1
EXHIBIT 4(b)
NOTE AGREEMENT
Dated as of June 1, 1988
By and Between
ALEXANDER ENERGY CORPORATION
And
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
2
TABLE OF CONTENTS
SECTION 1. PURCHASE AND SALE OF NOTES WITH WARRANT
1.1 Issue of Notes............................................. 1
1.2 The Closing................................................ 3
1.3 Purchase for Investment.................................... 3
1.4 Failure to Deliver......................................... 4
1.5 Expenses................................................... 4
SECTION 2. WARRANTIES AND REPRESENTATIONS
2.1 Corporate Organization and Authority....................... 5
2.2 Business................................................... 7
2.3 Financial Statements....................................... 7
2.4 Full Disclosure............................................ 8
2.5 Pending Litigation......................................... 9
2.6 Title to Properties........................................ 10
2.7 Compliance with Law and Other Instruments.................. 10
2.8 No Defaults................................................ 11
2.9 Governmental Consents; Offering of Notes................... 11
2.10 Taxes...................................................... 12
2.11 Use of Proceeds............................................ 12
2.12 Insurance Coverage......................................... 13
2.13 Brokers and Finders........................................ 13
2.14 Restrictions on Company and Affiliates..................... 14
2.15 ERISA...................................................... 14
2.16 Receivables................................................ 15
2.17 Trading With the Enemy Act, Etc.; Holding Company;
Investment Company....................................... 15
2.18 Trademarks, Patents, Etc. ................................. 16
2.19 Stock Repurchase Obligation ............................... 16
2.20 Local Qualification and Taxes.............................. 16
SECTION 3. CLOSING CONDITIONS
3.1 Your Conditions............................................ 17
3.2 Company's Condition........................................ 18
3
SECTION 4. PURCHASER'S SPECIAL RIGHTS
4.1 Direct Payment............................................... 18
4.2 Delivery Expenses............................................ 19
4.3 Issue Taxes.................................................. 19
SECTION 5. REGISTRATION; SUBSTITUTION OF NOTES; INTEREST
5.1 Registration of Notes........................................ 20
5.2 Exchange of Notes............................................ 20
5.3 Replacement of Notes......................................... 20
5.4 Interest..................................................... 21
SECTION 6. COMPANY BUSINESS COVENANTS
6.1 Payment of Taxes and Claims................................. 21
6.2 Maintenance of Properties and Corporate Existence........... 22
6.3 Payment of Notes and Maintenance of Office.................. 23
6.4 Acquisition and Disposal of Equity Interests................ 24
6.5 Sale of Assets or Merger.................................... 25
6.6 Leases...................................................... 26
6.7 Liens and Encumbrances...................................... 27
6.8 Consolidated Debt........................................... 29
6.9 Distributions and Investments............................... 30
6.10 Guaranties.................................................. 31
6.11 ERISA Compliance............................................ 32
6.12 Transactions with Affiliates................................ 32
6.13 Sale or Discount of Receivables............................. 33
6.14 Business.................................................... 33
6.15 Acquisition of Notes........................................ 33
6.16 Receivables................................................. 33
6.17 Certain Registrations or Approvals.......................... 34
6.18 Coverage.................................................... 34
SECTION 7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information.......................... 35
7.2 Officers' Certificates...................................... 38
7.3 Accountants' Certificate.................................... 38
7.4 Inspection.................................................. 38
4
SECTION 8. PREPAYMENT OF NOTES
8.1 Required Prepayments......................................... 39
8.2 No Prepayment or Call........................................ 40
SECTION 9. EVENTS OF DEFAULT
9.1 Nature of Events............................................. 40
9.2 Default Remedies............................................. 42
9.3 Annulment of Acceleration of Notes........................... 44
SECTION 10. INTERPRETATION OF THIS AGREEMENT
10.1 Terms Defined................................................ 44
10.2 Accounting Principles........................................ 52
10.3 Directly or Indirectly....................................... 53
10.4 Governing Law................................................ 53
10.5 References................................................... 53
SECTION 11. MISCELLANEOUS
11.1 Notices...................................................... 53
11.2 Survival..................................................... 54
11.3 Successors and Assigns....................................... 54
11.4 Amendment and Waiver......................................... 55
11.5 Knowledge.................................................... 56
11.6 Multiple Counterparts........................................ 56
5
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Investment Agreement
Exhibit D - Ownership of the Company
Exhibit E - Subsidiaries, Partnerships, and Joint Ventures
Exhibit F - Litigation
Exhibit G - Certain Loans and Liens
Exhibit H - Insurance
Exhibit I - Certain Agreements
Exhibit J - Agreements to Repurchase Stock
Exhibit K - Opinion of McAfee & Taft
Exhibit L - Notices & Payments
-iv-
6
ALEXANDER ENERGY CORPORATION
-----------------------
$5,000,000
-----------------------
10% Senior Notes due June 30, 1998
With Warrant to Purchase 670,000 Shares of
Common Stock at $1.00 Per Share Through
December 31, 1993
Dated as of June 1, 1988
John Hancock Mutual Life
Insurance Company
Bond and Corporate Finance
Department, T-57
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: William A. Kinsley
Dear Sirs:
Alexander Energy Corporation (the "Company"), an Oklahoma corporation,
hereby agrees with you as follows (this letter agreement being entitled the
"Note Agreement" and sometimes referred to herein as this "Agreement" and
certain terms being defined in Section 10.1 or elsewhere herein):
SECTION 1. PURCHASE AND SALE OF NOTES WITH WARRANT
1.1 Issue of Notes. The Company will duly authorize the issue of
$5,000,000 in aggregate principal amount of its 10% Senior Notes due June 30,
1998 (the "Notes"), and Warrant (herein so called) for the purchase by you of
670,000 shares of the Company's Common Stock pursuant to and in accordance with
the terms of the form of Stock Purchase Warrant attached hereto as Exhibit B
(the "Warrant"). Each Note will be in the amount of at least $1,000,000; will
bear
7
interest on the unpaid principal balance thereof from the date of the Note at
the lesser of the rate of 10% per annum or the maximum rate of interest that
may be lawfully contracted for, charged, taken, reserved, or received by you
from the Company in connection with this Agreement under applicable law (the
"Maximum Lawful Rate"), payable semi-annually on June 30 and December 30 in each
year, commencing with December 31, 1988, until the principal amount thereof
shall be paid, and will bear interest on any overdue principal (including any
overdue prepayment of principal) and (to the extent permitted by applicable
law) on any overdue installment of interest, at the lesser of (a) the greater
(determined on a daily basis) of (i) the rate of 12% per annum and (ii) the
rate per annum that The Chase Manhattan Bank, N.A. announces publicly from time
to time as its "prime" rate of interest or successor rate, and (b) the Maximum
Lawful Rate; will be subject to certain required prepayments of principal, but
will not otherwise be prepayable; and will mature on June 30, 1998. The Notes
will be in the form set out in Exhibit A (herein sometimes called the
"Registered Notes") to this Agreement. It is expressly stipulated and agreed
to be the intention of the Company and you to comply at all times with
applicable laws governing the maximum rate or amount of interest payable on or
in connection with the Notes. Accordingly, if any of the transactions
contemplated hereby would be usurious under applicable law now or hereafter
governing the interest payable hereunder (including applicable United States
federal law or applicable state law, to the extent not preempted by United
States federal law), then, in that event, notwithstanding anything to the
contrary in this Note Agreement or any other agreement entered into in
connection with or as security for any Note, it is agreed as follows: (x) the
aggregate of all consideration that constitutes interest under applicable law
that is contracted for, charged, taken, reserved, or received under such Note
or under any of the other aforesaid agreements or otherwise in connection with
such Note under no circumstances shall exceed the maximum amount of interest
allowed by applicable law, and any excess shall be credited on such Note by the
holder thereof (or if such Note shall have been paid in full, refunded to the
Company); and (y) in the event that maturity of such Note is accelerated by
reason of an election by the holder thereof resulting from any default
hereunder or
-2-
8
otherwise, or in the event of any required or permitted prepayment or
conversion, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in such Note or otherwise shall be cancelled automatically as
of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited on such Note (or if such Note shall have been paid in full,
refunded to the Company), and the provisions of such Note, such Note Agreement
and any other agreements entered into in connection with or as security for
such Note shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced accordingly, without the necessity
of the execution of any new document, so as to comply with the then applicable
law. Determination of the rate of interest for purposes of determining whether
this transaction is usurious under any applicable laws, to the full extent
permitted by applicable law, shall be made by amortizing, prorating,
allocating, and spreading throughout the full stated term hereof until payments
in full, all sums at any time contracted for, charged, taken, reserved, or
received from the Company for the use, forbearance, or detention of money in
connection herewith.
1.2 The Closing. Subject to the terms and conditions hereof and
on the basis of the representations and warranties hereinafter set forth, the
Company hereby agrees to issue and sell to you, and you hereby agree to
purchase from the Company, in accordance with the provisions of this Agreement,
the aggregate principal amount of the Notes, together with the Warrant, at a
price of 100% of the principal amount of the Notes. The closing of your
purchase (the "Closing") shall be held at 10:00 a.m. Oklahoma City time on June
1, 1988 ("Closing Date") at the offices of McAfee & Taft in Oklahoma City,
Oklahoma. At the Closing the Company will duly execute and deliver to you the
Warrant, an Investment Agreement substantially in the form attached hereto as
Exhibit C (the "Investment Agreement"), and a single Note in the principal
amount of your purchase, dated the Closing Date and payable to you, against
payment by check payable in, or a bank wire transfer in, federal funds.
1.3 Purchase for Investment. (a) You represent to the Company
that you are acquiring the Notes for your own
-3-
9
account for the purpose of investment and not with a view to the resale or
distribution thereof; provided, however, that the disposition of your property
shall at all times be within your control. It is understood that, in making
the representations set out in Sections 2.7 and 2.9, the Company is relying, to
the extent applicable, upon your representation in this Agreement.
(b) You agree that you will not sell or otherwise dispose of any
Note in the absence of (i) registration under the Securities Act of 1933, as
amended (the "1933 Act") or and applicable state securities laws, or (ii) an
opinion acceptable in form to the Company from counsel reasonably satisfactory
to the Company (it being understood that counsel on your in-house legal staff
is satisfactory counsel), or an opinion of counsel to the Company, to the
effect that no registration is required for such disposition, or (iii) as to
the 1933 Act, a "no-action" letter from the staff of the Securities and
Exchange Commission to the effect that such staff will not recommend any action
to such commission if such a disposition takes place without registration.
1.4 Failure to Deliver. If at the Closing the Company fails to
tender to you the Notes to be purchased by you or if the conditions specified
in Section 3.1 have not been fulfilled, you thereupon may elect to be relieved
of all further obligations under this Agreement. Nothing in this Section shall
operate to relieve the Company from any of its obligations hereunder or to
waive any of your rights against the Company.
1.5 Expenses. Regardless of whether the Notes are sold and the
Warrant is issued, except as otherwise specifically provided in this Agreement
or the documents delivered at the Closing, the Company will pay all expenses
relating to this Agreement and the Investment Agreement, including, without
limitation, the following:
(a) the cost of reproducing this Agreement, the Notes,
the Warrant, and the Investment Agreement;
(b) the reasonable fees and disbursements of your special
counsel;
-4-
10
(c) your reasonable out-of-pocket expenses;
(d) all expenses relating to any amendments, waivers or
consents pursuant to the provisions of this Agreement, the Notes, the
Warrant, the Investment Agreement, and the other documents
contemplated thereby; and;
(e) all expenses relating to the enforcement of your
rights under this Agreement, the Notes, the Warrant, the Investment
Agreement, and the transactions contemplated thereby.
The obligations of the Company under this Section 1.5 shall survive the payment
or prepayment, if any, of the Notes, the issuance of stock pursuant to the
Warrant, and the termination of this Agreement and the Investment Agreement.
SECTION 2. WARRANTIES AND REPRESENTATIONS
The Company warrants and represents to you that:
2.1 Corporate Organization and Authority. (a) The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Oklahoma and has all requisite power and authority and all
necessary licenses and other governmental authorizations to own and operate its
Properties and to conduct its business as such business is now and has
heretofore been conducted and as presently proposed to be conducted. The
Company is duly qualified, authorized to do business, and in good standing as a
foreign corporation in each jurisdiction where the character of its Properties
or the nature of its activities makes such qualification necessary, including,
without limitation, the States of Arkansas, California, Colorado, Kansas,
Louisiana, Montana, Nebraska, New Mexico, Texas, and Wyoming. The authorized
number of shares of common stock of the Company is 20,000,000, par value $0.01
per share, and the Company is not authorized to issue any other form of stock
or equity security. As of the date hereof, 7,304,366 shares of such common
stock are issued and outstanding. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid, and nonassessable, were
issued in compliance with applicable securities laws, and are owned
-5-
11
beneficially and of record as shown on Exhibit D. The Company heretofore has
delivered to you true and complete copies of the Company's articles of
incorporation and bylaws, including, without limitation, all amendments
thereto. The common stock of the Company presently is quoted on the National
Association of Securities Dealers Automated Quotation System, and the Company
is in good standing under all rules and regulations of that system.
(b) Exhibit E correctly lists all Subsidiaries of the Company as
of the date of this Agreement and, as to each such Subsidiary, (i) its name,
(ii) the jurisdiction of its incorporation, and (iii) the percentage of its
issued and outstanding shares owned by the Company or another Subsidiary
(specifying such other Subsidiary). Each Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority and
all necessary licenses and other governmental authorizations to own and operate
its Properties and to conduct its business as such business is now and has
heretofore been conducted and as presently proposed to be conducted, and is
duly qualified, authorized to do business, and in good standing as a foreign
corporation in each jurisdiction where the character of its Properties or where
the nature of its activities makes such qualification necessary. All of the
outstanding shares of capital stock of each Subsidiary are validly issued,
fully paid, and nonassessable, all such shares indicated in Exhibit E as being
owned by the Company or by any other Subsidiary are so owned beneficially by
the Company or such other Subsidiary free and clear of any Lien except as shown
on Exhibit E, and are held of record by the Company or its nominees as
specified on Exhibit E or by such other Subsidiary or its nominees as specified
on Exhibit E, and there is no outstanding right, regardless of whether
currently exercisable, to acquire any capital stock of any Subsidiary the Net
Worth of which (i) exceeds 2% of Consolidated Net Worth, or (ii) when
aggregated with the Net Worth of all other Subsidiaries as to which there are
such outstanding rights, exceeds 5% of Consolidated Net Worth. Except as
specified on Exhibit E, no Subsidiary accounts for 25% or more of Consolidated
Net Worth, Consolidated Net Income, or Consolidated Cash Flow of the company as
reflected in the financial statements described in Section 2.3.
-6-
12
(c) The Company has all necessary corporate power and authority to
enter into this Agreement and the Investment Agreement, to issue and sell the
Notes and the Warrant, and to perform all of the obligations to be performed by
it hereunder and thereunder. The execution, delivery, and performance of this
Agreement, the Notes, the Investment Agreement, and the Warrant have been duly
authorized by all requisite action on the part of the officers, directors, and
security holders of the Company, and this Agreement constitutes, and each of
the Notes, the Investment Agreement, the Warrant, and the stock to be issued
pursuant thereto, when executed, delivered, and (if applicable) paid for in
accordance with the terms of this Agreement and the Warrant, will constitute, a
valid and binding obligation of the Company, enforceable in accordance with its
terms.
2.2 Business. (a) The Company was organized in 1980 and is
engaged exclusively in the exploration for, development of, and production of
oil and gas and related hydrocarbons, the acquisition, disposition, and
operation of real and personal property in connection therewith, and the
providing of services in conjunction with and attendant to such activities
(whether for its own account or for others), and from time to time also may
engage in any or all other activities necessary or desirable and relating to
such business including, without limitation, the treatment, transportation, and
marketing of oil and gas and related hydrocarbons or products derived
therefrom.
(b) The Company or a Subsidiary is a partner (and if such
Partnership is a limited partnership, is a general partner) in the Partnerships
and is a party to the Joint Ventures described on Exhibit E. None of the
Company, the Subsidiaries, the Partnerships, and the Joint Ventures has any
equity interest in any Person other than the Subsidiaries and the Company's
and the Subsidiaries' interests in the Partnerships and the Joint Ventures
described in Exhibit E.
2.3 Financial Statements. The Company heretofore has delivered to
you the following financial statements: (a) the audited consolidated balance
sheets of the Company, the Partnerships as applicable, and the Subsidiaries as
of
-7-
13
March 31, 1985, 1986, and 1987, and the related consolidated statements of
operations, changes in shareholders' equity, and changes in financial position
for the years ended March 31, 1985, 1986, and 1987, together with the notes
thereto, as certified by Arthur Young & Co., certified public accountants, and
(b) the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of December 31, 1987, and the related consolidated statements
of operations, changes in shareholders' equity, and changes in financial
position for the nine-month period ended December 31, 1987. Such financial
statements include the accounts of the Company and the Subsidiaries and their
share of the assets, liabilities, and operations of the Partnerships and Joint
Ventures. All such financial statements are true and complete in all material
respects and together fairly and accurately present, in accordance with
generally accepted accounting principles (applied on a consistent basis except
as disclosed in the notes thereto), the consolidated financial position and the
consolidated results of operations of the Company and the Subsidiaries as of
the dates and for the periods therein set forth. As of the date of the balance
sheet included in the most recent unaudited consolidated financial statements
of the Company delivered to you, which is dated December 31, 1987, none of the
Company, the Subsidiaries, the Partnerships, and the Joint Ventures had any
debts, liabilities or obligations, whether absolute, accrued, contingent, or
otherwise, that are not fully reflected in such balance sheet or the notes
thereto other than those that, in any one case or in the aggregate, would not
have a material and adverse effect on the business, assets, liabilities,
condition (financial or otherwise), affairs, operations, or prospects of the
Company or such Subsidiary, Partnership, or Joint Venture as of such date.
Since December 31, 1987, there has not been any material and adverse change in
the financial condition, results of operations, business or prospects of the
Company or any Subsidiary, Partnership, or Joint Venture, and there has been no
occurrence or other event or condition that might reasonably be expected to
result in such material and adverse change after the date hereof.
2.4 Full Disclosure. None of the financial statements referred to
in Section 2.3, and neither this Agreement nor any writing furnished by or on
behalf of the Company to you
-8-
14
pursuant to or in connection with this Agreement or the negotiation of the
issuance contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein or herein not
misleading in light of the circumstances under which they are made; provided,
however, that in the case of projections (if any) prepared jointly by the
Company and you, the Company represents and warrants only the factual
information serving as a basis for such projections and not the assumptions
therein. To the knowledge of the Company and the Subsidiaries, there is no
fact or circumstance that the Company has not disclosed to you in writing and
that, in its judgment, materially and adversely affects, or threatens in the
future materially and adversely to affect, the business, Properties,
liabilities, condition (financial or otherwise), affairs, operations, or
prospects of the Company or any Subsidiary, Partnership, or Joint Venture, or
the ability of the Company to perform its obligations under this Agreement, the
Notes, the Investment Agreement, or the Warrant, other than economic trends or
proposed legislation affecting the oil and gas industry generally.
2.5 Pending Litigation. Except as set forth in Exhibit F, there
is no action, suit, proceeding, arbitration, or investigation pending or, to
the best knowledge of the Company, the Subsidiaries, the Partnership, and the
Joint Ventures, threatened against the Company or any Subsidiary, Partnership,
or Joint Venture, or involving any of their assets, or against any employee,
officer, director, stockholder, or partner thereof in his capacity as such or
relating to his activities with the Company or any Subsidiary, Partnership, or
Joint Venture, that might result in any material and adverse change in the
Properties, business, prospects, profits, or condition (financial or otherwise)
of the Company or any Subsidiary, Partnership, or Joint Venture, or the ability
of the Company to perform its obligations under this Agreement, the Notes, the
Investment Agreement, or the Warrant, or the ability of the Company or any
Subsidiary, Partnership, Joint Venture to perform any agreement entered into in
connection herewith, and based upon the knowledge of the officers and directors
of the Company and the Subsidiaries after due investigation, none of the
Company, the Subsidiaries, the Partnerships, and the Joint Ventures is aware of
any fact that might result in or form
-9-
15
the basis for any such action, suit, proceeding, arbitration, or investigation.
None of the Company, the Subsidiaries, the Partnerships, and the Joint Ventures
is in default with respect to any order of any court, governmental authority,
or arbitration board or tribunal.
2.6 Title to Properties. Each of the Company, the Subsidiaries,
the Partnerships, and the Joint Ventures has good and defensible title to all
assets and Properties used or held for use in its respective business (other
than to nonproducing oil and gas properties, with respect to which the
Companies, the Subsidiaries, the Partnerships, and the Joint Ventures have made
such examinations of title, and are satisfied they have such title, as conforms
to best industry practice for such types of properties), including, without
limitation, all assets and Properties reflected in the consolidated balance
sheet of the Company and the Subsidiaries at December 31, 1987, described in
Section 2.3(b) or acquired subsequent thereto (except to the extent that such
properties and assets have been disposed of for fair value in the ordinary
course of business since the date of such consolidated balance sheet), subject
to no Liens, except (a) as noted in such consolidated balance sheet or notes
thereto, (b) as set forth in Exhibit G, and (c) as permitted by Section 6.7.
2.7 Compliance with Law and Other Instruments. The business and
operations of each of the Company, the Subsidiaries, the Partnerships, and the
Joint Ventures have been and are being conducted in accordance with all laws,
rules, regulations, judgments, and decrees to which it is subject, and none of
the Company, the Subsidiaries, the Partnerships, or the Joint Ventures has
failed to obtain any licenses, permits, franchises, or other governmental
authorizations, the failure to comply with or obtain which, either singly or in
the aggregate, would have a material and adverse effect upon the Properties
business, prospects, profits, or condition (financial or otherwise) of the
Company, the Subsidiaries, the Partnerships, and the Joint Ventures taken as a
whole or of any Subsidiary, Partnership, or Joint Venture that accounts for 25%
or more of Consolidated Net Worth, Consolidated Net Income, or Consolidated
Cash Flow as reflected in the financial statements described in Section 2.3.
The execution,
-10-
16
delivery, and performance by the Company of any of the provisions of this
Agreement, the Notes, the Investment Agreement, or the Warrant, with or without
the giving of notice or the passage of time or both, will not violate any
provision of law or any regulation or award, judgment, order, injunction, or
decree of any arbitrator or court or other governmental body to which the
Company or any Subsidiary, Partnership, or Joint Venture is subject, or any
provision of the Company's or any Subsidiary's articles of incorporation or
bylaws or the organizational documents of any Partnership or Joint Venture, or
result in the breach of or constitute a default under any indenture, contract,
or other agreement, document, or instrument to which the Company or any
Subsidiary, Partnership, or Joint Venture is a party or by which it or any of
its Properties are bound or affected, or result in the creation or imposition
of any Lien of any nature whatsoever upon the Properties of the Company or any
Subsidiary, Partnership, or Joint Venture or, to the best knowledge of the
Company and the Subsidiaries after due investigation, will cause the Company or
any Subsidiary, Partnership, or Joint Venture to lose the benefit of any
material right or privilege it presently enjoys or any Person who normally does
a material amount of business with the Company or any Subsidiary, Partnership,
or Joint Venture to discontinue to do so on the same basis.
2.8 No Defaults. No event has occurred and no condition exists
that, upon the issuance of the Notes or the Warrant, would constitute a Default
or an Event of Default. Each of the Company, the Subsidiaries, the
Partnerships, and Joint Ventures in all material respects has performed all
obligations required to be performed by each of them to date and is not in
violation of its articles of incorporation, bylaws, or other organizational
documents, or in default under any loan agreement, promissory note, mortgage,
lease, contract, commitment, or agreement to which any of them is a party or by
which any of them may be bound, and no event or condition has occurred that,
with the giving of notice or passage of time, or both, would constitute a
default under any such agreement.
2.9 Governmental Consents; Offering of Notes. No consent,
authorization, approval, permit, or order of, or declaration to or filing with,
any governmental or regulatory
-11-
17
authority is required in connection with the execution, delivery, and
performance of this Agreement by the Company or the offer, issuance, sale, or
delivery of the Notes and the Warrant. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, sold or offered for sale, or
solicited any offers to buy, any securities, or otherwise approached or
negotiated with any person or persons, so as to subject the offer or sale of
the Notes, the Warrant, or the stock issuable pursuant thereto to the
provisions of section 5 of the 1933 Act, or to comparable provisions of any
applicable state securities laws, and, except as expressly provided to the
contrary in this Agreement, the Warrant, or the Investment Agreement, the
Company agrees that neither it nor any agent acting on its behalf will take any
action that would subject the offer or sale of the Notes, the Warrant, or the
stock issuable pursuant thereto to those provisions or that is intended by the
Company to have the effect of preventing or otherwise hindering the sale by you
of the Notes, the Warrant, or the stock issuable pursuant thereto.
2.10 Taxes. Each of the Company, the Subsidiaries, Partnerships,
and the Joint Ventures has accurately prepared and duly and timely filed with
the appropriate governmental agencies all federal, state, and local income,
franchise, real and personal property, excise, severance, and other tax returns
and reports required to be filed and have paid all taxes shown or claimed to be
due thereon. There are included in the audited consolidated balance sheet of
the Company and the Subsidiaries as of March 31, 1987, described in Section
2.3(a) adequate reserves for the payment of all federal, state, and local taxes
of the Company, the Subsidiaries, the Partnerships, and the Joint Ventures,
including interest and penalties, for the fiscal year ended March 31, 1987, and
for all fiscal years prior thereto. Neither the Company nor any Subsidiary,
Partnership, or Joint Venture has executed or filed with the Internal Revenue
Service any agreement extending the period for assessment and collection of any
federal tax, nor is any of them a party to any action or proceeding by any
governmental authority for assessment and collection of taxes, and no claim for
assessment and collection of taxes which has been asserted against the Company
or any Subsidiary, Partnership, or Joint Venture remains unpaid.
-12-
18
2.11 Use of Proceeds. The Company will use the proceeds of the
sale of the Notes and the Warrant to you to retire in full that certain
Convertible Note dated June 6, 1984, issued by the Company and held by The
Liberty National Bank and Trust Company of Oklahoma City (the "Bank"), in the
original principal amount of $7,500,000, and to purchase from the Bank all
shares of, and all options or warrants to acquire shares of, the Company's
capital stock for an aggregate payment in immediately available funds of
$5,000,000. None of the transactions contemplated in this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Notes) will violate or result in a violation by the Company or any of its
Affiliates of section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations G (12 C.F.R. 207, as amended), T (12 C.F.R. 220, as amended), U (12
C.F.R. 221, as amended), and X (12 C.F.R. 224, as amended) of the Board of
Governors of the Federal Reserve System. Neither the Company nor any Affiliate
owns or intends to carry or purchase any "margin security" within the meaning
of said Regulation G or U or X, including, without limitation, margin
securities originally issued by it.
2.12 Insurance Coverage. Exhibit H contains an accurate list of
the insurance coverage maintained by the Company, the Subsidiaries, the
Partnerships, and the Joint Ventures. Such coverage, in the Company's
judgment, is adequate for the business being conducted, and Properties owned or
leased, by the Company, the Subsidiaries, Partnerships, and the Joint Ventures,
as applicable.
2.13 Brokers and Finders. Except with respect to the Company's
agreement to pay a finder's fee to Newbury, Piret & Company, Inc., no Person
has or will have any right, interest, or valid claim against you, the Company,
or any Subsidiary, Partnership, or Joint Venture, because of any agreement or
undertaking by the Company or any Subsidiary, Partnership, Joint Venture, or
other person acting on behalf of the Company or any of the foregoing, for any
commission, fee, or other compensation as a result of this transaction as a
finder or broker or in any similar capacity as a result of any act or omission
by the Company or any Subsidiary,
-13-
19
Partnership, Joint Venture, or other Person acting on behalf of the Company or
any of the foregoing. The Company hereby agrees to indemnify you and hold you
harmless from and against any and all such commissions, fees, or other
compensation (including, without limitation, that payable to Newbury, Piret &
Company, Inc. as described above) together with any and all claims disputes or
other losses or costs (including, without limitation, reasonable attorneys'
fees) arising from agreements or undertakings of the Company or any Subsidiary,
Partnership, Joint Venture, or other person acting on behalf of the Company or
any of the foregoing.
2.14 Restrictions on Company and Affiliates. Neither the Company
nor any Subsidiary, Partnership, or Joint Venture is a party to any contract or
agreement, or subject to any corporate, partnership, or other restriction, that
materially and adversely affects the business of the Company or any Subsidiary,
Partnership, or Joint Venture. Except as described on Exhibit I, neither the
Company nor any Subsidiary, Partnership, or Joint Venture is a party to any
contract or agreement that restricts the right or ability of such entity to
incur Consolidated Debt, other than this Agreement. Neither the Company nor
any Subsidiary, Partnership, or Joint Venture has agreed or consented to cause
or permit in the future (upon the happening of a contingency or otherwise) the
Property of any such Person, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 6.7.
2.15 ERISA. (a) Except for a defined contribution plan, neither
the Company nor any ERISA Affiliate (as such term is herein defined) thereof
sponsors, maintains, or contributes to, or has at any time in the six-year
period preceding Closing sponsored, maintained, or contributed to, any
"employee pension benefit plan," as such term is defined in section 3(2) of
ERISA, that is intended to be qualified under sections 401 and 501 of the Code.
Without limiting the scope of the foregoing, neither the Company nor any ERISA
Affiliate thereof sponsors, maintains, or contributes to, or has at any time in
the six-year period preceding Closing sponsored, maintained, or contributed to,
(i) any employee pension benefit plan that is subject to title IV of ERISA or
(ii) any "multiemployer pension plan," as such term is defined in section 3(37)
or 4001(a)(3) of ERISA. For
-14-
20
purposes of this Section 2.15, the term "ERISA Affiliate" refers to any entity
described in section 4001(b)(1) of ERISA with respect to the Company.
(b) No act or transaction has occurred that could result in
imposition on the Company or any Subsidiary, Partnership, or Joint Venture
(either directly or indirectly by reason of any indemnification or
hold-harmless agreement) of a tax or penalty imposed pursuant to section 4975
of the Code or section 502 of ERISA.
(c) Neither the Company nor any Subsidiary, Partnership or Joint
Venture sponsors, maintains, or contributes to an "employee welfare benefit
plan" within the meaning of section 3(1) of ERISA, including, without
limitation, any plan to provide benefits to former employees of such entities,
that may not be terminated by the Company or any Subsidiary, Partnership, or
Joint Venture in its sole discretion at any time without any material liability
to any Person.
2.16 Receivables. Neither the Company nor any Subsidiary,
Partnership, or Joint Venture presently has any ownership or security interest
in any accounts receivable, promissory notes receivable, installment notes
receivable, lease receivables, equipment rental receivables, or other
receivables (hereinafter collectively called "Receivables") acquired from
another Person for value or as security for an obligation owed to the Company
or such Subsidiary, Partnership, or Joint Venture.
2.17 Trading With the Enemy Act, Etc.; Holding Company; Investment
Company. Neither this Agreement nor any of the transactions contemplated
hereby is or would be in violation of the Trading With the Enemy Act, as
amended, the International Emergency Economic Powers Act or the Executive
Orders of the President of the United States issued pursuant to such Act, or
any regulations issued under such Acts or Executive Orders, including, without
limitation, the following regulations of the United States Treasury Department
(31 C.F.R. subtitle B, chapter V, as amended): the Foreign Assets Control
Regulations, the Transactions Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets
-15-
21
Control Regulations, the Libyan Sanctions Regulations, the Nicaraguan Trade
Control Regulations, and the South African Transactions Regulations; nor will
the proceeds of the sale of the Notes or the Warrant be used by the Company in
a manner that would violate any such Acts, Executive Orders, or regulations.
Neither the Company nor any Subsidiary, Partnership, or Joint Venture is a
"utility company" or a "holding company" or a "subsidiary company" or an
"affiliate" of the foregoing, as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended. No determination has been made by the
Securities and Exchange Commission that the Company is subject to a controlling
influence by any such holding company. Neither the Company nor any Subsidiary,
Partnership, or Joint Venture is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
2.18 Trademarks, Patents, Etc. Each of the Company, the
Subsidiaries, the Partnerships, and the Joint Ventures possesses such
trademarks, tradenames, copyrights, patents, licenses, or rights in any
thereof, as are adequate for the conduct of its respective business, without
known conflict with the rights of others.
2.19 Stock Repurchase Obligation. Except as provided in the
agreements described on Exhibit J, neither the Company nor any Subsidiary,
Partnership, or Joint Venture is obligated to purchase any stock, warrants, or
other equity interests in any of them or any debt or other security convertible
into any of the foregoing.
2.20 Local Qualification and Taxes. You shall not be required,
solely on account of the transactions contemplated by this Agreement, the
Notes, the Warrant, and the Investment Agreement, to do any of the following:
(a) qualify as a foreign corporation or file a
designation for service of process or file any reports to any
governmental agency of the State of Oklahoma or any other jurisdiction
in which the Company or any Subsidiary, Partnership or Joint Venture
owns Properties or transacts business;
-16-
22
(b) pay any taxes, fees, charges, or other levies under
the laws of any such jurisdiction; or
(c) file any returns in respect of any taxes or other
matters described in Section 2.20(b).
SECTION 3. CLOSING CONDITIONS
3.1 Your Conditions. Your obligation to purchase and pay for the
Notes and the Warrant to be delivered to you at the Closing shall be subject to
the following conditions precedent:
(a) Opinions of Counsel. You shall have received from
McAfee & Taft, counsel for the Company, the closing opinion described
in Exhibit K and from Vinson & Elkins, your special counsel, an
opinion in form and substance satisfactory to you.
(b) Warranties and Representations True as of Closing
Date. The warranties and representations contained herein or in any
exhibit, certificate, or document delivered pursuant hereto shall be
true and complete in all respects on the Closing Date with the same
effect as though made on and as of the closing, subject to any change
hereafter because of any action required by this Agreement and subject
to any waiver by you in writing of any such representation or
warranty.
(c) Compliance with Business Covenants. The Company
shall be taking no action and permitting no condition to exist that
would be prohibited by Section 6.
(d) Compliance with this Agreement. The Company shall
have performed and complied with all agreements and conditions on its
part required to be performed or complied with by the Company pursuant
to this Agreement before or at the closing.
(e) No Material Adverse Changes. No event shall have
occurred and no condition shall exist that has or might result in a
material and adverse change in the Properties, business, prospects,
profits, or condition
-17-
23
(financial or otherwise) of the Company or any Subsidiary,
Partnership, or Joint Venture, or the ability of the Company to
perform its obligations under this Agreement, or the ability of any
Subsidiary, Partnership, or Joint Venture to perform any agreement
entered into in connection herewith.
(f) Officers' Certificate. You shall have received an
Officers' Certificate dated the Closing Date certifying that the
conditions specified in Section 3.1(b) through (f) have been
fulfilled.
(g) Legality. The Notes and the Warrant on the Closing
Date shall qualify as a legal investment for insurance companies under
chapter 175, section 63 of the Massachusetts General Laws, and you
shall have received such evidence as you may reasonably request to
establish compliance with this condition.
(h) Proceedings Satisfactory. All proceedings taken in
connection with the issuance and sale of the Notes and the issuance of
the Warrant and all documents and papers relating thereto shall be
satisfactory to you and your special counsel. You and your special
counsel shall have received copies of such closing documents as you or
they may reasonably request in connection therewith, all in form and
substance satisfactory to you and your special counsel.
3.2 Company's Condition. The Company's obligation to issue and
deliver to you the Notes and the Warrant at the Closing shall be subject to the
condition precedent that you shall have performed and complied with all
agreements and conditions on your part required to be performed or complied
with by you pursuant to this Agreement before or at the Closing.
SECTION 4. PURCHASER'S SPECIAL RIGHTS
4.1 Direct Payment. Notwithstanding anything to the contrary in
this Agreement or the Notes, the Company shall pay all amounts payable with
respect to any Notes held by each holder of Registered Notes (without any
presentment of such Notes and without any notation of such payment being
-18-
24
made thereon) by crediting before 12:00 noon, Boston time, by federal funds
bank wire transfer to the account and in the manner described in Exhibit L, or
in such other manner or to such other address in the continental United States
as may be designated in writing to the Company by such holder at least ten days
prior to the date fixed for such payment, each such payment being accompanied
by sufficient information to identify the source and application thereof. The
holder of any Notes to which this Section 4.1 applies agrees that in the event
it shall sell or transfer any such Notes (a) prior to the delivery of such
Notes, it shall make a notation thereon of all principal, if any, prepaid on
such Notes and will also note thereon the date to which interest has been paid
on such Notes, and (b) it promptly shall notify the Company of the name and
address of the transferee of any Notes so transferred; provided, however, that
failure to comply with the preceding provisions of this sentence shall not
relieve the Company of its obligations to make payments under the Notes as and
when the same become due.
4.2 Delivery Expenses. If you surrender any Note to the Company
pursuant to this Agreement, the Company shall pay the cost of delivering to or
from your home office from or to the Company, insured to your satisfaction, the
surrendered Note and any Note issued in substitution or replacement for the
surrendered Note.
4.3 Issue Taxes. The Company shall pay all taxes in connection
with the issuance and sale of the Notes, the Warrant, and the stock issuable
pursuant thereto and in connection with any modification of the Notes and the
Warrant and shall save you harmless without limitation as to time against any
and all liabilities with respect to all such taxes. The obligations of the
Company under this Section 4.3 shall survive the payment or prepayment, if any,
of the Notes, the issuance of stock pursuant to the Warrant, and the
termination of this Agreement and the Investment Agreement.
-19-
25
SECTION 5. REGISTRATION; SUBSTITUTION OF NOTES; INTEREST
5.1 Registration of Notes. As provided in Section 1.1, the Notes
issuable under this Agreement shall be in the form of Registered Notes. The
Company shall cause to be kept at its office maintained pursuant to Section 6.3
or at its office in Oklahoma City, Oklahoma, a register for the registration
and transfer of Registered Notes. The names and addresses of the holders of
Registered Notes shall be registered in the register. The Person in whose name
any Registered Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes of this Agreement, and the Company
shall not be affected by any notice or knowledge to the contrary, provided that
the Company at all times shall use its best efforts promptly and properly to
record the names and addresses of all holders of Notes whose ownership and
identity is disclosed to the Company in accordance with the provisions of this
Agreement and the Notes.
5.2 Exchange of Notes. Upon surrender of any Note at the office
of the Company maintained pursuant to Section 6.3 and, if applicable,
compliance with Section 1.3(b), the Company, at the request of the holder
thereof, will execute and deliver, at the Company's expense (except as provided
below), new Notes in exchange therefor in denominations of at least $1,000,000,
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be a Registered Note substantially in the form of
the Note set out in Exhibit A. Each such new Note shall be dated and bear
interest from the date to which interest has been paid on the surrendered Note
or dated the date of the surrendered Note if no interest has been paid thereon.
The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any transfer.
5.3 Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction, or mutilation of any Note and
-20-
26
(a) in the case of loss, theft, or destruction, of
indemnity reasonably satisfactory to the Company (provided, if you are
the holder of the Note or the holder of the Note is an insurance
company having admitted assets in excess of $100,000,000, your or its
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense will execute and deliver in lieu thereof a new
Note of like tenor, dated and bearing interest from the date to which interest
has been paid on such lost, stolen, destroyed, or mutilated Note or dated the
date of such lost, stolen, destroyed, or mutilated Note if no interest has been
paid thereon. Every new Note issued pursuant to this Section 5.3 in lieu of
any destroyed, lost, stolen, or mutilated Note shall constitute an original
additional contractual obligation of the Company, regardless of whether the
destroyed, lost, stolen, or mutilated Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Notes duly issued hereunder.
5.4 Interest. Each Note delivered under this Agreement upon
registration of, transfer of, or in exchange for or in lieu of any other Note
shall carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Note. Interest on the Notes shall be computed on
the basis of a 365- or 366-day year, as applicable.
SECTION 6. COMPANY BUSINESS COVENANTS
The Company covenants that on and after the date of initial issue of
the Notes, as long as any of the Notes are outstanding:
6.1 Payment of Taxes and Claims. The Company shall pay, and shall
cause each Subsidiary, Partnership, and Joint Venture to pay, before they
become delinquent:
-21-
27
(a) all taxes, assessments, and governmental charges or
levies imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords, and other like Persons that, if
unpaid, might result in the creation of a Lien upon its Property;
provided, however, that any of the foregoing items need not be paid while being
contested in good faith and by appropriate proceedings, and so long as adequate
book reserves have been established with respect thereto, and so long as the
failure to pay timely any such item does not materially and adversely affect
the business, prospects, profits, Properties, or condition (financial or
otherwise) of the Company or any Subsidiary, Partnership, or Joint Venture. In
the case of any item of the foregoing description involving in excess of
$100,000, the adequacy of such reserves shall be supported by a certificate of
the independent accountants of the Company delivered to you promptly upon the
failure to pay timely such item.
6.2 Maintenance of Properties and Corporate Existence. The
Company shall, and shall cause each Subsidiary, Partnership, and Joint Venture
to:
(a) Property - maintain its Property in good condition
and make all renewals, replacements, additions, betterments, and
improvements thereto necessary for the effective and proper conduct of
its business;
(b) Insurance - maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and
business against such casualties and contingencies, of such types
(including public liability, larceny, embezzlement, or other criminal
misappropriation insurance) and in such amounts as is customary in the
case of corporations of established reputations engaged in the same or
a similar business and similarly situated, and shall not cause or
permit the alteration of the insurance coverage described in Exhibit H
without at least 30 days' prior written notice to you;
-22-
28
(c) Financial Records - keep books of records and
accounts in which true and complete entries will be made of all its
business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance
with generally accepted accounting principles;
(d) Existence and Rights - except as otherwise permitted
by Sections 6.4 and 6.5, do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate or other
applicable existence, rights, and franchises to the extent that the
failure to preserve and keep the same in full force and effect might
materially and adversely affect the business, prospects, profits,
Properties, or condition (financial or otherwise) of the Company, the
Subsidiaries, the Partnerships, and the Joint Ventures taken as a
whole or of any Subsidiary, Partnership, or Joint Venture that
accounts for 25% or more of Consolidated Net Worth, Consolidated Net
Income, or Consolidated Cash Flow; and
(e) Compliance with Law - not be in violation of any
laws, ordinances, or governmental rules and regulations to which it is
subject and not fail to obtain any licenses, permits, franchises, or
other governmental authorizations necessary to the ownership of its
Properties or to the conduct of its business, which violation or
failure to obtain might materially and adversely affect the business,
prospects, profits, Properties or condition (financial or otherwise)
of the Company, the Subsidiaries, Partnerships, and the Joint Ventures
taken as a whole or of any Subsidiary, Partnership, or Joint Venture
that accounts for 25% or more of Consolidated Net Worth, Consolidated
Net Income, or Consolidated Cash Flow.
6.3 Payment of Notes and Maintenance of Office. The Company will
punctually pay or cause to be paid the principal and interest to become due in
respect of the Notes according to the terms thereof and will maintain an office
or agency where the Notes may be surrendered upon maturity or for prepayment,
conversion, or transfer in accordance with this
-23-
29
Agreement. Such office or agency shall be maintained at the address given in
Section 11.l(a)(ii) until 10 days after such time as the Company shall notify
the holders of the Notes of any change of location of such office.
6.4 Acquisition and Disposal of Equity Interests. The Company
shall not permit any Subsidiary, Partnership, or Joint Venture to issue, sell,
or otherwise dispose of any shares of its own stock (or any options or warrants
to purchase stock or other Securities exchangeable for or convertible into
stock) of a Subsidiary or any interest in a Partnership or Joint Venture (said
stock, options, warrants, other Securities, and equity interests herein called
"Subject Stock"), if the effect of the transaction would be to reduce the
proportionate interest of the Company, direct or indirect, in the outstanding
Subject Stock of the Subsidiary, Partnership, or Joint Venture the interests in
which are the subject of the transaction; provided, however, that the foregoing
restrictions do not apply to:
(a) the issue of directors' qualifying shares; and
(b) the sale for a cash consideration at one time to a
Person (other than directly or indirectly to an Affiliate) of the
entire investment (whether represented by stock, debt, claims, or
otherwise) of the Company, the Subsidiaries, the Partnerships, and the
Joint Ventures in any Subsidiary, Partnership, or Joint Venture, if
all of the following conditions are met:
(i) the assets (valued at the greater of fair
market value or net book value) of such Subsidiary,
Partnership, or Joint Venture, do not, together with assets of
the Company and all Subsidiaries, Partnerships, and Joint
Ventures previously disposed of during the twelve months
immediately preceding the date of the proposed disposition
(other than in the ordinary course of business), exceed a
Substantial Part of the consolidated assets of the Company and
its Subsidiaries;
(ii) in the fiscal year then most recently ended,
the sum of the portions of Consolidated Net Income that were
contributed during such year by
-24-
30
(x) such Subsidiary, Partnership, or Joint Venture, (y) each
Subsidiary that has been disposed of since the beginning of
such fiscal year, and (z) other assets of the Company, the
Subsidiaries, the Partnerships, and the Joint Ventures
disposed of since the beginning of such fiscal year (other
than in the ordinary course of business), has not constituted
a Substantial Part of Consolidated Net Income for any such
year;
(iii) in the opinion of the Company's Board of
Directors, the sale is for fair value and is in the best
interests of the Company;
(iv) such Subsidiary, Partnership, or Joint Venture
being disposed of has no continuing investment in any other
Subsidiary, Partnership, or Joint Venture not being
simultaneously disposed of or in the Company; and
(v) immediately after the consummation of the
transaction and after giving effect thereto, no Default or
Event of Default would exist.
6.5 Sale of Assets or Merger. (a) Sale of Assets. The Company
shall not, and shall not permit any Subsidiary, Partnership, or Joint Venture
to, sell, lease, transfer, or otherwise dispose of assets except in the
ordinary course of business; provided, however, that the foregoing restrictions
do not apply to the sale of such assets for a cash consideration to a Person
other than an Affiliate if all of the following conditions are met:
(i) such assets (valued at the greater of fair market value
or net book value) do not, together with assets of the Company and all
other Subsidiaries, Partnerships, and Joint Ventures previously
disposed of during the twelve months immediately preceding the date of
the proposed disposition (other than in the ordinary course of
business), exceed a Substantial Part of the consolidated assets of the
Company and its Subsidiaries;
-25-
31
(ii) in the fiscal year then most recently ended, the sum of
the portions of Consolidated Net Income (excluding losses) that were
contributed during such year by (x) such assets and (y) other assets
of the Company, the Subsidiaries, the Partnerships, and the Joint
Ventures disposed of since the beginning of such fiscal year (other
than in the ordinary course of business), has not constituted a
Substantial Part of Consolidated Net Income for any such year;
(iii) in the opinion of the Company's Board of Directors, the
sale is for fair value and is in the best interest of the Company; and
(iv) immediately after the consummation of the transaction,
and after giving effect thereto, no Default or Event of Default would
exist.
(b) Merger and Consolidation. The Company shall not, and shall
not permit any Subsidiary, Partnership, or Joint Venture to, consolidate with
or merge into any other Person or permit any other Person to consolidate with
or merge into it (except that a Subsidiary may consolidate with or merge into
the Company or another Subsidiary); provided, however, that the foregoing
restriction does not apply to the merger or consolidation of the Company with
another corporation, if:
(i) the Company is the corporation that results from such
merger or consolidation (the "surviving corporation");
(ii) immediately after the consummation of the proposed
merger or consolidation, and after giving effect thereto, the
surviving corporation will not have outstanding any Indebtedness or
have its Property subject to any Lien not permitted to be incurred by
the Company pursuant to this Agreement; and
(iii) immediately after the consummation of the proposed
merger or consolidation, and after giving effect thereto, no Default
or Event of Default would exist.
-26-
32
6.6 Leases. (a) Limitation on Leases. The Company shall not, and
shall not permit any Subsidiary, Partnership, or Joint Venture to, become
liable as lessee under any lease (other than (i) a Capitalized Lease
Obligation, (ii) a lease of data processing equipment, office furniture, office
space, or vehicles, (iii) a lease expiring not more than three years from the
date of incurrence, or longer in the case of leases of oilfield equipment
entered into in the ordinary cause of business, (iv) a lease under which the
Company or a Wholly-Owned Subsidiary is lessor, or (v) a lease of oil, gas, or
other hydrocarbon Property) of Property if the aggregate annual Rentals payable
during any current or future period of twelve consecutive months under the
lease in question and all other such leases under which the Company or a
Subsidiary, Partnership, or Joint Venture is then lessee would exceed 1% of the
Company's aggregate Reserves Value.
(b) Subsidiary. Any corporation that becomes a Subsidiary after the
date hereof shall be deemed to have become liable as lessee, at the time it
becomes a Subsidiary, under all leases (under which it is liable as lessee) of
such corporation existing immediately after it becomes a Subsidiary.
(c) Rentals. The term "Rentals" means, as of the date of
determination, all fixed payments which the lessee is required to make by the
terms of any lease which is restricted by Section 6.6(a) net of sublease
income, but shall not include amounts required to be paid in respect of
maintenance, repairs, income taxes, property taxes, insurance, assessments, or
other similar charges or additional rentals (in excess of fixed minimums) based
upon a percentage of gross receipts.
6.7 Liens and Encumbrances. The Company shall not, and shall not
permit any Subsidiary, Partnership, or Joint Venture to, cause, or agree or
consent to cause in the future (upon the happening of a contingency or
otherwise), any of its Property, whether now owned or hereafter acquired, to be
subject to a Lien except:
(a) Liens securing taxes, assessments, or governmental charges
or levies or the claims or demands of materialmen, mechanics,
carriers, warehousemen, land-
-27-
33
lords and other like Persons, provided the payment thereof is not at
the time required by Section 6.1;
(b) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workers' compensation, unemployment
insurance, social security, and other like laws, or (ii) to secure the
performance of letters of credit, bids, tenders, sales contracts,
leases, statutory obligations, surety, appeal and performance bonds,
and other similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of Property; provided, however, that in any
one case or in the aggregate, such Liens do not have a material and
adverse effect upon the Company's or any Subsidiary's, Partnership's,
or Joint Venture's title to any of its Property, or upon the business,
condition (financial or otherwise), affairs, operations, or prospects
of the Company, Subsidiaries, the Partnerships, and the Joint Venture
taken as a whole or of any Subsidiary, Partnership, or Joint Venture
that accounts for 25% or more of Consolidated Net Worth, Consolidated
Net Income, or Consolidated Cash Flow;
(c) attachments, judgments, and other similar Liens arising in
connection with court proceedings, provided the execution or other
enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
(d) Liens securing only obligations owing to the Company or
a Wholly-Owned Subsidiary;
(e) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other
similar title exceptions or encumbrances affecting real Property (or
Property consisting of an interest or interests in oil, gas or other
hydrocarbons) that were not incurred in connection with the borrowing
of money and that do not in the aggregate materially detract from the
value of said Properties or materially interfere with their use in the
ordinary conduct of the owning entity's business;
-28-
34
(f) Liens on Property hereafter acquired (i) existing on
Property of a Person at the time it becomes a Subsidiary or (ii)
existing on Property acquired by the Company or a Subsidiary through
purchase, merger, consolidation or otherwise, whether or not assumed
by the Company or such Subsidiary, and any Lien renewing, extending or
refunding any such Lien;
(g) Liens described on Exhibit G or exclusively securing the
Indebtedness described in Exhibit G; and
(h) Liens securing borrowings permitted by Section 6.18 from
one or more banks for working capital.
6.8 Consolidated Debt. The Company shall not, and shall not permit
any Subsidiary, Partnership, or Joint Venture to, create, incur, assume, suffer
to exist, or in any manner become liable in respect of any Consolidated Debt
other than:
(a) debt represented by commercial paper exempt from
registration pursuant to section 3(a)(2) of the 1933 Act, provided
that the Company at all times shall have unused lines of credit from
commercial banks organized under the laws of the United States or any
State thereof equal to 100% of the outstanding debt represented by
such commercial paper; and
(b) any other Consolidated Debt, provided that the
requirements of Section 6.18 would be met after taking into account
any such proposed additional Consolidated Debt.
The Company shall not, and shall not permit any Subsidiary, Partnership, or
Joint Venture to, create, suffer to exist, or in any manner become or remain
liable in respect of any Consolidated Debt (other than Subordinated Debt) in
favor of any Affiliate of the Company or such Subsidiary, Partnership, or Joint
Venture (i) on terms less favorable to the Company or such Subsidiary,
Partnership, or Joint Venture than would result from an arms-length negotiated
agreement, or (ii) without having first offered to you and without your
-29-
35
having declined the right to become the obligee under such Consolidated Debt in
lieu of such Affiliate on identical terms and conditions. For purposes of this
Section 6.8, neither the Company nor any Subsidiary, Partnership, or Joint
Venture will be required to include in Consolidated Debt the Indebtedness of
any partnership or joint venture in which the Company or such Subsidiary,
Partnership, or Joint Venture is a general partner ("Partnership Indebtedness")
or its obligation as a guarantor of Indebtedness of an Affiliate of the Company
or such Subsidiary, Partnership, or Joint Venture ("Guaranteed Indebtedness")
except to the extent that (x) such Partnership Indebtedness or Guaranteed
Indebtedness is a recourse obligation to the Company or any Subsidiary,
Partnership, or Joint Venture and (y) (1) such Partnership Indebtedness exceeds
50% of such partnership or joint venture's aggregate Reserves Value, or (2)
such Guaranteed Indebtedness exceeds 50% of the aggregate Reserves Value of the
Affiliate debt of which has been guaranteed, or (3) in cases where the
Affiliate obligated on Guaranteed Indebtedness is the same Person as the
partnership or joint venture obligated on Partnership Indebtedness, such
Guaranteed Indebtedness and Partnership Indebtedness together exceed 50% of
such Person's aggregate Reserves Value.
6.9 Distributions and Investments. (a) The Company shall not, and
shall not permit any Subsidiary, Partnership, or Joint Venture to declare,
make, or incur any liability to make any Distribution in respect of the capital
stock of the Company (other than a Distribution consisting solely of such
capital stock) or make or authorize any Restricted Investment if, immediately
after giving effect to the proposed Distribution or Restricted Investment, the
sum of Distributions in respect of its capital stock and the amount of
Restricted Investments (valued immediately after such action, as provided in
the definition thereof) for the period subsequent to December 31, 1987, would
exceed 50% of cumulative Consolidated Net Income for the period from December
31, 1987, to the end of the fiscal quarter immediately preceding the making of
the Distribution or Restricted Investment. Any corporation that becomes a
Subsidiary hereafter shall be deemed to have made, at the time it becomes a
Subsidiary, all Restricted Investments of such corporation existing immediately
after it becomes a Subsidiary.
-30-
36
(b) The Company shall not authorize a Distribution on its capital
stock that is not payable within ninety days of authorization.
(c) The Company shall not, and shall not permit any Subsidiary,
Partnership, or Joint Venture to, authorize or make a Distribution on the
capital stock of the Company or make any Restricted Investment if, immediately
after giving effect to the proposed Distribution or Restricted Investment, a
Default or an Event of Default would exist.
(d) The Company shall not, and shall not permit any Subsidiary,
Partnership, or Joint Venture to, make a Distribution consisting of evidences
of its Indebtedness or assets (including, without limitation, Securities) other
than a Distribution of Common Stock, rights, options, or warrants to subscribe
for or purchase Common Stock, or cash out of the earned surplus of the Company
or such Subsidiary, Partnership, or Joint Venture. For the purpose of this
Section 6.9(d), the reclassification (including any reclassification upon a
consolidation or merger in which the Company is the continuing corporation) of
Common Stock into securities other than Common Stock shall be deemed to involve
a Distribution of securities other than Common Stock.
6.10 Guaranties. The Company shall not, and shall not permit any
Subsidiary, Partnership, or Joint Venture to, become or be liable in respect of
any Guaranty except (a) the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection, (b) to the extent that the
obligation so guaranteed is limited to a specific and finite amount that could
then be incurred directly by the Company pursuant to Section 6.8, or (c)
Guaranties of the Company's or any Wholly-Owned Subsidiary's Indebtedness
otherwise permitted hereby. "Guaranty" by any Person shall mean all
obligations of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend, or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including obligations
incurred through an agreement contingent or otherwise, by such Person:
(i) to purchase such Consolidated Debt or
-31-
37
obligation or any Property or assets constituting security therefor;
(ii) to advance or supply funds (x) for the purchase or
payment of such Indebtedness or obligation, or (y) to maintain working
capital or other balance sheet condition or any income statement
condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation;
(iii) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner
of such Indebtedness or obligation of the ability of the primary
obligor to make payment of the Indebtedness or obligation; or
(iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect thereof.
6.11 ERISA Compliance. (a) The Company shall not, and shall not
permit any ERISA Affiliate (as such term is defined in Section 2.15) to, at any
time:
(i) engage in any "prohibited transaction" described in
section 406 of ERISA or section 4975 of the Code;
(ii) sponsor, maintain, or contribute to any employee pension
benefit plan (within the meaning of section 3(2) of ERISA) that is
subject to title IV of ERISA;
(iii) contribute to or assume an obligation to contribute to
any "multiemployer plan" as such term is defined in section 3(37) or
4001(a)(3) of ERISA; or
(iv) acquire an interest in a Person that causes such Person
to become an ERISA Affiliate with respect to the Company or with
respect to any ERISA Affiliate of the Company if such Person sponsors,
maintains, or contributes to, or at any time in the six-year period
preceding such acquisition has sponsored, maintained, or contributed
to, (A) any "multiemployer pension plan" as
-32-
38
that term is defined in section (3)(37) or 4001(a)(3) of ERISA or (B)
any employee pension benefit plan that is subject to title IV of
ERISA.
6.12 Transactions with Affiliates. The Company shall not, and shall
not permit any Subsidiary, Partnership, or Joint Venture to, enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
Property or the rendering of any service, with any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of the
Company's or such Subsidiary's, Partnership's, or Joint Venture's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary, Partnership, or Joint Venture than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
6.13 Sale or Discount of Receivables. Except in connection with a
sale of assets permitted by Section 6.5, neither the Company shall not, and
shall not permit any Subsidiary, Partnership, or Joint Venture to, discount or
sell any of its notes receivable or accounts receivable.
6.14 Business. The Company shall not, and shall not permit any
Subsidiary, Partnership, or Joint Venture to, engage in any business other than
the exploration for, development of, and production of oil, gas, and related
hydrocarbons, the acquisition, disposition, and operation of real and personal
property in connection therewith, and the providing of services in conjunction
with and attendant to such activities (whether for its own account or for
others), and any or all other activities necessary or desirable and relating to
such business.
6.15 Acquisition of Notes. Without creating any right to purchase or
to prepay any Note except as otherwise expressly provided herein, the Company
shall not, and shall not permit any Subsidiary, Partnership, or Joint Venture
to, directly or indirectly, acquire or make any offer to acquire any Notes
unless the Company or such Subsidiary, Partnership, or Joint Venture has
offered to acquire Notes pro rata from all holders of the Notes and upon the
same terms. In case the Company acquires any Notes, such Notes shall
thereafter
-33-
39
be cancelled and no Notes shall be issued in substitution therefor.
6.16 ReceivabLes. The Company shall, and shall cause each Subsidiary,
Partnership, and Joint Venture to, take, and to the extent necessary will
require any Person from whom it purchases or otherwise acquires any
Receivables for value to take, all actions necessary to perfect and preserve
its rights and security interests in and to effect the transfer to it of full
ownership of and title to substantially all such Receivables (and any
underlying collateral therefor) so purchased or acquired, or acquired as
security for an obligation owed to it, including, without limitation:
(a) in the case of such Receivables that do not constitute
Chattel Paper, the filing and the maintaining of the filing of all
such financing and continuation statements or other documents as may
be necessary or appropriate under the Uniform Commercial Code or any
other applicable laws to perfect and preserve such rights and security
interests, and
(b) in the case of Chattel Paper (i) acquiring only Chattel
Paper with respect to which the vendor thereof has perfected its
security interest, if any, therein and in any underlying collateral,
and (ii) taking and maintaining by the Company of physical possession
of such Chattel Paper and documents relating thereto.
6.17 Certain Registrations or Approvals. If the Note, the Warrant or
the stock issuable pursuant thereto require declaration or registration with or
approval of any governmental official or authority (other than registration
under the Securities Act or state securities or blue sky laws under Section 12)
the Company will at its sole expense take all requisite action in connection
with such declaration and will use its best efforts to cause such Notes,
Warrant, or stock to be duly registered or approved as may be required.
6.18 Coverage. The Company shall cause (a) its Consolidated Cash Flow
for each fiscal year to equal or exceed the greater of (i) 200% of the
aggregate principal payments payable with respect to Consolidated Debt during
-34-
40
such fiscal year or (ii) 200% of the aggregate principal payments payable on
Consolidated Debt during the next succeeding fiscal year, and (b) its Reserves
Value (determined as of March 31 of each year by a recognized firm of
independent petroleum engineers) to equal at least 225% of the aggregate of all
Consolidated Debt as of such date.
SECTION 7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information. The Company will deliver, or
will cause to be delivered, to you, if at the time you or your nominee holds
any Notes (or if you are obligated to purchase any Notes), and to each other
Institutional Holder of at least 20% of the then outstanding Notes:
(a) Quarterly Statements - as soon as practicable after the
end of each quarterly fiscal period in each fiscal year of the
Company, and in any event within 60 days thereafter, duplicate copies
of:
(i) consolidated balance sheets of the Company and
its consolidated Subsidiaries, if any, as at the end of such
quarter, and
(ii) consolidated statements of operations and of
retained earnings of the Company and its consolidated
Subsidiaries, if any, for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year
ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail and certified as complete and correct, subject to changes
resulting from year-end adjustments, by a principal financial officer
of the Company;
(b) Annual Statements - as soon as practicable after the end
of each fiscal year of the Company, and in any event within 120 days
thereafter, duplicate copies of:
-35-
41
(i) consolidated balance sheets of the Company and its
consolidated Subsidiaries, if any, at the end of such year, and
(ii) consolidated statements of operations and of retained
earnings of the Company and its consolidated Subsidiaries, if any, for
such year,
setting forth, in the case of the consolidated statements, in comparative form,
the figures for the previous year, all in reasonable detail and, in the case of
the consolidated statements, accompanied by an opinion thereon of the
accountants named in Section 2.3 or other independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that, except as expressly set forth in said opinion, such
financial statements fairly present the financial condition and the results of
operations and changes in financial position (all consolidated, if applicable)
of the companies being reported upon in accordance with generally accepted
accounting principles consistently applied (except for changes in application
in which such accountants concur) and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, included such tests of
the accounting records and such other auditing procedures as they considered
necessary in the circumstances;
(c) Opinions of Independent Accountants - as soon as practicable after
the end of each fiscal year of the Company, and in any event within 120 days
thereafter, duplicate copies of all certificates of the independent accountants
of the Company required pursuant to Section 7.1(b);
(d) Audit Reports - promptly upon receipt thereof, one copy of each
other report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit made by
them of the books of the Company or any Subsidiary, Partnership, or Joint
Venture;
-36-
42
(e) SEC and Other Reports - promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement sent by
the Company or any Subsidiary, Partnership, or Joint Venture to stockholders or
owners of equity interests therein generally, and of each regular or periodic
report and any registration statement, prospectus or written communication
(other than transmittal letters) in respect thereof filed by the Company or any
Subsidiary, Partnership, or Joint Venture with, or received by such Person in
connection therewith from, any securities exchange or the Securities and
Exchange Commission or any successor agency;
(f) ERISA - immediately upon becoming aware of the occurrence of any
(i) "reportable event" as such term is defined in section 4043 of ERISA or (ii)
"prohibited transaction" as such term is defined in section 4975 of the Code,
in either case in connection with any employee pension benefit plan or any
trust created thereunder, a written notice specifying the nature thereof, what
action the Company or any Subsidiary, Partnership, or Joint Venture is taking
or proposes to take with respect thereto and, when known, any action taken by
the Internal Revenue Service, the Department of Labor, or the Pension Benefit
Guaranty Corporation with respect thereto;
(g) Notice of Default or Event of Default - as soon as practicable,
but in any event within five Business Days, after becoming aware of the
existence of any condition or event which constitutes a Default or an Event of
Default, a written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect thereto;
(h) Notice of Claimed Default - as soon as practicable, but in any
event within five Business Days, after becoming aware that the holder of any
Note or of any evidence of Indebtedness or other Security of the Company or any
Subsidiary, Partnership, or Joint Venture has given notice or taken any other
action with respect to a claimed Default or Event of Default, a written
-37-
43
notice specifying the notice given or action taken by such holder and the
nature of the claimed Default or Event of Default and what action the Company
is taking or proposes to take with respect thereto;
(i) Reserve Report - within 60 days following March 31 each
year, a reserve report of the type described in Section 6.18(b); and
(j) Requested Information - with reasonable promptness, such
other data and information as from time to time may be reasonably
requested.
(k) Bankruptcy Event - immediately following its occurrence,
an event of the type described in Section 9.1(g), (h), or (i) with
respect to the Company or any Subsidiary, Partnership, or Joint
Venture, regardless of the requirements of Section 9.1(g), (h), or (i)
with respect to Consolidated Net Worth, Consolidated Net Income, or
Consolidated Cash Flow.
7.2 Officers' Certificates. Each set of financial statements
delivered to you or any other Institutional Holder of the Notes pursuant to
Section 7.1(a) or (b) will be accompanied by an Officers' Certificate setting
forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether the Company was
in compliance with the requirements of Section 6 during the period
covered by the income statement then being furnished; and
(b) Event of Default - that the signers have reviewed the
relevant terms of this Agreement and have made, or caused to be made,
under their supervision, a review of the transactions and conditions
of the Company and the Subsidiaries, the Partnerships, and the Joint
Ventures from the beginning of the accounting period covered by the
income statements being delivered therewith to the date of the
certificate and that such review has not disclosed the existence
during such period of any condition or event which constitutes a
Default or an Event of Default or, if any such condition or event
existed or exists, specifying the nature and
-38-
44
period of existence thereof and what action the Company has taken or
proposes to take with respect thereto.
7.3 Accountants' Certificate. Each set of annual financial statements
delivered pursuant to Section 7.1(b) will be accompanied by a certificate of
the accountants who certify such financial statements, stating that they have
reviewed this Agreement and stating further whether, in making their audit,
such accountants have become aware of any condition or event that then
constitutes a Default or an Event of Default and, if any such condition or
event then exists, specifying the nature and period of existence thereof.
7.4 Inspection. The Company shall permit, and shall cause each
Subsidiary, Partnership, and Joint Venture to permit, any of your
representatives, while you or your nominee holds any Note, or the
representatives of any other Institutional Holder that holds at least 20% of
the aggregate outstanding principal amount of the Notes, at your or such
holder's expense, to visit and inspect any of the Properties of the Company or
any Subsidiary, Partnership, or Joint Venture, to examine all their books of
account, records, reports, and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances, and accounts with
their respective officers and employees (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and all Subsidiaries, Partnerships, and Joint Ventures) all at such reasonable
times and as often as may be reasonably requested; provided, however, that you
or such holder will keep confidential all information obtained in connection
with any such inspection that the Company designates to you and such holder in
writing as confidential prior to your disclosure, except that you or such
holder may reveal such information (a) pursuant to the receipt of any legal
process that appears valid on its face, (b) pursuant to order or request of any
governmental or industry regulatory body having or acquiring jurisdiction over
you or such holder, as applicable, (c) that has become public through no action
of you or such holder, as applicable, or (d) to your or such holder's
accountants, attorneys, or other advisers who have been instructed to be bound
by such restrictions.
-39-
45
SECTION 8. PREPAYMENT OF NOTES
8.1 Required Prepayments. The Company covenants and agrees that, in
addition to the payments of principal of the Notes to be made on the expressed
maturity date thereof, the Company shall prepay principal on the Notes to the
extent and under the following circumstances:
(a) To the extent that, during any fiscal year, the Company
expends less than 50% of its Consolidated Cash Flow on payment of
principal on outstanding Indebtedness and capital expenditures
(computed in accordance with the Company's practices in effect as of
the date hereof), an amount equal to the difference between the
aggregate of such expenditures and 50% of the Company's Consolidated
Cash Flow for such fiscal year shall be prepaid and applied by the
Company on the principal indebtedness evidenced by the Notes on June
30 of the next succeeding fiscal year following the fiscal year in
question ("Required Prepayment Dates"); and
(b) on June 30, 1994, and on each June 30 thereafter through
June 30, 1997, $1,000,000; provided, however, that the amount of such
prepayment due June 30, 1997 shall be reduced by an amount equal to
the sum of the prepayments made pursuant to Section 8.1(a) and, if
such sum exceeds $1,000,000, such excess shall be applied to reduce
the prepayments due pursuant to this Section 8.1(b) in like fashion in
reverse chronological order.
The portion of this amount applied to the principal outstanding under any given
Note shall be in the same proportion that the principal evidenced by such Note
bears to the aggregate of the outstanding principal of all Notes then
outstanding.
8.2 No Prepayment or Call. Except as provided in Sections 1.1 and
8.1, the Company shall have no right to prepay or to acquire any Note.
-40-
46
SECTION 9. EVENTS OF DEFAULT
9.1 Nature of Events. An "Event of Default" shall exist if any of
the following occurs and is continuing:
(a) Principal Payments - the Company fails to make any payment
of principal on any Note on or before the date such payment is due;
(b) Interest Payments - the Company fails to make any payment
of interest on any Note on or before the date such payment is due;
(c) Particular Covenant Defaults - the Company or any
Subsidiary, Partnership, Joint Venture, or Affiliate fails to perform
or observe any covenant contained in Sections 6.3 through 6.10, 6.13
through 6.18, in Section 7.1(g), (h), or (i) or in the Investment
Agreement or the Warrant;
(d) Other Defaults - the Company or any Subsidiary,
Partnership, Joint Venture, or Affiliate fails to perform, observe, or
comply with any other provision of this Agreement, and such failure
continues for more than 30 days after such failure shall first become
known to any officer of the Company or any Subsidiary;
(e) Warranties or Representations - any warranty,
representation, or other statement by or on behalf of the Company
contained in this Agreement or in any instrument furnished in
compliance with or in reference to this Agreement is false or
misleading in any respect;
(f) Default on Indebtedness or Other Security - the Company
or any Subsidiary, Partnership, or Joint Venture fails to make any
payment due on any Indebtedness or other Security or any event shall
occur or any condition shall exist in respect of any Indebtedness or
other Security of the Company or any Subsidiary, Partnership, or Joint
Venture, or under any agreement securing or relating to such
Indebtedness or other Security, the effect of which is (i) to cause
(or permit any holder of such Indebtedness or other Security or a
trustee to cause) such Indebtedness or other
-41-
47
Security, or a portion thereof, to become due prior to its stated
maturity or prior to its regularly scheduled date of payment or (ii)
to permit a trustee or the holder of any Security (other than common
stock of the Company or any Subsidiary, Partnership, or Joint
Venture) to elect a majority of the directors on the Board of
Directors of the Company or such Subsidiary or to change the control
of any Partnership or Joint Venture;
(g) Involuntary Bankruptcy Proceedinqs - a receiver,
liquidator, custodian, or trustee of the Company or any Subsidiary,
Partnership, or Joint Venture that accounts for 25% or more of
Consolidated Net Worth, Consolidated Net Income, or Consolidated Cash
Flow, or of any material Property of the Company or any Subsidiary,
Partnership, or Joint Venture, is appointed by court order and such
order remains in effect for more than 60 days; or any of the material
Property of the Company or any Subsidiary, Partnership, or Joint
Venture, is sequestered by court order and such order remains in
effect for more than 60 days; or a petition is filed, a case is
commenced or relief is ordered against the Company or any Subsidiary,
Partnership, or Joint Venture that accounts for 25% or more of
Consolidated Net Worth, Consolidated Net Income, or Consolidated Cash
Flow, under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed
within 60 days after such filing, commencement, or relief is ordered
against the Company or any such Subsidiary, Partnership, or Joint
Venture;
(h) Voluntary Petitions - the Company or any Subsidiary,
Partnership, or Joint Venture that accounts for 25% or more of
Consolidated Net Worth, Consolidated Net Income, or Consolidated Cash
Flow files a petition commencing a case in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or consents to
-42-
48
the filing of any petition or the commencement of any case against it
under any such law;
(i) Assiqnments for Benefit of Creditors, etc.- the Company
or any Subsidiary, Partnership, or Joint Venture that accounts for 25%
or more of Consolidated Net Worth, Consolidated Net Income, or
Consolidated Cash Flow makes an assignment for the benefit of its
creditors, or fails to pay its debts generally as they become due, or
consents to the appointment of a receiver, trustee, custodian or
liquidator of the Company or any Subsidiary, Partnership, or Joint
Venture that accounts for 25% or more of Consolidated Net Worth,
Consolidated Net Income, or Consolidated Cash Flow, or of all or any
part of the Property of any of them; or
(j) Undischarged Final Judgments- final judgment or judgments
for the payment of money aggregating in excess of $250,000 is or are
outstanding against one or more of the Company, the Subsidiaries, the
Partnerships, and the Joint Ventures, and any one of such judgments
has been outstanding for more than 60 days from the date of its entry
and has not been discharged in full or stayed.
9.2 Default Remedies.
(a) Acceleration. If an Event of Default exists, the holder
or holders of more than 33-1/3% in principal amount of the Notes then
outstanding (exclusive of Notes then owned by the Company, the
Subsidiaries, the Partnerships, the Joint Ventures, and the
Affiliates) may exercise any right, power, or remedy permitted to such
holder or holders' by law, and shall have, in particular, without
limiting the generality of the foregoing, the right to declare the
entire principal and all interest accrued on all the Notes then
outstanding to be, and such Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly waived. The
Company forthwith will pay to the holder or holders of all the Notes
then outstanding the entire principal of and interest accrued on the
Notes, provided that during the existence of an Event of Default
described in Section 9.1(a)
-43-
49
or (b) and irrespective of whether the holder or holders of more than
33-1/3% in principal amount of Notes then outstanding have declared
all the Notes to be due and payable pursuant to this Section 9.2(a),
any holder of Notes that has not consented to any waiver with respect
to such Event of Default, at its option by notice in writing to the
Company, may declare the Notes then held by such holder to be, and
such Notes shall thereupon become, forthwith due and payable together
with all interest accrued thereon without any presentment, demand,
protest, or other notice of any kind, all of which are hereby
expressly waived, and the Company forthwith shall pay to such holder
the entire principal of and interest accrued on such Notes.
(b) Nonwaiver and Expenses. No course of dealing on the part
of any holder of the Notes nor any delay or failure on the part of any
holder of the Notes to exercise any right, power, or remedy shall
operate as a waiver of such right, power, or remedy or otherwise
prejudice such holder's rights, powers, and remedies. If the Company
fails to pay when due the principal or interest on any Note, or fails
to comply with any other provision of this Agreement, the Company will
pay to the holders of the Notes, to the extent permitted by law, such
further amounts as shall be sufficient to cover the cost and expenses,
including, without limitation, reasonable attorneys' fees, incurred by
such holders in collecting any sums due on the Notes or in otherwise
enforcing any of their rights.
9.3 Annulment of Acceleration of Notes. If a declaration is made
pursuant to Section 9.2(a) by any holder or holders of the Notes, then and in
every such case, the holders of 66-2/3% in aggregate principal amount of the
Notes then outstanding (exclusive of Notes then owned by the Company, the
Subsidiaries, the Partnerships, the Joint Ventures, and the Affiliates) by
written instrument filed with the Company, may rescind and annul such
declaration, and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
-44-
50
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal or interest on the Notes that has become due and payable by
reason of such declaration under Section 9.2(a)) shall have been duly
paid; and
(c) each and every other Default and Event of Default shall
have been waived pursuant to Section 11.5 or otherwise made good or
cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereon.
SECTION 10. INTERPRETATION OF THIS AGREEMENT
10.1 Terms Defined. As used in this Agreement, the following terms
have the respective meanings set forth below or set forth in the Section
following such term:
Affiliate - any Person that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company or any Subsidiary, Partnership, or
Joint Venture. The term "control" as used in the foregoing sentence
means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person,
whether through, the ownership of voting securities, by contract, or
otherwise.
Business Day - Each Monday, Tuesday, Wednesday, Thursday, or
Friday that is not a day on which banking institutions in the State of
Oklahoma are authorized or obligated by law or executive order to
close.
Capitalized Lease Obliqations - all rental obligations
that, under generally accepted accounting principles in effect on the
date hereof, are or would be required to be capitalized on the books
of the Company or any Subsidiary (including, without limitation, all
existing rental obligations that would be required to be so
capitalized for calendar or fiscal years beginning
-45-
51
after March 31, 1987, and any rentals incurred in connection with
issues of "industrial revenue bonds" as defined in section 103(c)(2)
and "pollution control bonds" within the meaning of section
103(b)(4)(f) of the Code), in each case taken at the amount thereof
accounted for as Indebtedness (net of interest expense) in accordance
with such principles.
Chattel Paper - "chattel paper" as defined in the Uniform
Commercial Code.
Closinq - Section 1.2.
Closing Date - Section 1.2.
Code - the Internal Revenue Code of 1986, as amended from time
to time.
Common Stock - any stock of any class of the Company that has
no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, and that is not subject to prepayment or
redemption by the Company.
Consolidated Cash Flow - Consolidated Net Income plus
depreciation, depletion, amortization and deferred taxes.
Consolidated Debt - with respect to any Person, means, without
duplication:
(1) its liabilities for borrowed money;
(2) liabilities secured by any Lien' existing on Property
owned by such Person (regardless of whether such
liabilities have been assumed);
(3) liabilities under Capitalized Lease Obligations;
(4) any other obligations (other than deferred taxes, gas
balancing amounts (regardless or whether current)),
and other noncurrent
-46-
52
liabilities) that are required by generally accepted
accounting principles to be shown as liabilities on
its balance sheet and which are payable or remain
unpaid more than one year from the creation thereof;
and
(5) Guaranties (other than those permitted by Section
6.10(a)).
Consolidated Net Income - net earnings (or loss) after income
taxes of the Company and the Subsidiaries determined on a consolidated
basis, but excluding:
(1) any gain (or loss) arising from the sale of capital
assets (i.e., those assets other than current assets);
(2) any gain (or loss) arising from any write-up or
write-down of assets;
(3) net earnings (or loss) of any Subsidiary accrued
prior to the date it became a Subsidiary;
(4) net earnings (or loss) of any Person, substantially
all the assets of which have been acquired in any manner,
realized by such Person prior to the date of such
acquisition;
(5) net earnings (or loss) of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has an
equity interest unless such net earnings (or loss) shall
have actually been received by the Company or such
Subsidiary in the form of cash distributions;
(6) any portion of the net earnings (or loss) of any
Subsidiary which contractually or legally is unavailable
for payment of dividends to the Company or any other
Subsidiary;
(7) the net earnings (or loss) of any Person with which
the Company shall have merged, prior to the date of such
transaction; and
-47-
53
(8) any gain (or loss) arising from the acquisition of
any Securities of the Company or any Subsidiary.
Consolidated Net Worth - the sum of the capital stock (but excluding
treasury stock and capital stock subscribed and unissued) and surplus
(including earned surplus, capital surplus, and the balance of the current
profit and loss account not transferred to surplus) accounts of the Company and
its Subsidiaries appearing on a consolidated balance sheet of the Company and
its Subsidiaries prepared in accordance with generally accepted accounting
principles, consistently applied, as of the date of determination, after
eliminating all intercompany transactions and all amounts properly
attributable to minority interests, if any, in Subsidiaries.
Default - an event or condition the occurrence of which, with the
lapse of time or the giving of notice or both, would become an Event of
Default.
Distribution - in respect of any corporation or other entity means:
(1) dividends or other distributions on capital stock or equity
interests in such entity; and
(2) the redemption or acquisition of such stock or other equity
interests or of warrants, rights, or other options to purchase
such stock unless made, contemporaneously, from the net
proceeds of a sale of such stock or other equity interests.
ERISA - means Security Act of 1974,the Employee Retirement Income as
amended from time to time.
Event of Default - Section 9.1.
Guaranty - Section 6.10.
-48-
54
Indebtedness - all obligations that, in accordance with generally
accepted accounting principles, should be classified as liabilities upon a
balance sheet, and in any event includes all borrowings and other monetary
obligations, whether direct or indirect or a direct or indirect guarantee, it
being understood that such term shall not include capital'or capital surplus.
Institutional Holder - any institutional investor of recognized
standing (including any commercial bank, savings bank, insurance company,
pension or retirement fund, bank holding company, or insurance holding
company) that shall become a holder of Note.
Joint Venture - any joint venture in which the Company or any
Subsidiary, Partnership, or other such Joint Venture is a participant;
provided, however, that the term "Joint Venture" shall not be deemed to include
joint exploration and operating arrangements customary in the oil and gas
industry and not intended to create (even if having the legal effect of
creating) a partnership, joint venture, or other relationship (other than
for income tax purposes) creating joint and several liability on the part of
the participants therein.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on law, statute, or contract, and including, without limitation, the
security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale, or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting Property. For
the purposes of this Agreement, the Company or a Subsidiary, Partnership, or
Joint Venture shall be deemed to be the owner of any Property that it has
acquired or holds subject to a conditional sale agreement, financing lease, or
other arrangement pursuant to which title to the Property has been
-49-
55
retained by or vested in some other Person for security purposes.
Net Worth - as to any Person, the net worth of such Person computed in
accordance with generally accepted accounting principles consistently applied.
Notes - Section 1.1.
Officers' Certificate - a certificate signed by (1) the Chairman of
the Board, the President, or a Vice President of the Company and (2) the
Treasurer, an Assistant Treasurer, the Secretary, or an Assistant Secretary of
the Company.
Partnership - any partnership (as defined in the Uniform Partnership
Act in effect in any applicable jurisdiction) or limited partnership in which
the Company or any Subsidiary, Joint Venture, or other such Partnership is a
partner; provided, however, that the term "Partnership" shall not be deemed to
include joint exploration and operating arrangements customary in the oil and
gas industry and not intended to create (even if having the legal effect of
creating) a partnership, joint venture, or other relationship (other than for
income tax purposes) creating joint and several liability on the part of the
participants therein.
Pension Plans - Section 2.-15(a).
Person - an individual, partnership, corporation, trust,
unincorporated organization, or other legal entity, or a government or agency
or political subdivision thereof.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Receivables - Section 2.16.
Reqistered Notes - Section 1.1.
Rentals - Section 6.6(c).
-50-
56
Required Prepayment Dates - Section 8.1.
Reserves Value - the present value of proved developed and undeveloped
oil and gas reserves owned by a Person as calculated using Securities and
Exchange Commission valuation methods and definitions.
Restricted Investments - all investments, made in cash or by delivery
of Property, by the Company, the Subsidiary, the Partnerships, and the Joint
Ventures (x) in any Person, whether by acquisition of stock, indebtedness or
other obligation or Security, or by loan, advance or capital contribution, or
otherwise, or (y) in any Property (items (x) and (y) herein called
"Investments"), except the following:
(1) investments in one or more Subsidiaries or any
corporation which concurrently with such Investment
becomes a Subsidiary;
(2) investments made in the ordinary course of business
as described in Section 2.2;
(3) investments in direct obligations of the United
States of America, or any agency thereof or
obligations guaranteed by the United States of
America, provided that such obligations mature within
two years from the date of acquisitions thereof;
(4) investments in municipal bonds given a rating of at
least AA or Aa or their equivalent by a national
credit rating agency and-maturing not more than 18
months from the date of purchase thereof;
(5) investments in certificates of deposit maturing
within one year from the date of acquisition issued
by a bank or trust company organized under the laws
of the United States or any state thereof or Canada
or any province thereof having capital, surplus and
undivided profits aggregating at least $40,000,000;
-51-
57
(6) investments in commercial paper given a rating of at
least Prime-1 or its equivalent by a national credit
rating agency and maturing not more than 270 days
from the date of creation thereof;
(7) the repurchase of capital stock of the Company from
any Company employee upon termination of his or her
employment with the Company to the extent that such
capital stock was acquired by such employee pursuant
to an employee incentive stock purchase plan (which
may relate to Common Stock directly or to rights,
options, warrants, or conversion rights with respect
thereto) adopted by the Company and submitted to all
and approved by a majority of its shareholders; and
(8) the repurchase of capital stock of the Company
pursuant to the agreements described on Exhibit J.
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon.
Security - shall have the same meaning as in section 2(1) of
the 1933 Act.
Subordinated Debt - all Consolidated Debt of the Company that
provides for the subordination of such Consolidated Debt to the Notes.
Subsidiary - a corporation, if any, of which the Company owns,
directly or indirectly, more than 50% of the Voting Stock.
Substantial Part - as used in Sections 6.4 and 6.5 means, when
used with respect to consolidated assets of the Company, the
Subsidiaries, the Partnerships, and the Joint Ventures more than 25%
thereof and when used with respect to Consolidated Net Income for any
period, more than 25% thereof for such period. Computations pursuant
-52-
58
to Section 6.5 shall include dispositions made pursuant to Section 6.4
and computations pursuant to Section 6.4 shall include dispositions
made pursuant to Section 6.5.
Votinq Stock - Securities of any class or classes of a
corporation the holders of which ordinarily, in the absence of
contingencies, are entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
Wholly-Owned Subsidiary - any Subsidiary, all of the
outstanding capital stock (except directors' qualifying shares) of
which are owned by the Company and/or other Wholly-Owned Subsidiaries.
1933 Act - Section 1.3(b).
10.2 Accountinq Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, this shall be done in accordance with generally
accepted accounting principles at the time of effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement. When any computations are made with respect to Subsidiaries,
Partnerships, or Joint Ventures, only the portion attributable to the
Company's direct or indirect equity interest therein shall be included.
10.3 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person, including actions taken by or on behalf
of any partnership in which such Person is a general partner.
10.4 Governinq Law. The parties hereto specifically agree that this
Agreement and the Notes shall be governed by and construed in accordance with
the laws of the State of Oklahoma, excluding any conflict-of-law rule or law
that might refer same to the laws of another jurisdiction. The parties hereto
specifically and non-exclusively submit
-53-
59
themselves to the personal jurisdiction of the state and federal courts in the
Commonwealth of Massachusetts, in connection with all controversies and
disputes arising out of or relating to the effect, interpretation, performance,
or breach of this Agreement, and, in that connection, the Company hereby
appoints the Secretary of State of the Commonwealth of Massachusetts as its
agent for service of process and any actions brought in the state or federal
courts in the Commonwealth of Massachusetts, arising out of or relating to the
effect, interpretation, performance, or breach of this Agreement.
10.5 References. All references herein to one gender shall include
the others. Unless otherwise expressly provided, all references to "Sections"
are to Sections of this Agreement and all references to "Exhibits" are to the
exhibits attached hereto, each of which is made a part hereof for all purposes.
SECTION 11. MISCELLANEOUS
11.1 Notices. (a) Except as otherwise provided in this Agreement or
in the Notes, all communications under this Agreement or under the Notes shall
be in writing and shall be mailed by first class mail, postage prepaid,
(i) if to you, in the manner set forth on Exhibit L, or at
such other address in Massachusetts as you have furnished the Company
by at least 15 days' prior notice, or
(ii) if to the Company, at Suite 600, Triad Center, 501
Northwest Expressway, Oklahoma City, Oklahoma 73118, Attention: Bob G.
Alexander,. or at such other address as it may have furnished by at
least 15 days' prior notice to you and all other holders of the Notes
at the time outstanding.
(b) Any notice so addressed and mailed by registered or certified
mail shall be deemed to be given when so mailed.
11.2 Survival. All warranties, representations, and covenants made
by the Company herein or on any certificate or other instrument delivered by it
under this Agreement shall
-54-
60
be considered to have been relied upon by you and shall survive the delivery to
you of the Notes and the Warrant regardless of any investigation made by you or
on your behalf. All statements in any such certificate or other instrument
shall constitute warranties and representations by the Company hereunder.
11.3 Successors and Assign. The Company may not assign any of its
rights or delegate any of its duties to any Person without your prior written
consent. Except as expressly set forth in Section 5 and this Section 11.3,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties, and the provisions of this Agreement are
intended to be for the benefit of all holders, from time to time, of the Notes,
and shall be enforceable by any such holder, regardless of whether an express
assignment to such holder of rights under this Agreement has been made by you
or your successor or assign.
11.4 Amendment and Waiver. (a) This Agreement may be amended, and
the observance of any term of this Agreement may be waived, with (and only
with) the written consent of the Company and the holders of at least 66-2/3% in
aggregate principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company, the Subsidiaries, the Partnerships, the Joint
Ventures, and the Affiliates); provided, however, that no such amendment or
waiver of any of the provisions of Sections 1 through 4 shall be effective as
to you unless consented to by you in writing; and provided further that without
the written consent of the holders of all the Notes at the time outstanding, no
such amendment or waiver shall (i) subject to Section 9.3, change the amount or
time of any payment of principal or the rate or time of payment of interest,
(ii) amend Section 9, or (iii) amend this Section 11.4.
(b) So long as any outstanding Notes are owned by you, the Company
shall not solicit, request, or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions of this Agreement or the Notes
unless each holder of the Notes (irrespective of the amount of Notes then owned
by it) shall be informed thereof by the Company and shall be afforded the
opportunity of considering the same and
-55-
61
shall be supplied by the Company with sufficient information to enable it to
make an informed decision with respect thereto. Executed or true and correct
copies of any waiver or consent effected pursuant to the provisions of this
Section 11.4 shall be delivered by the Company to each holder of outstanding
Notes forthwith following the date on which the same shall have been executed
and delivered by the holder or holders of the requisite percentage of
outstanding Notes. The Company shall not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee, or otherwise, to any holder of the Notes as consideration for or
as an inducement to entering into by any holder of the Notes of any waiver or
amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to the holders of
all of the Notes then outstanding.
(c) Any such amendment or waiver shall apply equally to all the
holders of the Notes and shall be binding upon each future holder of any Note
and upon the Company regardless of whether such Note shall have been marked to
indicate such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation not expressly amended or waived or impair any right
consequent thereon.
11.5. Knowledqe. Any statement in this Agreement that is expressed
in terms of the knowledge of the Company or any Subsidiary, Partnership, or
Joint Venture is intended to and shall be deemed to mean the actual knowledge
of the officers, directors, or managerial personnel of such Person with
respect to the matter in question, and the knowledge that any of such officers,
directors, or managerial personnel would obtain after making due investigation
into the matter in question.
11.6 Multiple Counterparts. Two or more counterparts of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
-56-
62
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement and
return such counterpart to the Company, whereupon this Agreement will become
binding between us in accordance with its terms effective as of June 1, 1988.
Very truly yours,
ALEXANDER ENERGY CORPORATION
BY: /S/ BOB G. ALEXANDER
--------------------
Name: Bob G. Alexander
--------------------
Title: President
--------------------
Accepted:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Margaret M. Stapleton
-------------------------
Name: Margaret M. Stapleton
-------------------------
Title: VICE PRESIDENT
-------------------------
-57 -
63
EXHIBIT A
10% SENIOR NOTE
$_________________Oklahoma City, Oklahoma ___________, 19__
FOR VALUE RECEIVED, Alexander Energy Corporation, an Oklahoma
corporation ("the Company"), promises and agrees to pay to___________________
_____________________ , a ________________________________________, or its
registered assign ("Holder") at the Bank of Boston, 100 Federal Street, Boston,
Massachusetts (or such other place as Holder may designate from time to time on
at least 30 days' notice to the Company), in coin or currency of the United
States of America that at the time of payment is legal tender for the payment
of public and private debts, the principal sum of_____________________________
AND______ /100THS DOLLARS ($_________), and to pay interest on the unpaid
principal balance thereof from the date of this Note at the rate of 10% per
annum, such interest to be payable semi-annually on the last day of June and
December in each year commencing with December 31, 1988, and continuing until
the entire principal balance thereof is paid. The rate of interest set forth
above shall be computed on the basis of a 365-day or 366-day year, as the
case may be. This Note, together with all accrued unpaid interest, shall be
paid June 30, 1998, provided, however, that mandatory prepayments of principal
shall be due and payable in four installments of _____________________________
AND ________ /100THS DOLLARS ($___________) each commencing June 30, 1994, and
continuing on June 30 each year thereafter through and including June 30, 1997;
provided, however, that the amount of such prepayment due June 30, 1997, under
this Note and all other 10% Secured Notes issued pursuant to the Note Agreement
(as hereinafter defined) shall be reduced by an amount equal to the sum of the
prepayments (if any) made pursuant to the Note Agreement and if such sum
exceeds $1,000,000, such excess shall be applied to reduce the mandatory
prepayments due pursuant to this Note and such other Notes in like fashion in
reverse chronological order.
Each payment made by the Company under this Note shall be made in
federal or other immediately available funds before 12:00 noon, Boston time, on
the date that such payment
64
or prepayment is required to be made. Any payment received and accepted by
Holder after such time shall be considered for all purposes (including the
calculation of interest, to the extent permitted by law) as having been made on
the next following Business Day.
If the date for any payment hereunder falls on a day that is not a
Business Day, then for all purposes of this Note the same shall be deemed to
have fallen on the next preceding Business Day.
The Company and each co-maker, guarantor, accommodation party,
endorser, or other person or entity liable for the payment or collection of
this Note expressly waive demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, bringing of suit
and diligence in taking any action to collect amounts called for hereunder and
in the handling of property at any time existing as security in connection
herewith, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder or in connection with any right, lien, interest or
property at any and all times had or existing as security for any amount called
for hereunder.
This Note is issued pursuant to and shall have the benefit of a Note
Agreement between the Company and Holder, dated as of June 1, 1988. Reference
is made to said Note Agreement for provisions regarding acceleration,
additional mandatory prepayments, payment of attorneys' fees, disbursements,
expenses, and all other purposes.
Except as provided in such Note Agreement and except for the mandatory
prepayments described herein, this Note may not be prepaid in whole or in part
at any time.
This Note is a registered note, and, as provided in the Note
Agreement, is transferable on the note register of the Company upon notice to
the Company accompanied by a written instrument of transfer reasonably
satisfactory to the Company duly executed by, or on behalf of, the registered
holder hereof. The Company may treat the person whose name appears in the note
register as the owner hereof for the purpose of receiving payment as herein
provided.
-2-
65
It is expressly stipulated and agreed to be the intention of Holder
and the Company to comply at all times with applicable laws governing the
maximum rate or amount of interest payable on or in connection with this Note.
Accordingly, if any of the transactions contemplated hereby would be usurious
under applicable law now or hereafter governing the interest payable hereunder
(including applicable United States federal law or applicable state law, to the
extent not preempted by United States federal law), then, in that event,
notwithstanding anything to the contrary in this Note or any other agreement
entered into in connection with or as security for this Note, it is agreed as
follows: (x) the aggregate of all consideration that constitutes interest
under applicable law that is contracted for, charged, taken, reserved, or
received under this Note or under any of the other aforesaid agreements or
otherwise in connection with this Note under no circumstances shall exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited on this Note by the holder thereof (or if such Note shall have been
paid in full, refunded to the Company); and (y) in the event that maturity of
this Note is accelerated by reason of an election by the holder thereof
resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment or conversion, then such consideration that
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this Note or
otherwise shall be cancelled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited on this Note (or
if this Note shall have been paid in full, refunded to the Company, and the
provisions of this Note and any other agreements entered into in connection
with or as security for such Note shall immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced accordingly,
without the necessity of the execution of any new document, so as to comply
with the then applicable law. Determination of the rate of interest for
purposes of determining whether this transaction is usurious under any
applicable laws, to the full extent permitted by applicable law, shall be made
by amortizing, prorating, allocating, and spreading throughout the full stated
term hereof until payments in full, all sums at any time contracted for,
charged, taken, reserved, or received from the Company for the use,
forbearance, or detention of money in connection herewith.
-3-
66
As used in this Note, the term "Business Day" means any day other than
a Saturday, Sunday, or legal holiday for commercial banks under the laws of the
Commonwealth of Massachusetts or any executive order issued thereunder. This
Note has been made in Oklahoma City, Oklahoma, and the Company and Holder agree
that this Note shall be governed by and construed in accordance with the laws
of the State of Oklahoma, excluding any conflict-of-law rule or law that might
refer same to the laws of another jurisdiction. The Company and Holder
specifically and non-exclusively submit themselves to the personal jurisdiction
of the state and federal courts in the Commonwealth of Massachusetts, in
connection with all controversies and disputes arising out of or relating to
the effect, interpretation, performance, or breach of this Note, and, in that
connection, the Company hereby appoints the Secretary of State of the
Commonwealth of Massachusetts as its agent for service of process and any
actions brought in the state of federal courts in the Commonwealth of
Massachusetts , arising out of or relating to the effect, interpretation,
performance, or breach of this Note.
ALEXANDER ENERGY CORPORATION
By: /s/ Bob G. Alexander
--------------------
Name: Bob G. Alexander
--------------------
Title: President
--------------------
-4-
67
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED
EXCEPT IN COMPLIANCE WITH SUCH LAWS.
Warrant to Purchase 670,000 Shares
Void after 5:00 p.m., Oklahoma City, Oklahoma Time on December 31, 1993
ALEXANDER ENERGY CORPORATION
Stock Purchase Warrant
June 1, 1988
THIS CERTIFIES THAT JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(the "Holder") is entitled to purchase from Alexander Energy Corporation, an
Oklahoma corporation (the "Company"), at the price and during the period
hereinafter specified, up to 670,000 shares of the Company's $0.01 per share par
value Common Stock ("Common Stock"), subject to adjustment as herein provided,
upon the terms and conditions set forth herein. This Warrant is issued pursuant
to that certain Investment Agreement (the "Agreement") dated June 1, 1988
between the Company and the Holder.
1. Warrant Price. This Warrant shall be exercisable by the
Holder, in whole or in part, at the price (the "Warrant Price") of $1.00 per
share, subject to adjustment as herein provided.
2. Duration. This Warrant shall expire and be of no further
force and effect, and the Holder shall have no right to purchase any shares
hereunder, after 5:00 p.m. Oklahoma City, Oklahoma, time on December 31, 1993.
3. Exercise of Warrant. This Warrant may be exercised at any
time and from time to time within the period above specified, in whole or in
part, by (a) the surrender of this Warrant (with a properly executed counterpart
of the Purchase Form annexed hereto) at the Company's office (or
68
such other office or agency of the Company as it may designate by notice of at
least five days (other than Saturdays, Sundays, or legal holidays under the laws
of the Commonwealth of Massachusetts) in writing to the Holder); and (b) payment
to the Company of an amount equal to the Warrant Price multiplied by the number
of shares of Common Stock specified in the appropriate Purchase Form. This
Warrant shall be deemed to have been exercised, in whole or in part to the
extent specified in the Purchase Form, immediately prior to the close of
business on the date this Warrant is surrendered and payment and delivery of the
appropriate agreement is made in accordance with the foregoing provisions of
this Section 3, and the person or persons in whose name or names the
certificates for shares of Common Stock shall be issuable upon such exercise
shall thereupon be deemed the holder or holders of record of such Common Stock
as of that time and date. The certificates for the Common Stock so purchased
shall be delivered to the Holder within a reasonable time, not exceeding ten
days (other than Saturdays, Sundays, or legal holidays under the laws of the
Commonwealth of Massachusetts), after this Warrant shall have been so
exercised. The certificate shall bear a legend regarding the unregistered
nature of those shares. At the time any Common Stock is delivered pursuant to
the preceding sentence, the Holder shall be entitled to receive a new Warrant
identical in all respects hereto for the unexercised portion (if any) of this
and any succeeding Warrant.
4. Holder's Put Option. At any time and from time to time after
December 31, 1992 and prior to 5:00 p.m., Oklahoma City, Oklahoma time on
December 31, 1993, the Holder, at its option and pursuant to the terms of this
Section 4, may sell and the Company agrees to purchase, all or any portion of
this Warrant not theretofore exercised or, theretofore purchased by the Company
pursuant to the Warrant Call Option (hereafter defined) for a purchase price
(the "Warrant Put Consideration") equal to $3.33 (adjusted in the same fashion
as the Warrant Price from time to time may be adjusted pursuant to Sections 7
and 8, but with $3.33 substituted for the Warrant Price of $1.00 (as previously
adjusted, if applicable) each place it appears) multiplied by the number of
shares of Common Stock represented by this Warrant with respect to which such
option is to be exercised (such option is herein referred to as the "Warrant Put
Option"). The Holder may, upon 60 days' written notice, exercise the Warrant Put
Option by surrendering this Warrant (with a
-2-
69
properly executed counterpart of the Warrant Put Form annexed hereto) at the
Company's office or such other office or agency of the Company as it may
designate by notice of at least five days (other than Saturdays, Sundays, or
legal holidays under the laws of the Commonwealth of Massachusetts) in writing
to the Holder. Contemporaneously with the surrender by the Holder of this
Warrant and the Warrant Put Form, the Company shall (a) pay to the Holder at the
Bank of Boston, 100 Federal Street, Boston Massachusetts (or such other place as
the Holder may designate from time to time on at least five days' notice to the
Company), in federal or other immediately available funds available before 12:00
noon, Boston, Massachusetts, time on the date of such surrender, the Warrant Put
Consideration and (b) shall deliver to the Holder a new Warrant identical in all
respects hereto for the portion (if any) of this and any succeeding Warrant not
theretofore (i) exercised by the Holder, (ii) sold to a third party, or (iii)
sold to the Company pursuant to an exercise of the Warrant Put Option. The
transfer of this Warrant by the Holder pursuant to the terms of this Section 4
shall be without representation or warranty of any kind, express or implied
(except for a warranty of title free and clear of encumbrances). Anything herein
to the contrary notwithstanding, the Holder's right to exercise the Warrant Put
Option and the Company's obligation to purchase the Warrant shall be subject to
and limited by the provisions of the Oklahoma General Corporation Act and the
terms of the Note Agreement.
5. Company's Call Option. At any time and from time to time
prior to December 31, 1993, if the daily closing price of the Common Stock as
reflected by the National Association of Securities Dealers Automated Quotations
system bid and asked quotations as published in the Wall Street Journal
(Southwest edition) exceeds $6.00 per share (adjusted in the same fashion as the
Warrant Price from time to time may be adjusted pursuant to Sections 7 and 8,
but with $6.00 substituted for the Warrant Price of $1.00 (as previously
adjusted, if applicable) each place it appears) for 90 consecutive trading days,
the Company, at its option and pursuant to the terms of this Section 5, may
purchase, and the Holder agrees to sell, this Warrant (to the extent not
theretofore exercised) for a purchase price (the "Warrant Call Consideration")
equal to $3.33 (adjusted in the same fashion as the Warrant Price from time to
time may be adjusted pursuant to Sections 7 and 8 but with $3.33 sub-
-3-
70
stituted for the Warrant Price of $1.00 (as previously adjusted, if applicable)
each place it appears) multiplied by the number of shares then represented by
this Warrant (such option is herein referred to as the "Warrant Call Option").
The Company may, upon 60 days' written notice, exercise the Warrant Call Option
by paying to the Holder at the Bank of Boston, 100 Federal Street, Boston,
Massachusetts (or such other place as the Holder may designate from time to time
on at least five days' notice to the Company), in federal or other immediately
available funds available before 12:00 noon, Boston, Massachusetts, time on the
date the Company wishes to consummate such purchase, the Warrant Call
Consideration. Contemporaneously with its receipt of the Warrant Call
Consideration, the Holder shall deliver this Warrant to the Company at its
office or such other office or agency of the Company as it may designate by
notice of at least five days (other than Saturdays, Sundays, or legal holidays
under the laws of the Commonwealth of Massachusetts) in writing to the Holder.
The transfer of this Warrant by the Holder pursuant to the terms of this Section
5 shall be without representation or warranty of any kind, express or implied
(except for a warranty of title free and clear of encumbrances).
6. No Rights of Stockholder. This Warrant shall not entitle any
Holder to any voting rights or other rights as a stockholder of the Company,
either at law or in equity.
7. Adjustments of and Number of Shares and Warrant Price. The
number of shares of Common Stock purchasable pursuant to this Warrant and the
Warrant Price shall be subject to adjustment from time to time as follows:
(a) In case the Company at any time shall issue or sell any
shares of Common Stock (including shares held in the Company's treasury but not
including shares issued or distributed as a result of the exercise of this
Warrant) for a consideration per share less than the Warrant Price in effect
immediately prior to the issuance or sale of such shares of Common Stock, or
without consideration, then, and thereafter successively upon each such issuance
or sale, the Warrant Price at the time of such issuance or sale shall forthwith
be reduced to a price (calculated to the nearest full cent) determined by
dividing (i) an amount equal to the sum of (x) the product of the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
-4-
71
multiplied by the Warrant Price in effect immediately prior to such issuance or
sale, plus (y) the consideration, if any, received by the Company upon such
issuance or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
(b) For the purposes of any computation to be made in accordance
with the provisions of Section 7(a), the following provisions shall be
applicable:
(i) in case of the issuance or sale of shares of Common Stock for
cash, the consideration received by the Company therefor shall be deemed to be
the net cash proceeds received by the Company for such shares after deducting
commissions or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with, the issuance or sale of such
shares;
(ii) in case of the issuance or sale of shares of Common Stock
for a consideration other than cash or a consideration a part of which shall be
other than cash, the amount of the consideration other than cash received by the
Company for such shares shall be deemed to be the value as determined by an
independent appraiser selected by the Board of Directors of the Company with the
approval of the Holder the expense of such appraiser to be borne equally by the
Company and the Holder;
(iii) in case of the issuance of shares of Common Stock as a stock
dividend or stock split, the shares shall be deemed to have been issued for no
consideration at the close of business on the dividend or split record date, but
if no dividend or split record date is fixed, the first day (other than a
Saturday, Sunday, or legal holiday under the laws of the Commonwealth of
Massachusetts) during which the transfer books of the Company shall be closed in
connection with the dividend or split shall be treated as the record date; and
(iv) the number of shares of Common Stock at any time outstanding
shall not include any shares then owned or held by or for the account of the
Company or any shares deliverable in respect of this Warrant until
-5-
72
after the actual issuance of such shares, but shall include the aggregate number
of shares deliverable in respect of the options, rights and convertible and
exchangeable securities referred to in Section 7(c).
(c) In case the Company at any time shall issue options or warrants or
rights to subscribe for shares of Common Stock (including shares now or
hereafter held in the Company's treasury), or issue any securities convertible
into or exchangeable for shares of Common Stock, for a consideration per share
less than the Warrant Price in effect immediately prior to the issuance of such
options or rights or convertible or exchangeable securities, or without
consideration, the Warrant Price as of the date of such issuance shall be
reduced to a price determined by making a computation in accordance with the
provisions of Section 7(a); provided, however, that
(i) the aggregate maximum number of shares of Common Stock
deliverable under such options or rights shall be considered to have been
delivered at the time such options or rights were issued for a consideration
equal to the minimum purchase price per share of such Common Stock provided for
in such options or rights, plus the consideration, if any, received by the
Company for such options or rights;
(ii) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such exchangeable or
convertible securities shall be considered to have been delivered at the time of
issuance of such exchangeable or convertible securities, and for a consideration
equal to the consideration received by the Company for such exchangeable or
convertible securities deducting therefrom commissions or other expenses paid or
incurred by the Company for any underwriting of, or otherwise in connection
with, the issuance of such exchangeable or convertible securities, plus the
minimum consideration, if any, to be received by the Company upon the conversion
or exchange thereof; and
(iii) on the expiration of such options or rights, or the
termination of such rights to convert or exchange, the Warrant Price as adjusted
as a result of the issuance of such options or rights shall be read-
-6-
73
justed to such price as would have resulted had the adjustment made upon the
issuance of such options, rights or convertible or exchangeable securities
been made upon the basis of (x) the delivery of only the number of shares of
Common Stock of the Company actually delivered upon the exercise, conversion
or exchange of such securities and (y) the receipt by the Company only the
consideration actually received by it upon the exercise, conversion or exchange
of such options or rights, plus the consideration, if any, received by it for
the options or rights so exercised, or, as the case may be, the consideration
received by the Company for such securities so converted or exchanged, after
deducting therefrom commissions or other expenses paid or incurred by it for
any underwriting of, or otherwise in connection with, the issuance of such
securities, plus only the consideration, if any, actually received by it upon
the conversion or exchange thereof.
(d) Upon each adjustment of the Warrant Price pursuant to this
Section, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, pursuant to this Warrant, at the then
current Warrant Price the number of shares of Common Stock, calculated to the
nearest full share, obtained by multiplying the number of shares Common Stock
specified at the head hereof by $1.00 and dividing the product so obtained by
the Warrant Price then in effect.
(e) Notwithstanding any other provision of this Section, no
adjustment shall be made in the Warrant Price or the number of shares of Common
Stock purchasable hereunder on account of options granted to the Company's
employees not aggregating in excess of 600,000 shares.
8. Reorganization Merger, etc. If as a result of any
reorganization, merger, consolidation, liquidation, recapitalization,
reclassification or stock split, combination of shares or stock dividend payable
with respect to such Common Stock, or any other reason, the outstanding shares
of Common Stock of the Company at any time shall be increased or decreased or
changed into or exchanged for a different number or kind of share or other
security of the Company or of another corporation, appropriate adjustments in
the number and kind of such securities then subject to this Warrant and the
Warrant Price therefor shall be made, effective as of the
-7-
74
date of such occurrence, so that the position of the Holder upon exercise of its
Warrant will be the same as it would have been had it exercised and owned,
immediately prior to the occurrence of such events, the Common Stock subject to
this Warrant.
9. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Oklahoma, excluding any
conflict-of-law rule or law that might refer same to the laws of another
jurisdiction. The Company and the Holder specifically and non-exclusively submit
themselves to the personal jurisdiction of the state and federal courts in the
Commonwealth of Massachusetts, in connection with all controversies and disputes
arising out of or relating to the effect, interpretation, performance, or breach
of this Warrant, and, in that connection, the Company hereby appoints the
Secretary of State of the Commonwealth of Massachusetts as its agent for service
of process and any actions brought in the state or federal courts in the
Commonwealth of Massachusetts, arising out of or relating to the effect,
interpretation, performance, or breach of this Warrant.
10. Transferability and Survival. Subject to the requirements of
federal or state securities laws, this Warrant shall be fully transferable by
the Holder to (a) any subsidiary, parent, or affiliate of the Holder, or (b) any
other person upon ten days' written notice to the Company. Any other transfer is
prohibited; provided, however, that the Holder shall always have control of its
assets. The Warrant Put Option shall be exercisable by and shall inure to the
benefit of the transferees, successors, and assigns of the Holder to the full
extent they would be exercisable if any such transferee, successor or assign was
a party to this Agreement. Notwithstanding anything in this Agreement to the
contrary, the Warrant Call Option shall be void and of no further force or
effect upon and to the extent of a transfer of a portion of this Warrant to a
third party, provided that such transfer occurs prior to the receipt by the
Holder of notice from the Company of its intent to exercise the Warrant Call
Option as set forth in Section 3.
11. Entire Aqreement. This Warrant and the Agreement constitute
the entire agreement of the Holder and the Company with respect to the subject
matter hereof and may not be changed or modified in any way except by written
instrument
-8-
75
executed by both the Holder and the Company.
12. Notices. If any notice shall be required hereunder, it shall
be in writing and delivered personally or by first-class United States Mail as
follows:
If to the Holder:
As provided in the Agreement
If to the Company:
Alexander Energy Corporation
Triad Center
501 Northwest Expressway, Suite 600
Oklahoma City, Oklahoma 73118
Attention: President
All notices shall be effective upon receipt.
13. Successors and Assigns. The provisions of this Warrant shall
be binding upon and inure to the benefit of the Holder, the Company, and their
respective successors and assigns to the extent permitted herein.
IN WITNESS WHEREOF, Alexander Energy Corporation has caused this
Warrant to be signed by its duly authorized officers this first day of June,
1988.
ALEXANDER ENERGY CORPORATION
By: /s/ Bob G. Alexander
Name: Bob G. Alexander
Title: President
ATTEST:
/s/ Sue Barnard
Sue Barnard, Secretary
76
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
to the extent of _____ shares of Alexander Energy Corporation $.__ Par Value
Common Stock, and herewith makes payment in full of the applicable Warrant Price
in the amount of $_____, and the undersigned further agrees to be bound by the
terms of the foregoing Warrant.
DATED:________________________________________________, 19__.
________________________________
Name of Holder
________________________________
Address of Holder
77
WARRANT PUT FORM
(To be signed only upon exercise of Warrant Put Option)
The undersigned, the holder of the foregoing Warrant, hereby
irrevocably elects to exercise the Warrant Put Option as set forth in such
Warrant to the extent of _____ shares of Alexander Energy Corporation $.__
Par Value Common Stock.
DATED:_________________, 19__.
___________________________________
Name of Holder
___________________________________
Address of Holder
78
EXHIBIT C
INVESTMENT AGREEMENT
Dated as of June 1, 1988
by and between
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
and
ALEXANDER ENERGY CORPORATION
79
TABLE OF CONTENTS
I. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
II. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF HANCOCK
2.1 Investment Intent........................ 2
2.2 Limitation on Transfer................... 2
2.3 Restrictive Legend....................... 2
2.4 Corporate Authority...................... 3
2.5 Brokers and Finders...................... 3
III. COVENANTS OF THE COMPANY
3.1 Compliance with Securities Laws.......... 4
3.2 SEC Filings.............................. 4
IV. PUT AND CALL OPTIONS
4.1 Hancock's Put Option..................... 4
4.2 Company's Call Option.................... 5
4.3 Adjustment............................... 6
V. CERTAIN RIGHTS AS SECURITIES HOLDER
5.1 Registration Rights...................... 6
5.2 Reports.................................. 13
5.3 NASDAQ Trading........................... 14
5.4 Assignment............................... 14
VI. GENERAL PROVISIONS
6.1 Representations, Warranties, and
Covenants................................ 14
6.2 No Third-Party Beneficiaries;
Assignability; Binding Nature............ 15
6.3 Entire Agreement......................... 15
6.4 Partial Invalidity....................... 15
6.5 Notices.................................. 15
6.6 Further Assurances....................... 16
6.7 Rights Cumulative........................ 16
6.8 No Waiver................................ 16
6.9 Internal References...................... 16
6.10 Counterpart Execution.................... 17
6.11 Governing Law............................ 17
80
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement") is made and entered
into as of June 1, 1988, by and between JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY, a Massachusetts corporation ( "Hancock" ), and ALEXANDER ENERGY
CORPORATION, an Oklahoma corporation (the "Company").
WITNESSETH:
WHEREAS, contemporaneously with the execution hereof, the Company
has delivered to Hancock that certain Warrant of even date herewith (the
"Warrant") entitling Hancock and/or its permitted transferees thereunder, among
other things, to purchase up to 670,000 shares of common stock, $0.01 par value,
of the Company (the "Warrant Shares," including any other securities into which
such stock is converted pursuant to any merger, consolidation, stock split or
combination, or otherwise) at a price of $1.00 per share; and
WHEREAS, Hancock and the Company desire to set forth their
understanding with respect to certain matters relating to the Warrant, the
Warrant Shares, and other matters:
NOW, THEREFORE, the parties hereto have agreed and, by these
presents, do hereby agree as follows:
I. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce Hancock to enter into the transactions contemplated by
this Agreement and that certain Note Agreement of even date herewith by and
between the Company and Hancock (the "Note Agreement," and capitalized used
herein and not otherwise defined having the meanings given them in the Note
Agreement) the Company represents and warrants to Hancock that all the
representations and warranties of the Company under the Note Agreement, and all
Officers' Certificate delivered at the Closing, are true and correct.
81
II. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF HANCOCK
To induce the Company to enter into the transactions
contemplated hereby Hancock represents, warrants, and/or covenants (as
applicable) to the Company that:
2.1 Investment Intent. Hancock represents and warrants that it
is acquiring the Warrant and, to the extent purchased, the Warrant Shares, for
its own account and for the purpose of investment and not with a view to the
sale or distribution thereof; provided, however, that the disposition by Hancock
of its assets shall at all times remain within its control. In addition, Hancock
understands that the Warrant and, to the extent purchased, the Warrant Shares
have not been (and as of any given date may not have been) registered under the
1933 Act (the Company being under no obligation to effect such registration
except as provided in this Agreement) and that such shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
1933 Act and any applicable state securities law or is exempt from such
registration.
2.2 Limitation on Transfer. Hancock covenants and agrees
that it will not sell or otherwise dispose of the Warrant or, to the
extent purchased, the Warrant Shares in the absence of (a) registration under
the 1933 Act and applicable state securities laws, or (b) an opinion acceptable
in form to the Company from counsel reasonably satisfactory to the Company (it
being understood that counsel on Hancock's in-house legal staff is satisfactory
counsel) or an opinion of counsel to the Company, to the effect that no
registration is required for such disposition, or (c) as to the 1933 Act, a
"no-action" letter from the staff of the Securities and Exchange Commission to
the effect that such staff will not recommend any action to such commission if
such a disposition takes place without registration.
2.3 Restrictive Leqend. The certificates representing the
Warrant Shares shall have stamped or imprinted thereon or affixed thereto a
legend to the effect:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
-2-
82
SOLD , PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED In THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."
The Company agrees to the issuance of replacement certificates
without the foregoing legend for any Warrant Shares then owned by Hancock to the
extent and under the conditions permitted by paragraph (k) of rule 144 of the
Securities and Exchange Commission or any successor rule or regulation.
2.4 Corporate Authority. Hancock has, or will have at any time so
required, all necessary corporate power and authority to enter into this
Agreement and all other documents and instruments to be entered into pursuant
hereto and to perform all the obligations to be performed by it hereunder and
thereunder, including, without limitation, the purchase of the Warrants Shares,
if purchased. The execution, delivery, and performance of this Agreement and all
other documents and instruments to be entered into pursuant hereto have been, or
will be at any time so required, duly authorized by all requisite action on the
part of the officers, directors, and security holders of Hancock and each such
document or instrument is, or will be when so authorized, a valid and binding
obligation of Hancock, enforceable against Hancock in accordance with its terms.
2.5 Brokers and Finders. No person or firm has, or will have, any
right, interest, or valid claim against the Company or any Subsidiary,
Partnership, or Joint Venture because of any agreement or undertaking by Hancock
or any of its affiliates (as defined in the rules and regulations under the
1933 Act) or agents for any commission, fee, or other compensation as a result
of this transaction as a finder or broker or in any similar capacity as a result
of any act or omission by Hancock, any affiliate thereof (as defined above) or
anyone acting on behalf of Hancock or any such affiliate. Hancock agrees to
indemnify and hold harmless the Company, the Subsidiaries, the Partnerships, and
the Joint Ventures from and against any and all such commissions, fees, or other
compensation together with any and all claims, disputes, or
-3-
83
other losses or costs (including, without limitation, reasonable attorneys'
fees) arising from agreements or undertakings of Hancock or any of its
affiliates (as defined above) or agents.
III. COVENANTS OF THE COMPANY
For as long as Hancock or any person controlling, controlled by,
or under common control with Hancock shall own any common stock of the Company
or the Warrant shall be exercisable, the Company shall faithfully and punctually
perform the following covenants:
3.1 Compliance with Securities Laws. Neither the Company
nor any agent acting on its behalf will take any action that would
subject the offer or sale of the Warrant Shares, to the extent purchased, to the
provisions of section 5 of the 1933 Act or the comparable provisions of any
applicable state securities laws, or that would have the effect of preventing or
otherwise hindering the sale of such stock by Hancock.
3.2 SEC Filinqs. The Company shall make all filings
required by section 12(g) of the Securities Exchange Act of 1934, as
amended, that may be necessary or appropriate 'to permit Hancock or such other
Person to dispose of such stock under the provisions of rule 144 (other than
rule 144(k)) of the Securities and Exchange Commission.
IV. PUT AND CALL OPTIONS
4.1 Hancock's Put Option. At any time and, from time to
time after December 31, 1992, and prior to 5:00 p.m., Oklahoma City,
Oklahoma time on December 31, 1993, Hancock, at its option and pursuant to the
terms of this Section 4.1, may sell, and the Company agrees to purchase, all or
any of the shares of stock of the Company acquired pursuant to an exercise of
the Warrant and not theretofore purchased by the Company pursuant to the Stock
Call Option (hereafter defined) for a purchase price (the "Stock Put
Consideration") equal to $4.33 multiplied by the number of shares of stock to be
so sold and purchased (such option herein referred to
-4-
84
as the "Stock Put Option"). Hancock may, upon 60 days' written notice, exercise
the Stock Put Option by surrendering share certificates, duly endorsed in blank,
representing not fewer than the number of shares of stock that Hancock wishes to
sell to the Company at the Company's office or such other office or agency of
the Company as it may designate by notice of at least five days (other than
Saturdays, Sundays, or legal holidays under the laws of the Commonwealth
Massachusetts) in writing to Hancock. Contemporaneously with the surrender by
Hancock of such share certificates the Company shall (a) pay to Hancock at the
Bank of Boston, 100 Federal Street, Boston Massachusetts (or such other place as
Hancock may designate from time to time on at least five days' notice to the
Company), in federal or other immediately available funds available before 12:00
noon, Boston, Massachusetts time, on the date of such surrender, the Stock Put
Consideration and (b) shall deliver to Hancock certificates representing a
number of shares of stock equal to the difference (if any) between the number of
shares of stock represented by the share certificates surrendered to the Company
in connection with the exercise cf such Share Put Option and the number of
shares of stock sold to the Company pursuant to the exercise of such Stock Put
Option. The transfer of the shares of stock by Hancock pursuant to the terms of
this Section 4.1 shall be without representation or warranty of any kind,
express or implied (except for a warranty of title free and clear of
encumbrances). Anything herein to the contrary notwithstanding, Hancock's right
to exercise the Stock Put Option and the Company's obligation purchase shares of
stock of the Company pursuant thereto shall be subject to and limited by the
provisions of the Oklahoma General Corporation Act and the terms of the Note
Agreement.
4.2 Company's Call Option. At any time and from time to
time prior to December 31, 1993, if the daily closing price of the Common Stock
as reflected by the National Association of Securities Dealers Automated
Quotations system bid and asked quotations as published in the Wall Street
Journal (Southwest edition) exceeds $6.00 per share for 90 consecutive trading
days, the Company, at its option and pursuant to the terms of this Section 4.2,
may purchase, and Hancock agrees to sell, all but not fewer than all the shares
of stock of the Company acquired by Hancock pursuant to an
-5-
85
exercise of the Warrant for a purchase price (the "Stock Call Consideration")
equal to $4.33 multiplied by the number of shares of stock to be so purchased
and sold (such option is herein referred to as the "Stock Call Option"). The
Company may, upon 60 days' written notice, exercise the Stock Call Option by
paying to Hancock at the Bank of Boston, 100 Federal Street, Boston,
Massachusetts (or such other place as Hancock may designate from time to time on
at least five days' notice to the Company), in federal or other immediately
available funds available before 12:00 noon, Boston, Massachusetts time, on the
date the Company wishes to consummate such purchase, the Stock Call
Consideration. Contemporaneously with its receipt of the Stock Call
Consideration, Hancock shall deliver share certificates, duly endorsed in blank,
representing the shares to be purchased and sold to the Company at its office or
such other office or agency of the Company as it may designate by notice of at
least five days (other than Saturdays, Sundays, or legal holidays under the laws
of the Commonwealth of Massachusetts) in writing to Hancock. The transfer of the
shares of stock by Hancock pursuant to the terms of this Section 4.2 shall be
without representation or warranty of any kind, express or implied (except for a
warranty of title free and clear of encumbrances).
4.3 Adjustment. If an event of the type described in Section 8
of the Warrant shall occur following the issuance of any Warrant Shares,
the number of shares to be purchased and the $4.33 figure in Sections 4.1 and
4.2 shall be adjusted in the same manner as is described in Section 8 of the
Warrant.
V. CERTAIN RIGHTS AS SECURITIES HOLDER
5.1 Reqistration Riqhts. (a) Promptly (and in no event more than
60 days) after the written request of Hancock, the Company shall file a
registration statement under the 1933 Act covering all Registrable Common Shares
(as hereinafter defined) that Hancock desires to register and shall use its best
efforts to cause such registration statement to become effective as soon as
practicable. Such written request shall include a designation of the number of
Registrable Common Shares to be registered. The Company
-6-
86
shall not, however, be required to file a registration statement with respect to
fewer than 100,000 Registrable Shares, unless there are then fewer than 100,000
Registrable Shares outstanding. If such offering is to be underwritten, the
Company shall have the right to select the managing underwriters, subject to the
consent of Hancock, which shall not be unreasonably withheld. Except for and
subject to the rights, terms, and provisions contained in the Investment
Agreement (the "Energy Reserves Agreement") dated as of December 12, 1985, by
and between Energy Reserves, Inc., a Wyoming corporation ("Energy Reserves"),
and the Company, no other Person (including the Company) shall be entitled to
include any securities in any registration pursuant to this Section 5.1(a)
without the consent of Hancock. If a registration pursuant to this Section
5.1(a) is commenced but has not become effective or becomes effective but fails
to remain effective for such period not exceeding nine months, as Hancock may
specify, the parties hereto agree that, for purposes of this Section 5.1(a),
such registration shall be deemed not to have taken place and Hancock shall
remain entitled to demand such registration pursuant to this Section 5.1(a);
provided, however, that such right shall be deemed to have been satisfied as of
the date on which a registration made pursuant to and in accordance with this
Section 5.1(a) has been effective for such specified period. In the event that
Energy Reserves notifies the Company of its election to exercise its
registration rights under the Energy Reserves Agreement within 30 days after its
receipt of the Company's notice of a proposed filing of a registration statement
requested by Hancock under this Section 5.1(a), and the managing underwriters
advise the Company that in their opinion the inclusion of the total number of
shares requested for inclusion would materially and adversely affect the
distribtion, only that number of shares that in the underwriter's opinion would
not have such an effect shall be included in the registration statement. In the
latter event, Energy Reserves and Hancock shall be entitled to include shares in
the registration statement in the ratio that the number of shares owned by each
that are entitled to registration bears to the aggregate number of shares owned
by both of them which are entitled to registration. Notwithstanding the
foregoing, if the number of shares that Hancock could include would be reduced
as aforesaid, Hancock may withdraw its demand with the effect that such demand
-7-
87
shall be deemed to not have been made. The Company shall not be required to
effect more than two registrations pursuant to this Section 5.1(a); provided,
however, if after Hancock has received two demand registrations under this
Section 5.1(a) it has not disposed of all of its Registrable Common Shares,
Hancock shall have one additional demand registration pursuant to this Section
5.1(a) but shall pay a percentage of the costs thereof that the Company
otherwise would pay pursuant to Section 5.1(f)(iii) equal to the ratio that the
number of Registrable Common Shares that were included in Hancock's second
demand registration bears to the total number of Registrable Common Shares that
Hancock requested to be registered in such registration.
(b) If the Company at any time shall propose to register any of
its securities under the 1933 Act for its own account or the account of any
security holders (other than a registration pursuant to Section 5.1(a) or any
registration relating to a merger or other business combination transaction), it
shall promptly give written notice to Hancock of its intention to do so. Subject
to Section 5.1(a) and (c), the Company shall include in such registration such
Registrable Common Shares as Hancock shall specify in a written notice delivered
to the Company within 30 days after its receipt of the Company's notice of the
proposed filing of the registration statement; provided, however, that the
Company may withdraw or cease proceeding with the registration of its securities
for any reason without liability to Hancock. Nothing contained in this Section
5.1(b) shall be construed to limit or otherwise prejudice the registration
rights provided Hancock in Section 5.1(a); provided, however, that if such
registration shall be made at the request of Energy Reserves and if, pursuant to
Section 5.1(c) and the similar provisions in. the Energy Reserves Agreement, the
total number of shares that Energy Reserves requested to be registered shall not
be registered, Hancock shall be required to pay, on the exercise of its second
registration pursuant to Section 5.1(a), a percentage of the cost thereof that
the Company otherwise would pay pursuant to Section 5.1(f)(iii) equal to the
ratio of the number of Registrable Common Shares that were included in such
registration requested by Energy Reserves bears to the total number of
Registrable Common Shares that Hancock requested to be registered.
-8-
88
(c) If the proposed registration of securities by the Company
referred to in Section 5.1(b) is an underwritten registration and the managing
underwriters advise the Company in writing that, in their opinion, the amount of
Registrable Common Shares proposed to be included in such registration
statement, together with any shares proposed for inclusion by Energy Reserves,
is likely to materially and adversely affect the distribution of the securities
originally proposed to be registered, Hancock and Energy Reserves shall be
entitled to include in such registration statement only such aggregate number of
shares as would not, in the opinion of such underwriters, materially and
adversely affect the distribution. In the latter event, Energy Reserves and
Hancock shall be entitled to include such aggregate number of shares in the
registration statement in the ratios that the number of share owned by each that
are entitled to registration bears to the aggregate number of shares owned by
both of them that are entitled to registration.
(d) If any proposed registration would, in the opinion of the
Board of Directors of the Company, determined reasonably and in good faith,
substantially and adversely affect the business of the Company or a transaction
or negotiation pending at the time (provided a written notice specifying the
reasons for such judgment by the Board of Directors is promptly delivered by the
Company to Hancock), then the Company may defer, for a period not exceeding 120
days from the date of first request for registration by Hancock, the filing of a
registration statement with respect to such Registrable Common Shares; provided,
however, that, in the case of a registration right afforded by Section 5.1(b),
the Company shall not be obligated to file such a deferred registration
statement for any transferee who is not an affiliate (as that term is defined in
the rules and regulations under the 1933 Act) of Hancock unless such transferee
has requested registration of at least 100,000 shares of Registrable Common
Shares.
(e) For purposes hereof, the term "Registrable Common Shares"
shall include all shares of Warrant Stock purchased by Hancock regardless of
whether such shares of Warrant Stock have been sold or transferred, except that
such term shall not include any shares of common stock of the Company that
-9-
89
previously have been sold or transferred pursuant to an effective registration
statement or pursuant to rule 144 of the Securities and Exchange Commission.
(f) Registration of Registrable Common Shares pursuant to Section 5.1
(a) or (b) shall be subject to the following:
(i) The Company shall file such amendments and supplements to the
registration statement and the related prospectus and take such other action as
may be necessary to keep the registration statement effective and to comply with
the 1933 Act for such period, not exceeding nine months (or two years in the
case of shelf registration pursuant to rule 415 of the Securities and Exchange
Commission) from the original effective date of the registration statement, as
Hancock may request.
(ii) The Company shall take such action under the securities laws
of such states as Hancock reasonably shall request; provided, however, that the
Company shall not be required by this Section 5.1(f)(ii) to qualify to do
business as a foreign corporation, or to file any general consent to service of
process, in any state.
(iii) Except to the extent prohibited by applicable state
securities laws or as provided in the last sentence of Section 5.1(a), all
expenses incurred by the Company in complying with this Article V, including,
without limitation, all registration and filing fees, including necessary blue
sky filing fees and expenses, printing expenses, and fees and disbursements of
counsel and auditors for the Company, shall be paid by the Company; provided,
however, that any other underwriting expenses, including, without limitation,
fees of underwriter's counsel and underwriter's selling expenses, brokerage
fees, discounts, or commissions, shall be prorated among all selling
shareholders and the Company as issuer. Applicable insurance or stock transfer
taxes incurred by Hancock in connection with transfers pursuant to such
registration, or any fees of counsel to Hancock, shall be paid by Hancock.
(iv) The Company shall not be required to effect
registration with respect to a distribution of the
-10-
90
Registrable Common Shares pursuant to Section 5.1(a) or (b) if Hancock shall
not have provided such information and executed such documents (including an
underwriting agreement containing representations, warranties, conditions, and
indemnification provisions customarily included in underwriting agreements for
similar offerings then used by the managing underwriter, if any, for the sale
of those Registrable Common Shares as are to be registered) as may reasonably
be required by the managing underwriter.
(v) The Company shall not be required to furnish any
annual reports, filings with the Securities and Exchange Commission, or audited
financial statements at the request of Hancock other than those statements
customarily prepared at the end of its fiscal quarter or year or otherwise
prepared pursuant to a registration under Section 5.1(b), unless Hancock agrees
to reimburse the Company for the out-of-pocket costs incurred by the Company in
the preparation of such other reports, filing, and statements.
(vi) the Company shall indemnify and hold harmless
Hancock, each Person who under the 1933 Act is deemed a controlling person of
Hancock, and each underwriter of Hancock against any losses, claims, damages,
or liabilities to which Hancock or any such controlling person or underwriter
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) shall arise out
of or be based upon any untrue or allegedly untrue statement of any material
fact contained in the registration statement, any related prospectus or
preliminary prospectus, or any amendment or supplement to the registration
statement or any prospectus or preliminary prospectus, or upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse any legal or other expenses reasonably incurred by Hancock or any
such controlling person or underwriter in connection with investigating or
defending against any such loss, claim, damage, liability, or action;
provided, however, that the Company
-11-
91
shall not be liable to Hancock or any such controlling person or underwriter for
any losses, claims, damages, liabilities, or actions insofar as the same shall
arise out of or be based upon any such untrue statement or omission made in
reliance upon and conformity with written information furnished by Hancock or
any such controlling person or underwriter seeking indemnification hereunder to
the Company for use in the registration statement, prospectus, preliminary
prospectus, amendment, or supplement. Hancock shall indemnify and hold harmless
the Company, each Person who under the Act is deemed a controlling person of the
Company, and each underwriter of the Company against any losses, claims,
damages, or liabilities to which the Company or any such controlling person or
underwriter may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) shall
arise out of or be based upon any untrue or allegedly untrue statement of any
material fact contained in the registration statement, any related prospectus or
preliminary prospectus, or any amendment or supplement to the registration
statement or any prospectus or preliminary prospectus, or upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but insofar and only
insofar as the same shall arise out of or be based on any untrue statement or
omission made in reliance on and in conformity with information furnished by
Hancock to the Company in writing for use in such document, and shall reimburse
any legal or other expenses reasonably incurred by the Company or any such
controlling person or underwriter in connection with investigating or defending
against any such loss, claim, damage, liability, or action.
(vii) Hancock shall not be entitled to request
registration or inclusion in a registration of its Registrable' Common Stock
pursuant to Section 5.1(a) or (b) at any time after all Registrable Common
Shares have been covered by a registration statement or registration statements
filed and effective under the 1933 Act for such period, not exceeding nine
months, as Hancock may specify.
-12-
92
(g) If the Securities and Exchange Commission shall adopt new
procedures or forms for public resales of restricted securities, the Company
shall take such action as reasonably may be requested by Hancock to permit
public resales of the Registrable Common Stock pursuant to such new procedures
or forms.
(h) If the Company at any time in the future should list its
common stock on a securities exchange, to the extent permitted by such
exchange's rules, the Company shall include all shares of common stock of the
Company owned by Hancock in such listing at no cost to Hancock.
5.2 Reports. (a) As long as Hancock or any Person controlling,
controlled by, or under common control with Hancock is the record holder of the
Warrant or any Warrant Shares, the Company shall furnish to such holder,
within 120 days after the end of each fiscal year, an annual report and a
copy of its Form 10-K as filed with the Securities and Exchange Commission
for such period. In addition, the Company shall furnish to such holder, within
45 days after the end of each fiscal quarter ending in June, September, and
December, a copy of its Form 10-Q as filed with the Securities and Exchange
Commission for such period.
(b) The Company shall permit Hancock and its affiliates (as that
term is defined in the rules and regulations under the 1933 Act) or their
designated representatives, and shall permit Hancock's transferees who are not
affiliates of Hancock and who own at least 134,000 shares of Warrant Shares,
full access during normal business hours to the books and records of the Company
and the Affiliates. Hancock shall not, and any transferee shall agree that it
will not, disclose or divulge to any Person (other than its employees, auditors,
counsel, or other consultants) any written information furnished by the Company
that is expressly identified as confidential or proprietary in writing at the
time of its delivery to Hancock or the transferee and will keep confidential any
such information; provided, however, that Hancock or the transferee shall not be
obligated to treat as confidential any information (a) that is or becomes
publicly available or readily ascertainable from public sources or that Hancock
or the transferee receives from a
-13-
93
third party (other than the Company's employees, auditors, or counsel), (b) as
may be required or appropriate in any report, statement, or testimony submitted
to any municipal, state, or federal regulatory body having or claiming to have
jurisdiction over Hancock or the transferee or to the National Association of
Insurance Commissioners or similar organizations or their successors, (c) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) to the extent that Hancock or the transferee
believes it appropriate to comply with any law, order, regulation, or ruling
applicable to it, and (e) to the extent that Hancock or the transferee believes
it appropriate to disclose such information to a prospective transferee, but
only to the extent that such prospective transferee shall agree to be subject to
the same terms and conditions described in this sentence and that such
disclosure is not in violation of applicable securities laws.
5.3 NASDAQ Trading. Neither the Company or any Affiliate
nor any director, officer, or employee of the Company, shall perform or
allow any act to be performed that would cause the common stock of the Company
to cease to be quoted by the National Association of Securities Dealers
Automated Quotations system.
5.4 Assignment. Subject to the limitation on the right of access
by any transferee set forth in Section 5.2(b), Hancock may transfer or assign
all or any part of its rights under this Article V to any transferee or assignee
of the Warrant Shares.
VI. GENERAL PROVISIONS
6.1 Representations, Warranties, and Covenants. (a) All
representations, warranties, and covenants herein shall survive the closing of
the issuance of the Warrant and the purchase of any Warrant Shares.
(b) Each party hereto hereby agrees to defend, indemnify, and
hold harmless each other party against and in respect of (i) all liability,
loss, damage, or deficiency resulting from any misrepresentation or breach of
warranty by the indemnifying party in this Agreement, or in any
-14-
94
certificate or other instrument furnished by or on behalf of the indemnifying
party pursuant to this Agreement, or from noncompliance by the indemnifying
party with any provisions of this Agreement, and (ii) all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, and expenses
(including, without limitation, attorneys' fees) incident to any of the
foregoing.
6.2 No Third-Party Beneficiaries; Assignability; Binding
Nature. Nothing in this Agreement (express or implied) is intended or shall be
construed to confer upon any Person not a party hereto any right, remedy, or
claim under or by reason of this Agreement. Except as expressly provided herein,
the rights and duties of the parties hereunder are not assignable; provided,
however, that Hancock may assign this Agreement or any portion hereof to any
affiliate (as that term is defined in the rules and regulations under the 1933
Act) of Hancock. Subject to the prior provisions of this Section 6.2, this
Agreement shall be binding upon and shall inure to the benefit of the respective
successors and assigns of the parties hereto.
6.3 Entire Agreement. This Agreement and the Warrant constitute
the entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior and contemporaneous agreements and understandings
of the parties hereto in connection therewith and may not be amended or modified
in any manner except by an instrument in writing executed by the parties hereto.
6.4 Partial Invalidity. In case any one or more of the
covenants, agreements, or provisions hereof shall be invalid, illegal, or
unenforceable in any respect, the validity of the remaining covenants,
agreements, or provisions hereof shall be in no way affected, prejudiced, or
disturbed thereby.
6.5 Notices. All notices, consents, approvals, requests,
demands, or other communications required or permitted to be given hereunder
shall be in writing, shall be given by mail, return receipt requested, postage
prepaid, prepaid telegram with confirmation of delivery obtained, or personally
delivered with confirmation of delivery obtained,
-15-
95
and shall be deemed to have been duly given when received at the address
specified below:
If to the Company:
Alexander Energy Corporation
Triad Center
501 Northwest Expressway, Suite 600
Oklahoma City, Oklahoma 73118
Attention: President
If to Hancock:
As provided in the Note Agreement
Any party shall have the right to change its address for notice hereunder from
time to time to such other address within the continental United States of
America as may hereafter be furnished in writing by such party to the other
parties hereto.
6.6 Further Assurances. Each party hereto from time to time
shall do and perform such further acts and execute and deliver such further
instruments, assignments and documents as may be required or reasonably
requested by the other party to establish, maintain, or protect the respective
rights and remedies of the parties hereto and to carry out and effect the
intentions and purposes of this Agreement.
6.7 Rights Cumulative. The rights and remedies granted to the
parties under this Agreement shall not be exclusive rights and remedies but
shall be in addition to all other rights and remedies available at law or in
equity.
6.8 No Waiver. The failure of any party hereto to insist upon
strict performance of any provision hereof shall not constitute a waiver of, or
estoppel against asserting, the right to require such performance in the future,
nor shall a waiver or estoppel in any one instance constitute a waiver or
estoppel with respect to a later breach of a similar nature or otherwise.
6.9 Internal References. Unless otherwise specified,
-16-
96
all references in this Agreement to "Articles" and "Sections" are to Articles
in Sections of this Agreement.
6.10 Counterpart Execution. This Agreement may be executed in a
number of counterparts, each of which shall have the force and effect of an
original although constituting but one instrument for all purposes.
6.11 Governing Law. The parties hereto specifically agree that
this Agreement shall be governed by and construed in accordance with the laws of
the State of Oklahoma, excluding any conflict-of-law rule or law that might
refer same to the laws of another jurisdiction. The parties hereto specifically
and non-exclusively submit themselves to the personal jurisdiction of the state
and federal courts in the Commonwealth of Massachusetts, in connection with all
controversies and disputes arising out of or relating to the effect,
interpretation, performance, or breach of this Agreement, and, in that
connection, the Company hereby appoints the Secretary of State of the
Commonwealth of Massachusetts as its agent for service of process and any
actions brought in the state or federal courts in the Commonwealth of
Massachusetts, arising out of or relating to the effect, interpretation,
performance, or breach of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
-17-
97
ALEXANDER ENERGY CORPORATION
By: /S/ Bob G. Alexander
Name: Bob G. Alexander
Title: President
-18-
98
EXHIBIT D
ALEXANDER ENERGY CORPORATION
STOCK OWNERSHIP
Actual Shares Outstanding
Owned Options
---------------- -----------
EMPLOYEE OWNERSHIP
Officers and Directors
Bob G. Alexander - -
Lila Alexander 852,417(1) -
Roger G. Alexander 53,600 42,000
Jim L. David 867,415(2) -
David E. Grose 41,000 10,000
M. Sue Barnard 250 4,000
Russell E. Christiansen -(3) -
DeWayne R. VonFeldt 190,131(2) -
Other Employees
Original employees 503,487 -
Employees hired subsequent
to public offering - 67,000
--------- -------
2,488,900 123,000
Former Employee(s) 562,200 -
INSTITUTIONAL OWNERSHIP
Liberty National Bank & Trust
Company and Liberty National
Corporation - shared invest-
ment and voting power 677,331
John Hancock Mutual Life
Insurance Company 314,735 78,684
Energy Reserves, Inc., a
wholly owned subsidiary of
Midwest Energy Company 314,735(3) 78,684
American National Bank &
Trust - Chicago 57,100 -
First Wilshire Securities
Management Inc. 18,800 -
Over-the-Counter Securities 142,000 -
Wellington Management 286,000(4) -
Bank of California 10,000 -
--------- -------
1,820,701 157,368
OPEN MARKET OWNERSHIP 2,432,565 -
OTHER OUTSTANDING STOCK OPTIONS
Brooks Hall - 220,000
-------
TOTAL OUTSTANDING SHARES OF AEC
COMMON STOCK AND OUTSTANDING
OPTIONS 7,304,366 500,368
=======
TREASURY STOCK 696,060
---------
TOTAL ISSUED SHARES OF AEC
COMMON STOCK 8,000,426
=========
(1) Lila Alexander is the former wife of Bob G. Alexander. Mr. Alexander
maintains the voting rights for these shares.
(2) Amounts shown include both direct and indirect beneficial ownership.
(3) Mr. Christiansen, as Chairman of the Board of Energy Reserves, Inc. and
Midwest Energy Company, has beneficial interest in these shares and may
exercise influence of their vote.
(4) Amount shown was verified by Binkley Shorts of Wellington Management as of
March 9, 1988.
99
EXHIBIT E
SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES
A. Subsidiaries
1. Edwards & Leach Oil Company
a. Date of Incorporation - December 1, 1980
State of Incorporation - Delaware
b. Shares of Common Stock Authorized - 3,000
Shares of Common Stock Issued - 1
Alexander Energy Corporation wholly owns (100%) the issued
stock of Edwards & Leach Oil Company. This subsidiary accounts
for 25% or more of consolidated net worth, consolidated net
income, or consolidated net cash flow of the Company as
reflected in the financial statements described in Section
2.3.
This Subsidiary accounts for 25% or more of Consolidated Net Worth,
Consolidated Net Income or Consolidated Cash Flow of the Company as
reflected in the financial statements described in Section 2.3 of the
Agreement.
B. Partnerships and Joint Ventures
ELOC 1981 Program, Ltd.
ELOC 1982-A Program, Ltd.
Alexander Energy 1983 Program, Ltd.
AEJH 1985 Limited Partnership
AEER 1985 Limited Partnership
AEJH 1987 Limited Partnership
AEJH 1987-A Limited Partnership
Oak Grove Gas Gathering System, a Joint Venture
100
EXHIBIT F
LITIGATION
1. The Company is a named party in a lawsuit, Ralph L. Harvey ("Harvey") v.
ELOC, ELOC 1982-A Program, Ltd. (the "Program") and the Company, brought
in the Oklahoma County, Oklahoma, District Court on January 10, 1986,
pursuant to which Harvey, as a limited partner in the Program, alleges that
ELOC, the Program and the Company breached their fiduciary duties to him in
connection with the Program's exploration activities. Harvey alleges the
Company, as the parent of ELOC, the general partner of the Program, is
liable for the breach of these duties because it allegedly controlled ELOC.
Harvey also contends a contract was created between ELOC, the Program and
Harvey and that the actions of ELOC and the Program constitute a breach of
that contract. Harvey seeks actual damages of $1,000,000 and punitive
damages of $250,000. The punitive damage claim is only against ELOC and the
Company. The Company is vigorously defending the suit and is proceeding to
initiate discovery. Management of the Company believes the suit to be
frivolous and totally without merit.
2. Samson Resources Company v. Edwards & Leach Oil Company ("ELOC"), et. al,
Case No. C-82-245, filed in the District Court of Dewey County, Oklahoma.
Samson sued ELOC for nonpayment of $254,607, plus interest and attorney
fees, which represents ELOC's share of cost associated with the recomple-
tion of the Clark 11-8 well. ELOC filed a counter-claim against Samson,
denying responsibility for such costs due to Samson's negligence during the
operation. The Company assumed ELOC's responsibility upon its merger with
ELOC.
101
EXHIBIT G
CERTAIN LOANS AND LIENS
A. Secured note payable to bank, interest at prime (10% at May 16, 1988);
balance of $2,808,001 at May 16, 1988. This is a $6,000,000 line of credit
due October 1988, limited to a borrowing base of $4,000,000, which is
determined based on the bank's evaluation of the Company's semi-annual
reserves study. A 1/2% commitment fee is payable on the unused portion of
the revolving credit.
B. 7% convertible debenture due in quarterly installments of $71,500, plus
interest until 1991, at which time the balance is due, convertible into
common stock of the Company at $7.00 per share. Balance of $6,024,126 at May
16, 1988.
C. Secured note payable to bank, interest at prime (10% at May 16, 1988);
balance of $402,133 at May 16, 1988, due in monthly installments of
$25,,133, plus interest until retired in August 1989.
D. Adjustable rate mortgage note (8..92% at May 16, 1988) is secured by real
estate and is due in monthly installments until 2014. Current payment is
$1,761 monthly,, with $211,782 outstanding at May 1988.
E. Unsecured notes payable to officer/director, due in monthly installments of
$3,029 for amortization of $90,889 amount. Interest due quarterly at prime
(10% at May 16, 1988) with an additional $50,000 of principal due October
1996, unless accelerated by holder to a four year pay-out retroactive from
October 1986.
F. Unsecured note payable to former employee/stockholder, due in monthly
installment of $4,651, plus interest at prime (10% at May 16, 1988) until
September 1989. Current balance at May 1988 is $74,416.
G. Current liabilities including accounts payable, revenues payable, accrued
liabilities and other liabilities due within one year.
Borrowings under the line of credit (described in A above) and the Secured
Credit Agreement (described in B and C above) are secured by a mortgage on
substantially all oil and gas properties. The terms of the agreements
include, among other terms, a minimum net worth requirement, a prohibition
on the payment of dividends, a restriction on sale of assets, mergers and
acquisition of treasury stock, and a limitation on the incurrence of
additional indebtedness.
102
EXHIBIT H
INSURANCE
Property & Casualty
Type of Coverage Carrier Term Limits Policy Number
---------------- ------- ---- ------ -------------
Comprehensive Mid-Continent Casualty Co. 12/15/87-88 $1,000,000 GL 110403
General Liability
Excess Liability Pacific Insurance Company 12/15/87-88 $5,000,000 PI 69119
Umbrella excess of primary
Excess Liability Transamerica Insurance 12/15/87-88 $2,000,000 XLX 1300827
Umbrella Company excess of
$5,000,000
Commerical Mid-Continent Casualty Co. 4/1/88-89 $1,000,000 GLA 52115
Automobile
Workers' Compensation Mid-Continent Casualty Co. 4/1/88-89 Statutory Limits WC 100241
and Employers'
Liability
Control of Well and New Hampshire through 4/1/88-89 $2MM to 10,000' PMI 87109
Operators Extra Petroleum Marine Insurance $3MM below
Expense Inc., Houston, TX 10,000'
Personal Property Employers National 12/15/87-88 $250,000 164482
(office contents, Insurance Company
computers and
software)
Valuable Papers Mid-Continent Casualty Co. 12/15/87-88 $100,000 SP 26470
Commercial Property Cigna Insurance Company of 1/12/88-89 $300,000 TCP DI 80 58
& General Liability Texas 45 5
Employee
Type of Coverage Carrier Term Policy Number
---------------- ------- ---- -------------
Health, Life and AD&D Association Life Insurance 8/1/87-88 Group 11765 Unit 6152
Company Inc.
Supplemental Life Principal Mutual Life 8/1/87-88 M50682-1
Insurance Company
Dental Security Benefit Life 8/1/87-88 GDB A0455-0001
Insurance Company
Long-Term Disability Union Life Insurance Company 8/1/87-88 0300210
of America
103
EXHIBIT I
CERTAIN AGREEMENTS
Secured Credit Agreement by and between the Company and Liberty National Bank
and Trust Company, Oklahoma City, Oklahoma, dated June 6, 1984, and including
First Amendment (November 30, 1984), Second Amendment (November 4, 1985), Third
Amendment (January 24, 1986) and Fourth Amendment (October 24, 1986).
Revolving line of credit (Note #402) as last amended on October 29, 1987.
104
EXHIBIT J
AGREEMENTS TO REPURCHASE STOCK
Pursuant to certain Employee Stock Purchase Agreements entered into as of the
6th day of November, 1981, by and between the Company and individuals who were
employed by the Company at said date (the "Agreements"), the Company has the
right of first refusal to repurchase those shares of Company common stock
subject to the Agreements upon (a) the employee's termination of employment with
the Company or (b) the employee's receipt of a bona fide offer from a third
party to purchase all or part of his shares of Company common stock. The Company
is in no way obligated to repurchase said common stock.
Those individuals and the number of shares of Company common stock subject to
the above Agreements are as follows:
Donna Kay (nee: Ports) Alexander 94,000
F. Wayne Campbell 75,000
Jim L. David 847,415
David E. Grose 41,000
Kim A. Lockwood 92,000
Randy T. McKenzie 50,000
Connie K. Vinyard 11,500
The Company has a conditional obligation to repurchase limited partnership
interests in ELOC 1981 Program, Ltd., ELOC 1982-A Program, Ltd. and Alexander
Energy 1983 Program, Ltd. The Company has a right of first refusal to purchase
shares pursuant to the John Hancock and Energy Reserve Investment Agreements.
105
EXHIBIT K
[McAFEE & TAFT LETTERHEAD]
June 1, 1988
John Hancock Mutual Life Insurance
Company
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Re: Alexander Energy Corporation
Ladies and Gentlemen:
We have acted as counsel to Alexander Energy Corporation, an Oklahoma
corporation (the "Company"), in connection with the authorization, execution,
and delivery of that certain Note Agreement of even date herewith (the
"Agreement"), by and between you and the Company and that certain Investment
Agreement of even date herewith by and between you and the Company, and the
issuance and sale by the Company to you of that certain 10% Senior Note of even
date herewith in the original principal amount of $5,000,000.00 (the "Initial
Note") and of that certain Stock Purchase Warrant of even date herewith.
Capitalized terms used in this opinion not otherwise defined have the meanings
given to them in the Agreement.
In connection with this opinion, we have examined original executed
counterparts of the Agreement, the Investment Agreement, and the Officers'
Certificates delivered at the closing under the Agreement, the Initial Note, and
the Warrant. We also have examined the originals or duplicate copies certified
to our satisfaction of the articles of incorporation and the bylaws of the
Company and the Subsidiaries, such other corporate and other records of the
Company, the Subsidiaries, the Partnership, and the Joint Ventures as we have
deemed appropriate, and such other documents, instruments, and records as we
have deemed appropriate. We have assume the genuineness of all signatures, the
authenticity of all documents and records
106
submitted to us as originals, and the conformity to originals of all documents
and records submitted to us as copies.
Based on the foregoing, having due regard for such legal consideration as
we deemed relevant, and subject to the qualifications hereinafter set forth, we
are of the opinion that:
1. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Oklahoma and has all requisite
power and authority and all necessary licenses and other governmental
authorizations to own and operate its Properties and to conduct its business as
such business is now and has heretofore been conducted and as presently proposed
to be conducted. The Company is duly qualified, authorized to do business, and
in good standing as a foreign corporation in each jurisdiction where the
character of its Properties or the nature of its activities makes such
qualification necessary, including, without limitation, the States of Arkansas,
California, Colorado, Kansas, Louisiana, Montana, Nebraska, New Mexico, Texas,
and Wyoming. The authorized number of shares of common stock of the Company is
20,000,000, par value $0.01 per share, and the Company is not authorized to
issue any other form of stock or equity security. As of the date hereof,
7,304,366 shares of such common stock are issued and outstanding. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid, and nonassessable, were issued in compliance with applicable securities
laws, and are owned of record as shown on Exhibit D to the Agreement.
2. To our knowledge, Exhibit E to the Agreement correctly lists all
Subsidiaries of the Company as of the date of this Agreement and, as to each
such Subsidiary, (i) its name, (ii) the jurisdiction of its incorporation, and
(iii) the percentage of its issued and outstanding shares owned of record by the
Company or another Subsidiary (specifying such other Subsidiary). Each
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority and all necessary licenses and other governmental
authorizations to own and operate its Properties and to conduct its business as
such business is now and has heretofore been conducted and as presently proposed
to be conducted, and is duly qualified,
-2-
107
authorized to do business, and in good standing as a foreign corporation in each
jurisdiction where the character of its Properties or where the nature of its
activities makes such qualification necessary. All of the outstanding shares of
capital stock of each Subsidiary are validly issued, fully paid, and
nonassessable, all such shares indicated in Exhibit E to the Agreement as being
owned by the Company or by any other Subsidiary are held of record by the
Company or its nominees as specified on Exhibit E to the Agreement or by such
other Subsidiary or its nominees as specified on Exhibit E to the Agreement, and
to our knowledge there is no outstanding right, regardless of whether currently
exercisable, to acquire any capital stock of any Subsidiary the Net Worth of
which (i) exceeds 2% of Consolidated Net Worth, or (ii) when aggregated with the
Net Worth of all other Subsidiaries as to which there are such outstanding
rights, exceeds 5% of Consolidated Net Worth.
3. The Company has all necessary corporate power and authority to enter
into the Agreement and the Investment Agreement, to issue and sell the Notes and
the Warrant, and to perform all of the obligations to be performed by it
thereunder. The execution, delivery, and performance of the Agreement, the
Notes, the Investment Agreement, and the Warrant have been duly authorized by
all requisite action on the part of the officers, directors, and security
holders of the Company, and each of the Agreement, the Investment Agreement, the
Warrant, and the Initial Note constitutes, and each of the other Notes and the
stock to be issued pursuant to the Warrant when executed, delivered, and (if
applicable) paid for in accordance with the terms of the Agreement and the
Warrant will constitute, a valid and binding obligation of the Company,
enforceable in accordance with its terms.
4. The Company or a Subsidiary is a partner (and if such Partnership is a
limited partnership, is a general partner) in the Partnerships and is a party to
the Joint Ventures described on Exhibit E to the Agreement. To our knowledge,
none of the Company, the Subsidiaries, the Partnerships, and the Joint Ventures
has any equity interest in any Person other than the Subsidiaries and the
Company's and the Subsidiaries' interests in the Partnerships and the Joint
Ventures described in Exhibit E to the Agreement.
5. Except as set forth in Exhibit F to the Agreement, to our knowledge
there is no action, suit, proceeding,
-3-
108
arbitration, or investigation pending or threatened against the Company or any
Subsidiary, Partnership, or Joint Venture, or involving any of their assets, or
against any employee, officer, director, stockholder, or partner thereof in his
capacity as such or relating to his activities with the Company or any
Subsidiary, Partnership, or Joint Venture, that might result in any material and
adverse change in the Properties, business, prospects, profits, or condition
(financial or otherwise) of the Company or any Subsidiary, Partnership, or Joint
Venture, or the ability of the Company to perform its obligations under the
Agreement, the Notes, the Investment Agreement, or the Warrant, or the ability
of the Company or any Subsidiary, Partnership, Joint Venture to perform any
agreement entered into in connection herewith, and aware of any fact that might
result in or form the basis for any such action, suit, proceeding, arbitration,
or investigation. To our knowledge, none of the Company, the Subsidiaries, the
Partnerships, and the Joint Ventures is in default with respect to any order of
any court, governmental authority, or arbitration board or tribunal.
6. The execution, delivery, and performance by the Company of any of the
provisions of the Agreement, the Notes, the Investment Agreement, or the
Warrant, with or without the giving of notice or the passage of time or both,
will not violate any provision of law or any regulation or award, judgment,
order, injunction, or decree of any arbitrator or court or other governmental
body to which the Company or any Subsidiary, Partnership, or Joint Venture is
subject, or any provision of the Company's or any Subsidiary's articles of
incorporation or bylaws or the organizational documents of any Partnership or
Joint Venture, or to our knowledge result in the breach of or constitute a
default under any indenture, contract, or other agreement, document, or
instrument to which the Company or any Subsidiary, Partnership, or Joint Venture
is a party or by which it or any of its Properties are bound or affected, or to
our knowledge result in the creation or imposition of any Lien of any nature
whatsoever upon the Properties of the Company or any Subsidiary, Partnership, or
Joint Venture or cause the Company or any Subsidiary, Partnership, or Joint
Venture to lose the benefit of any material right or privilege it presently
enjoys or any Person who normally does a material amount of business with the
Company or any Subsidiary, Partnership, or Joint Venture to discontinue to do so
on the same basis.
-4-
109
7. No consent, authorization, approval, permit, or order of, or
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery, and performance of this
Agreement by the Company or the offer, issuance, sale, or delivery of the Notes
and the Warrant. The offer or sale of neither the Notes nor the Warrant nor the
stock issuable pursuant thereto is subject to the provisions of section 5 of
the 1933 Act, or to comparable provisions of any applicable state securities
laws.
8. Neither the Company nor any Subsidiary, Partnership, or Joint Venture
is a "utility company" or a "holding company" or a "subsidiary company" or an
"affiliate" of the foregoing, as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended. To our knowledge, no determination has
been made by the Securities and Exchange Commission that the Company is subject
to a controlling influence by any such holding company. Neither the Company nor
any Subsidiary, Partnership, or Joint Venture is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
9. Except as provided in the agreements described on Exhibit J to the
Agreement, to our knowledge neither the Company nor any Subsidiary,
Partnership, or Joint Venture is obligated to purchase any stock, warrants,
or other equity interests in any of them or any debt or other security
convertible into any of the foregoing.
10. You shall not be required, solely on account of the transactions
contemplated by this Agreement, the Notes, the Warrant, and the Investment
Agreement, to do any of the following:
(i) qualify a foreign corporation or file a designation for service
of process or file any reports to any governmental agency of the State of
Oklahoma;
(ii) pay any taxes, fees, charges, under the laws of the State of
Oklahoma; or other levies or
(iii) file any returns in respect of any taxes or other matters
described in clause (ii) above.
-5-
110
The opinions set forth above are qualified in all respects by the
following:
a. We are licensed to practice law in the State of Oklahoma, and
accordingly our opinions set forth above are limited in all respect to laws of
such state and of United States America.
b. With respect to the opinion set forth in the second sentence of
paragraph 3 above, we note that enforceability of the documents and instruments
therein described may be limited by bankruptcy, insolvency, moratorium, and
other laws effecting creditors' rights generally and by general equitable
principles (whether arising in a proceeding inequity or otherwise), and we have
assumed that you have duly authorized, executed, and delivered the Agreement and
the Investment Agreement and have accepted delivery of the Initial Note and the
Warrant.
c. In rendering our opinion set forth in paragraph 7 above, we have relied
your representations and warranties set forth in Section 1.3 of the Agreement
and Section 2.2 of the Investment Agreement.
Very truly yours,
McAFEE & TAFT
-6-
111
EXHIBIT L
SCHEDULE OF INFORMATION FOR PAYMENT AND NOTICES
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
GUARANTEED BENEFIT SUB-ACCOUNT
1. All payments on account of the Notes or other obligations in accordance
with the provisions thereof shall be made by bank wire transfer of
immediately available funds for credit, not later than 12 noon, Boston
time, to:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
Account of: John Hancock Mutual Life Insurance
Company, GBSA Account
Account Number: 535-84164
On Order of: Alexander Energy Corporation
2. Contemporaneous with the above wire transfer, advice setting forth (1) the
full name, interest rate and maturity date of the Notes or other
obligations; (2) allocation of payment between principal and interest and
any special payment; and (3) name and address of Bank (or Trustee) from
which wire transfer was sent, shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Attention: Securities Administration T-56
3. All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department,
T-57
4. All Securities acquired for the Guaranteed Benefit Sub-Account shall be
registered in the name of John Hancock Mutual Life Insurance Company.