested, addressed as follows:
a. If to Bank: Amarillo National Bank
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxx 00000
b. If to Lyric: Lyric Energy, Inc.
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxx 00000
16. The failure of either party to insist upon a strict
performance of any term or condition of this Agreement shall not
be deemed a waiver of any right or remedy that that party may
have, and shall not be deemed a waiver of any subsequent breach
of any such term or condition.
17. This Agreement is performable in the State of Texas and
shall be construed in accordance with the laws of the State of
Texas.
18. This Agreement shall inure to the benefit of the
parties hereto and to their respective heirs, personal
representatives, successors and assigns.
19. This Agreement is executed simultaneously in multiple
counterparts, each of which shall be deemed to be an original.
20. This Agreement contains the entire agreement of the
parties with respect to the matters covered hereby and supersedes
all prior and contemporaneous agreements by the parties. It may
not be amended or modified except in writing executed by both
parties.
21. The parties to this Agreement shall cooperate in
defending the validity of the transactions contemplated hereby in
any court, administrative or judicial action, subject to the
legal obligation of each party to cooperate fully with any
trustee duly appointed in a bankruptcy proceeding in which such
party is a debtor (a "Debtor#) under protection of the United
States Bankruptcy Code (a "Bankruptcy Case"). If a bankruptcy
court or other court of competent jurisdiction should enter an
order or judgment (in connection with a Bankruptcy Case) holding
or ordering that all or any part of the transfers of Property,
overriding royalty interests, production payments or any other
transfers to Bank contemplated by this Agreement are
preferential, illegal, unenforceable or voidable (any such order
or judgment being called an "Avoidance Order"), than all releases
granted in favor of Lyric in such Bankruptcy Case shall be
rescinded and of no further force and effect; provided, however,
that the resulting obligations of Lyric to the Bank shall be
reduced by the amount of the lawful payments or transfers that
were made to the Bank which have not been voided or required to
be refunded (such voiding of releases being a "Reinstatement of
Obligations"); and provided further that there shall be no
Reinstatement of Obligations if the Bank shall appeal from the
Avoidance Order and the Avoidance Order shall be reversed on
appeal which becomes final. The Bank shall be entitled (but not
required)to prosecute any appeal from an Avoidance Order.
EXECUTED and effective as of this 31st day of July, 1991.
LYRIC ENERGY, INC.
By: /s/ X.X. Xxxxx
X.X. Xxxxx, President
AMARILLO NATIONAL BANK
By: /s/ R. Xxxxxx Xxxxxx
R. Xxxxxx Xxxxxx
Executive Vice President
