EXHIBIT 10.3
NONRECOURSE SECURED PROMISSORY NOTE
$71,593,795 January 29, 2003
FOR VALUE RECEIVED, the undersigned Flying J Oil & Gas
Inc., a Utah corporation and Big West Oil & Gas Inc., a Utah corporation
(together hereinafter the "Borrower") each hereby jointly and severally promise
to pay in U.S. Dollars to the order of St. Mary Land & Exploration Company,
a Delaware corporation (hereinafter, with any subsequent holder, the "Lender"),
the principal sum of $71,593,795 (the "Loan").
Interest. The Loan shall bear interest at the rate of two
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percent above the one-year LIBOR rate (London InterBank Offered Rate) in effect
at the date Lender funds the Loan in connection with consummation of the
transaction wherein NPC Inc. has acquired certain oil and gas assets of the
Borrower (the "Acquisition"). The applicable interest rate will be adjusted on
each one year anniversary of the Loan, compounded annually, with such interest
due and payable at maturity as set forth below.
Repayment. The Loan shall be repayable in its entirety,
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including principal and interest accrued thereon, (A) by offset against amounts
Lender shall owe to the Borrower: upon the earlier of: (i) the exercise and
consummation by the Borrower of its put option, as provided in Exhibit G to the
Purchase and Sale Agreement dated December 13, 2002 by and between the Borrower
and the Lender (the "PSA"), to require the Lender to purchase shares of the
Lender's Stock issued to the Borrower pursuant to the terms of the PSA (the
"Lender's Stock"), or (ii) the exercise and consummation by the Lender of its
call option, as provided in Exhibit G to the PSA, to purchase the Lender's
Stock; and (B) in any event, no later than the later of: (i) three years and
ninety days after the Loan, or (ii) one year and ninety days after the
registration of the Lender's Stock as provided on Exhibit F to the PSA.
Prepayment. The Borrower may without penalty prepay any or all
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of the amounts due under this Nonrecourse Secured Promissory Note at any time,
with such prepayments to be applied first to accrued interest and second to
unpaid principal.
Default. Subject to the non-recourse provision set forth
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below, in the event of any failure of the Borrower to repay this Nonrecourse
Secured Promissory Note, in accordance with the terms hereof, the Loan shall
after the date due bear interest due and payable at the rate of twelve percent
per annum.
NON-RECOURSE NATURE OF OBLIGATIONS. THIS NONRECOURSE SECURED
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PROMISSORY NOTE IS AND SHALL BE A NON-RECOURSE PROMISSORY NOTE. IN THE EVENT OF
ANY DEFAULT BY THE BORROWER OF ITS OBLIGATIONS HEREUNDER, WHETHER FOR PAYMENT OF
THE PRINCIPAL AMOUNT OF THIS NOTE, ACCRUED INTEREST OR OTHERWISE, THE LENDER'S
ONLY RECOURSE SHALL BE AGAINST THE COLLATERAL PLEDGED TO SECURE PAYMENT OF THIS
NOTE. IN THE EVENT THAT THE EXERCISE OF RIGHTS AGAINST THE COLLATERAL ARE NOT
SUFFICIENT TO SATISFY BORROWER'S PAYMENT OBLIGATIONS HEREUNDER, NEITHER THE
BORROWER, NOR ANY OF ITS OFFICERS, DIRECTORS, AFFILIATES, SHAREHOLDERS OR
REPRESENTATIVES SHALL BE LIABLE FOR ANY DEFICIENCY.
Security. To secure the obligations of the Borrower under this
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Nonrecourse Secured Promissory Note, the Lender, pursuant to that certain Stock
Pledge Agreement executed between the Borrower and the Lender of even date
herewith, has been granted a security interest in and senior lien on the
Lender's Stock. The Loan shall otherwise be without recourse to the Borrower.
Waivers. Except as expressly set forth in this Nonrecourse
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Secured Promissory Note, and to the extent necessary for Lender to realize upon
the collateral in the event of a default in this Nonrecourse Secured Promissory
Note, the Borrower hereby (a) waives all presentment, demand for performance,
notice of non-performance, protest, notice of protest and notice of dishonor,
and all other demands and notices in connection with the delivery, acceptance,
performance, default or realization of collateral of this Nonrecourse Secured
Promissory Note, (b) assents to any extension or postponement of the time of
payment or any other indulgence, (c) waives any requirement of diligence or
promptness on the part of the Lender in the enforcement of its right to realize
the collateral under this Nonrecourse Secured Promissory Note, and (d) waives
any valuation, stay, appraisement or redemption laws..
Payments; Notices. All payments to Lender shall be made at the
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address set forth below or at such other address as the Lender shall specify in
writing to the Borrower. Any notice or demand in connection with this
Nonrecourse Secured Promissory Note shall be in writing and shall be deemed to
have been duly given when (a) delivered by hand, (b) sent by facsimile (with
receipt confirmed) to the facsimile number set forth below, provided that a copy
is promptly thereafter mailed by first-class prepaid certified mail, return
receipt requested, (c) received by the addressee, if sent with delivery receipt
requested by Express Mail, Federal Express, or other express delivery service or
first-class prepaid certified mail, in each case to the appropriate addresses
set forth below, or to such other address(es) as a party may designate as to
itself by notice to the other party.
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If to the Lender:
St. Mary Land & Exploration Company 1776
Lincoln Street, Suite 1100 Denver, Colorado
80203-1080 Attn: Mr. Richard C. Norris
Facsimile: 303-861-0934
If to the Borrower:
Flying J Oil & Gas Inc. and Big West Oil & Gas Inc.
c/o Flying J Inc.
1104 Country Hills Drive
Ogden, Utah 84403
Attn: Mr. Phil Adams
Facsimile: 801-624-1705
Costs and Attorneys' Fees. Subject to the non-recourse
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provision set forth above, after demand by the Lender the Borrower shall pay any
reasonable costs and expenses of the Lender (including without limitation
reasonable attorneys' fees and out-of-pocket expenses) in connection with the
enforcement and collection of this Nonrecourse Secured Promissory Note.
Assignability; Governing Law. This Nonrecourse Secured
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Promissory Note shall bind and inure to the benefit of the Borrower and the
Lender and their respective successors, assigns, heirs and personal
representatives. This Nonrecourse Secured Promissory Note shall be governed by
and construed in accordance with the laws of the State of Colorado, and venue
for any action regarding this Nonrecourse Secured Promissory Note shall lie
exclusively in the state or federal district court located in Denver, Colorado.
EXCEPTION. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH
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ABOVE IN THIS NONRECOURSE SECURED PROMISSORY NOTE, THE OBLIGATION OF THE
BORROWER WITH RESPECT TO INTEREST ACCRUED ON THE LOAN DURING THE PERIOD FROM AND
AFTER TWO YEARS AND SIX MONTHS FOLLOWING THE DATE THE LENDER FUNDS THE LOAN,
TOGETHER WITH ANY DEFAULT INTEREST ACCRUING ONLY WITH RESPECT TO ANY NON-PAYMENT
OF INTEREST DURING THE PERIOD COMMENCING TWO YEARS AND SIX MONTHS FOLLOWING THE
DATE HEREOF AND REASONABLE COSTS OF COLLECTION WITH RESPECT TO THE FOREGOING
INTEREST, SHALL BE WITH FULL RECOURSE TO THE BORROWER. SUCH RECOURSE OBLIGATION
SHALL NOT BE SECURED BY THE LENDER'S STOCK PURSUANT TO THE ABOVE REFERRED TO
STOCK PLEDGE AGREEMENT.
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IN WITNESS WHEREOF, the Borrower has caused this Nonrecourse
Secured Promissory Note to be executed as of the date first set forth above.
FLYING J OIL & GAS INC.,
a Utah corporation
By: /s/ JOHN R. SCALES
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Title: President
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BIG WEST OIL & GAS INC.
a Utah corporation
By: /s/ JOHN R. SCALES
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Title: PRESIDENT
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