This excerpt taken from the PKD 10-K filed Mar 1, 2007.
Termination of Split Dollar Life Insurance Agreement
Robert L. Parker, through the Robert L. Parker, Sr. Family Limited Partnership (the Limited Partnership) owns a 2,987 acre ranch near Kerrville, Texas, the (Cypress Springs Ranch) and a 4,982 acre ranch in Mazie, Oklahoma (the Mazie Ranch). The Cypress Springs Ranch has lodging, conference facilities, sporting and other outdoor activities which the Company utilized in connection with marketing and other business purposes during 2005 and 2004. The Mazie Ranch has hunting, fishing and other outdoor facilities. Effective as of January 1, 2004, the Company and the Limited Partnership entered into a Lease Agreement pursuant to which the Company pays the Limited Partnership a monthly fee in exchange for unlimited access to the facilities of the Limited Partnership at the Cypress Springs Ranch and the Mazie Ranch. During 2006 and 2005, the Company paid the Limited Partnership a total of $0.4 million in lease fees per year. The Limited Partnership also entered into a Services Agreement with the Company effective January 1, 2004, pursuant to which the Company provided certain personnel to the Limited Partnership to maintain the Cypress Springs Ranch and the Mazie Ranch. During 2006 and 2005, the Limited Partnership paid the Company a total of $0.3 million for the provision of such personnel per year. The Lease Agreement and the Services Agreement were terminated effective December 31, 2006.
On April 4, 2006, Mr. Parker Sr. and the Company entered into a Termination of Split Dollar Life Insurance Agreement between the Company and Robert L. Parker, Sr. and Catherine M. Parker Family Trust Under Indenture Dated the 23rd Day of July, 1993 (the Trust) (the Termination Agreement). The terms of the Termination Agreement provide that the Trust will pay the Company $2,400,000 in exchange for a release of the Companys collateral assignment of all insurance policies owned by the trust on the lives of either Mr. Parker Sr. or both Mr. Parker Sr. and his spouse, Mrs. Parker. Subject to the parties complying with their respective undertakings in regard to the lawsuit filed by the Company and the Trust against the insurer and brokers in connection with the insurance policies that were the subject of the Split Dollar Life Insurance Agreement, i.e. the Companys agreement to pay the expenses of the lawsuit and the parties agreement that any proceeds shall be paid first to repay these expenses plus interest at 7% and then shared equally, the parties also agreed to mutually release each other from any further obligations under the Split Dollar Life Insurance Agreement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 Related Party Transactions (continued)