UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 3, 1999
Date of Report (Date of earliest event reported)_______________________________
MAGNUM HUNTER RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 1-12508 87-0462881
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 401-0752
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On February 3, 1999, Magnum Hunter Resources, Inc. announced that it had
closed various transactions with ONEOK, Inc. (NYSE: OKE), the eighth largest
natural gas distributor in the United States, relating to ONEOK's purchase of
$50 million of Convertible Preferred Stock of Magnum Hunter, ONEOK's ability to
market certain of Magnum Hunter's natural gas production in the state of
Oklahoma and ONEOK's ability to participate in future acquisitions of Magnum
Hunter in the state of Oklahoma.
The Preferred Stock has a liquidation value of $50 million and will be
convertible into Magnum Hunter's Common Stock at $5.25 per share. Dividends on
the Preferred Stock will be payable in cash at the rate of 8% per annum and will
be cumulative. Magnum Hunter will use the net proceeds from the transaction to
repay senior bank indebtedness, to provide working capital for general corporate
purposes and to finance acquisitions, as determined by Magnum Hunter's Board of
Directors. ONEOK will have the right to nominate two new members to Magnum
Hunter's existing Board of Directors.
A copy of the press release is filed as an exhibit to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
4.1 Certificate of Designations for 1999 Series A 8% Convertible Preferred
Stock
10.1 Stock Purchase Agreement between ONEOK Resources, Inc. and Magnum
Hunter Resources, Inc., dated February 3, 1999
99.1 Press Release dated February 3, 1999 issued by Magnum
Hunter Resources, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MAGNUM HUNTER RESOURCES, INC.
/s/ Gary C. Evans
By:____________________________
Gary C. Evans
President and CEO
/s/ Morgan F. Johnston
By:____________________________
Morgan F. Johnston
Vice President, General
Counsel and Secretary
Dated: February 11, 1999
CERTIFICATE OF DESIGNATIONS
1999 SERIES A 8% CONVERTIBLE PREFERRED STOCK
(Par Value $.001 Per Share)
of
MAGNUM HUNTER RESOURCES, INC.
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Pursuant to Section 78.1955
of the Nevada General Corporation Law
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We, Gary C. Evans, President and Chief Executive Officer, and Morgan F.
Johnston, Vice President and Secretary, of Magnum Hunter Resources, Inc., a
corporation organized and existing under the laws of the State of Nevada (the
"Corporation"), DO HEREBY CERTIFY that, pursuant to the authority conferred on
the Board of Directors of the Corporation by the Articles of Incorporation, as
amended, of the Corporation and in accordance with Section 78.1955 of the
General Corporation Law of the State of Nevada, the Board of Directors of the
Corporation on January 27, 1999 duly adopted the following preamble and
resolution establishing and creating a series of 50,000 shares of Preferred
Stock, par value $.001 per share, of the Corporation, designated "1999 Series A
8% Convertible Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") in accordance with the provisions
of its Articles of Incorporation, as amended, a series of Preferred Stock, par
value $.001 per share, of the Corporation is hereby created, and that the
designation and number of shares thereof and the voting powers, designations,
preferences, limitations, restrictions and relative rights thereof are as
follows:
Section 1. Designation, Number of Shares and Stated Value of 1999 Series A
8% Convertible Preferred Stock. There is hereby authorized and established a
series of Preferred Stock that shall be designated as "1999 Series A 8%
Convertible Preferred Stock" (hereinafter referred to as "Series A 8%
Preferred"), and the number of shares constituting such series shall be 50,000.
Such number of shares may be increased or decreased, but not to a number less
than the number of shares of Series A 8% Preferred then issued and outstanding,
by resolution adopted by the full Board of Directors. The "Stated Value" per
share of the Series A 8% Preferred shall be equal to One Thousand Dollars
($1,000.00).
Section 2. Definitions. In addition to the definitions set forth elsewhere
herein, the following terms shall have the meanings indicated:
"Affiliate" shall mean, with respect to any person, any other person that
directly or indirectly controls or is controlled by or is under complete control
with such person. For the purposes of this definition, "control" when used with
respect to any person means the ownership of at least a majority of the issued
and outstanding voting securities or capital interests of such person. "Business
Day" shall mean any day other than a Saturday, Sunday or a day on which banking
institutions in Dallas, Texas are authorized or obligated by law or executive
order to close.
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"Common Stock" shall mean the common stock, par value $0.002 per share, of
the Corporation.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Series A 8% Preferred is convertible, as such conversion
price may be adjusted pursuant to the provisions hereof. The initial Conversion
Price is Five Dollars and Twenty-Five Cents ($5.25).
"Junior Securities" means any capital stock of the Corporation issued after
the Original Issue Date and any other series of stock issued by the Corporation
ranking junior as to the Series A 8% Preferred upon liquidation, dissolution or
winding up of the Corporation.
"Original Issue Date" shall mean the date on which shares of the Series A
8% Preferred are first issued.
"Original Holders" shall mean the person or persons to whom shares of the
Series A 8% Preferred are issued on the Original Issue Date and, as long as
there is a direct chain of ownership by such persons or persons and their
Affiliates, any Affiliate of such person or persons to whom shares of the Series
A 8% Preferred are transferred.
"Parity Security" means any class or series of stock issued by the
Corporation ranking on a parity with the Series A 8% Preferred upon liquidation,
dissolution or winding up of the Corporation.
"Person" means any individual, corporation, association, partnership, joint
venture, limited liability company, trust, estate, or other entity or
organization, other than the Corporation, any subsidiary of the Corporation, any
employee benefit plan of the Corporation or any subsidiary of the Corporation,
or any entity holding shares of Common Stock for or pursuant to the terms of any
such plan.
"Senior Securities" means the Corporation's 1996 Series A Preferred Stock,
1993 Series A Preferred Stock and any other class or series of stock issued and
outstanding as of the Original Issue Date by the Corporation ranking senior to
the Series A 8% Preferred upon liquidation, dissolution or winding up of the
Corporation.
Section 3. Dividends and Distributions.
(a) The holders of shares of the Series A 8% Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available therefor, cumulative cash dividends at an annual rate of eight percent
(8%) of the Stated Value (the "Dividend Rate"), or Eighty and 0/100 Dollars
($80) per share per annum. Such dividends on shares of Series A 8% Preferred
shall be cumulative from the date such shares are issued, whether or not in any
period there shall be funds of the Corporation legally available for the payment
of such dividends and whether or not such dividends are declared, and shall be
payable quarterly, when, as and if declared by the Board of Directors, on
February 28, May 31, August 31 and November 30 in each year (each a "Dividend
Payment Date"), commencing August 31, 1999. Except for the dividend payable on
August 31, 1999 (which dividend shall cover the period from the Original Issue
Date through August 31, 1999, inclusive), the amount of each dividend for any
full quarter shall be Twenty and 0/100 Dollars ($20) per share. Such dividends
shall accrue whether or not there shall be (at the time such dividend becomes
payable or at any other time) profits, surplus or other funds of the Corporation
legally available for the payment of dividends.
(b) Dividends shall be calculated for the period from the Original Issue
Date through August 31, 1999 and for any period that is not a full quarter on
the basis of the time elapsed from and
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including the date immediately following the most recent Dividend Payment Date
(or, in the case of the dividend payable on August 31, 1999, from and including
the Original Issue Date) to and including the final distribution date relating
to conversion or redemption or to a dissolution, liquidation or winding up of
the Corporation (or, in the case of the dividend payable on August 31, 1999, to
and including August 31, 1999). Dividends payable on the shares of Series A 8%
Preferred for the period from the Original Issue Date through August 31, 1999
and for any period that is not a full quarter shall be calculated at the
Dividend Rate on the basis of a 365-day or 366-day, as appropriate, year.
(c) No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A 8% Preferred which
are in arrears; provided, however, that in the event dividends on shares of the
Series A 8% Preferred have not been paid for two consecutive quarters, interest
shall accrue at a rate equal to the Dividend Rate (with interest calculated on
the basis of a 365-day or 366-day, as appropriate, year) on each such unpaid
dividend payment from and including the second consecutive Dividend Payment Date
on which no dividend payment is made to and including the date on which such
dividend payment in arrears is paid.
(d) Dividends payable on each Dividend Payment Date shall be paid to record
holders of the shares of Series A 8% Preferred as they appear on the books of
the Corporation at the close of business on the tenth Business Day immediately
preceding the respective Dividend Payment Date or on such other record date as
may be fixed by the Board of Directors of the Corporation in advance of a
Dividend Payment Date, provided that no such record date shall be less than ten
nor more than 60 calendar days preceding such Dividend Payment Date. Dividends
payable to Original Holders shall be paid by the Corporation by wire transfer in
same-day funds to one account to be designated in writing by the Original
Holders to the Corporation at least three days prior to any Dividend Payment
Date, or by such other means mutually agreed upon by the parties.
(e) So long as any shares of Series A 8% Preferred are outstanding, no
dividend or other distribution, whether in liquidation or otherwise, shall be
declared or paid, or set apart for payment on or in respect of, any Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired for any consideration (or any money be paid to a sinking fund or
otherwise set apart for the purchase or redemption of any such Junior
Securities), unless (i) the full cumulative dividends, if any, accrued on all
outstanding shares of the Series A 8% Preferred shall have been paid or set
apart for payment for all past dividend periods and (ii) sufficient funds shall
have been set apart for the payment of the dividend for the then current
dividend period with respect to the Series A 8% Preferred.
Section 4. Certain Covenants and Restrictions.
(a) So long as any shares of Series A 8% Preferred are outstanding;
(i) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the shares of Series A 8% Preferred such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the conversion of all outstanding shares of Series A 8% Preferred, and
all other securities and instruments convertible into shares of Common Stock,
and shall take all reasonable action within its power required to increase the
authorized number of shares of Common Stock necessary to permit the conversion
of all such shares of Series A 8% Preferred and all other securities and
instruments convertible into shares of Common Stock.
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(ii) The Corporation represents, warrants and agrees that all shares of
Common Stock that may be issued upon exercise of the conversion rights of shares
of Series A 8% Preferred will, upon issuance, be fully-paid and nonassessable.
(iii) The Corporation shall pay all taxes and other governmental charges
(other than any income or franchise taxes) that may be imposed with respect to
the issue or delivery of shares of Common Stock upon conversion of Series A 8%
Preferred as provided herein. The Corporation shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer involved in
the issue of any certificate for shares of Common Stock in any name other than
that of the registered holder of the shares of the Series A 8% Preferred
surrendered in connection with the conversion thereof, and in such case the
Corporation shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid, or it has been established to the
Corporation's reasonable satisfaction that no tax or other charge is due.
Section 5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation (in connection with the bankruptcy or insolvency of the Corporation
or otherwise), whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of shares of any Junior Securities, the
holders of the shares of Series A 8% Preferred shall be entitled to receive an
amount equal to the Stated Value multiplied by the number of shares of Series A
8% Preferred held by them, plus all cumulative dividends (whether or not
declared) that are accrued and unpaid thereon. To the extent the available
assets are insufficient to fully satisfy such amounts, then the holders of the
Series A 8% Preferred shall share ratably in such distribution in the proportion
that the number of each holder's Series A 8% Preferred Shares bears to the total
number of shares of Series A 8% Preferred outstanding. No further payment on
account of any such liquidation, dissolution or winding up of the Corporation
shall be paid to the holders of the shares of Series A 8% Preferred or the
holders of any Parity Securities unless there shall be paid at the same time to
the holders of the shares of Series A 8% Preferred and the holders of any Parity
Securities proportionate amounts determined ratably in proportion to the full
amounts to which the holders of all outstanding shares of Series A 8% Preferred
and the holders of all such outstanding Parity Securities are respectively
entitled with respect to such distribution. For purposes of this Section,
neither a consolidation or merger of the Corporation with one or more
partnerships, corporations or other entities nor a sale, lease, exchange or
transfer of all or any substantial part of the Corporation's assets for cash,
securities or other property shall be deemed to be a liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary.
(b) After the payment of all amounts owing to the holders of stock ranking
prior to the Common Stock, the holders of Common Stock shall share ratably in
the distribution of the remaining available assets of the Corporation in the
proportion that each holder's shares bear to the total number of shares of
Common Stock outstanding.
(c) Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given, not less than 15 days prior to any payment date stated therein, to the
holders of record of the shares of Series A 8% Preferred in accordance with
Section 12 hereof.
Section 6. Optional Redemption by the Corporation. The outstanding shares
of Series A 8% Preferred are subject to redemption in accordance with the
following provisions:
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(a) Subject to the terms hereof, the Corporation may at its option, so long
as it has sufficient funds legally available therefor, elect to redeem, in whole
or in part, the outstanding shares of Series A 8% Preferred at any time after
the date of issuance of such shares.
(b) The redemption price per share for Series A 8% Preferred redeemed on
any optional redemption date (the "Redemption Price") shall be determined as
follows:
(i) at any time within the five-year period immediately following the
Original Issue Date at that redemption price per share (the "Initial Redemption
Price") equal to the sum of [A] the Stated Value and [B] an amount necessary for
the holders of the Series A 8% Preferred to achieve a 20% per annum rate of
return on such shares of Series A 8% Preferred from the Original Issue Date
through the Redemption Date (as herein defined) inclusive of all dividends paid
on such Series A 8% Preferred from the Original Issue Date through the
Redemption Date; and
(ii) at any time after the third anniversary of the Original Issue Date
through the end of the fifth anniversary of the Original Issue Date, as an
alternative to the Initial Redemption Price and at the option of the
Corporation, at that redemption price per share equal to 125% of the Stated
Value plus an amount equal to accrued and unpaid dividends, if any, to the date
fixed for redemption, whether or not earned or declared, provided that the
Common Stock has traded at a closing price of $7.875 or more for at least 20
trading days of the prior 30 trading days; and
(iii) at any time after the fifth anniversary of the Original Issue Date at
the following redemption prices per share (expressed as a percentage of the
Stated Value) plus an amount equal to accrued and unpaid dividends, if any, to
the date fixed for redemption, whether or not earned or declared:
Year Price Per Share
Year 6 106.0%
Year 7 104.5%
Year 8 103.0%
Year 9 101.5%
Year 10 and thereafter 100.0%
The Redemption Price shall be paid in cash from any source of funds legally
available therefor.
(c) Not less than 30 nor more than 60 days prior to the date fixed for any
redemption of any shares of Series A 8% Preferred, a notice specifying the time
(the "Redemption Date") and place of such redemption and the number of shares to
be redeemed shall be given in accordance with Section 12 hereof to the holders
of record of the shares of Series A 8% Preferred to be redeemed at their
respective addresses as the same shall appear on the books of the Corporation
(but no failure to mail such notice or any defect therein shall affect the
validity of the proceedings for redemption except as to the holder to whom the
Corporation has failed to mail such notice or except as to the holder whose
notice was defective), calling upon each such holder of record to surrender to
the Corporation on the Redemption Date at the place designated in such notice
such holder's certificate or certificates representing the then outstanding
shares of Series A 8% Preferred held by such holder being redeemed by the
Corporation. On or after the Redemption Date, each holder of shares of Series A
8% Preferred called for redemption shall surrender such holder's certificate or
certificates for such shares to the Corporation at the place designated in the
redemption notice and shall thereupon be entitled to receive payment of the
Redemption Price. From and
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after the Redemption Date, unless there shall have been a default in payment of
the Redemption Price, all rights of the holders of Series A 8% Preferred
designated for redemption (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
Section 7. Reacquired Shares. Any shares of Series A 8% Preferred
repurchased, redeemed, converted or otherwise acquired by the Corporation shall
be retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock, without designation as to series.
Section 8. Voting Rights.
(a) Except as otherwise provided in this Section or required by law or any
provision of the Articles of Incorporation of the Corporation, and subject to
any shareholder and voting or similar agreement existing now or hereinafter
entered into by any Original Holder and the Corporation, the Original Holders
(but not any other transferees or other subsequent holders of the Series A 8%
Preferred) shall vote together with the shares of Common Stock as a single class
at any annual or special meeting of shareholders of the Corporation, and each
Original Holder shall be entitled to that number of votes equal to the number of
shares of Common Stock into which the shares of Series A 8% Preferred held by
such Original Holder on the record date fixed for such meeting are convertible.
(b) The Corporation shall not, without the affirmative vote or consent of
at least a simple majority of the shares of Series A 8% Preferred voting
together as a separate class (and irrespective of whether such shares are held
by the Original Holders or any transferees or subsequent holders):
(i) amend, repeal or change any of the provisions of the Articles of
Incorporation of the Corporation in any way which would materially and adversely
affect the rights or preferences of the Series A 8% Preferred (including the
Certificate of Designations relating to the Series A 8% Preferred) as a class;
or
(ii) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock of Senior Securities or Parity
Securities, or any security convertible into or exchangeable for Senior
Securities or Parity Securities (other than in connection with stock option
plans in which employees, independent directors, or consultants of the
Corporation are eligible to participate) or reclassify or modify any Junior
Securities so as to become Parity Securities or Senior Securities.
Section 9. Conversion Rights. Holders of shares of Series A 8% Preferred
shall have the right to convert from time to time, in whole or in part and
without the payment of any additional consideration by the holder, any or all of
such shares into Common Stock, as follows:
(a) At any time, each share of Series A 8% Preferred shall be convertible
at the option of the holder thereof into fully paid, non-assessable shares of
Common Stock. The number of shares of Common Stock deliverable upon conversion
of each share of Series A 8% Preferred shall be determined by dividing the
Stated Value of such share of Series A 8% Preferred by the Conversion Price then
in effect.
(b) In case at any time the Corporation shall (i) subdivide the outstanding
shares of Common Stock into a greater number of shares, (ii) combine the
outstanding shares of Common Stock into a smaller
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number of shares or (iii) pay a dividend in Common Stock on its outstanding
shares of Common Stock, then the Conversion Price in effect immediately prior
thereto shall be multiplied by the fraction obtained:
by dividing
(X), which is the numerator equal to the total number of issued and
outstanding shares of Common Stock immediately prior to the
effectiveness of such action by the Corporation,
by
(Y), which is the denominator that equals the actual total number of
issued and outstanding shares of Common Stock immediately after such
effectiveness.
Such adjustment shall become effective immediately after the effective date of a
subdivision, combination or stock dividend. In the event of a consolidation or
merger of the Corporation with or into another corporation or entity as a result
of which a greater or lesser number of shares of common stock of the surviving
corporation or entity are issuable to holders of capital stock of the
Corporation in respect of the number of shares of its capital stock outstanding
immediately prior to such consolidation or merger, then the Conversion Price in
effect immediately prior to such consolidation or merger shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding shares of capital stock of the Corporation. The Corporation shall
not effect any such consolidation or merger unless prior to or simultaneously
with the consummation thereof the successor (if other than the Corporation)
resulting from such consolidation or merger shall expressly assume, by written
instrument executed and delivered (and satisfactory in form) to the Series A 8%
Preferred holders, (i) the obligation to deliver to such holders such stock as,
in accordance with the foregoing provisions, such holders may be entitled to
purchase and (ii) all other obligations of the Corporation hereunder.
(c) In the event that the Corporation proposes to take any action specified
in this Section 9 which requires any adjustment of the Conversion Price, then
and in each such case the Corporation shall at least 30 days prior to any such
event, and within five business days after it has knowledge of any such pending
transaction, provide to the Series A 8% Preferred holders written notice of the
date on which the books of the Corporation shall close or a record shall be
taken for such dividend or for determining rights to vote in respect of any such
consolidation or merger. Such notice shall also specify, as applicable, the date
on which the holders of capital stock shall be entitled thereto or the date on
which the holders of capital stock shall be entitled to exchange their stock for
securities deliverable upon such consolidation or merger, as the case may be.
Such notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act of 1933, as amended, or to a favorable vote of security holders, if either
is required. Furthermore, any notice shall state the Conversion Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares obtainable at such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(d) The conversion of any share of Series A 8% Preferred may be effected by
the holder thereof by the surrender of the certificate or certificates therefor,
duly endorsed, at the principal offices of the Corporation or to such agent or
agents of the Corporation as may be designated by the Board of Directors and by
giving written notice to the Corporation that such holder elects to convert the
same.
(e) After the surrender of shares of Series A 8% Preferred for conversion,
the Corporation shall (i ) as promptly as practicable issue and deliver or cause
to be issued and delivered to the holder of
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such shares certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such shares of Series A 8%
Preferred have been converted in accordance with the provisions of this Section
and (ii) within two business days pay to the holder of such shares all accrued
and unpaid dividends (whether or not earned or declared) to the date of such
surrender. Subject to the following provisions of this Section, such conversion
shall be deemed to have been made as of the close of business on the date on
which the shares of Series A 8% Preferred shall have been surrendered for
conversion in the manner herein provided, so that the rights of the holder of
the shares of Series A 8% Preferred so surrendered shall cease at such time, and
the person or persons entitled to receive the shares of Common Stock upon
conversion thereof shall be treated for all purposes as having become the record
holder or holders of such shares of Common Stock at such time; provided,
however, that any such surrender on any date when the stock transfer books of
the Corporation are closed shall be deemed to have been made, and shall be
effective to terminate the rights of the holder or holders of the shares of
Series A 8% Preferred so surrendered for conversion and to constitute the person
or persons entitled to receive such shares of Common Stock as the record holder
or holders thereof for all purposes, at the opening of business on the next
succeeding day on which such transfer books are open.
(f) The Corporation shall not be required to issue fractional shares of
stock upon the conversion of the Series A 8% Preferred. As to any final fraction
of a share which the holder of one or more shares of Series A 8% Preferred would
otherwise be entitled to receive upon conversion, the Corporation shall, in lieu
of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the same fraction of the Conversion Price on the
day of conversion.
(g) In case the Corporation shall be a party to any transaction (including
without limitation, a merger, consolidation, statutory share exchange, sale of
all or substantially all of the Corporation's assets or recapitalization of the
Common Stock), in each case as a result of which shares of Common Stock shall be
converted into the right to receive stock, securities or other property
(including cash or any combination thereof) (each of the foregoing transactions
being referred to as a "Fundamental Change Transaction"), then the shares of
Series A 8% Preferred remaining outstanding will thereafter no longer be subject
to conversion into Common Stock pursuant to this Section, but instead each share
shall be convertible into the kind and amount of stock and other securities and
property receivable (including cash) upon the consummation of such Fundamental
Change Transaction by a holder of that number of shares of Common Stock into
which one share of Series A 8% Preferred was convertible immediately prior to
such Fundamental Change Transaction (including an immediate adjustment of the
Conversion Price if by reason of or in connection with such merger,
consolidation, statutory share exchange, sale or recapitalization any securities
are issued or event occurs which would, under the terms hereof, require an
adjustment of the Conversion Price), assuming such holder of Series A 8%
Preferred has failed to elect to have all or a part of such holder's shares
redeemed or otherwise acquired. The provisions of this paragraph shall similarly
apply to successive Fundamental Change Transactions.
Section 10. Ranking. For purposes of dividends and the distribution of
assets upon liquidation, dissolution or winding up of the Corporation, (i) the
Junior Securities shall rank junior to the Series A 8% Preferred and (ii) the
Parity Securities shall rank on a parity with the Series A 8% Preferred.
Section 11. Record Holders. The Corporation may deem and treat the record
holder of any shares of Series A 8% Preferred as the true and lawful owner
thereof for all purposes, and the Corporation shall not be affected by any
notice to the contrary.
Section 12. Notice. Except as may otherwise be provided by law or provided
for herein, all notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given
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upon receipt, in the case of a notice of conversion given to the Corporation,
or, in all other cases, upon the earlier of receipt of such notice or three
Business Days after the mailing of such notices sent by Registered Mail (unless
first-class mail shall be specifically permitted for such notice under the terms
hereof) with postage prepaid, addressed: if to the Corporation, to its principal
executive offices or to any agent of the Corporation designated as permitted
hereby; or if to a holder of the Series A 8% Preferred, to such holder at the
address or telecopy of such holder of the Series A 8% Preferred as listed in the
stock record books of the Corporation, or to such other address or telecopy as
the Corporation or holder, as the case may be, shall have designated by notice
similarly given. Notices given by facsimile transmission on weekends, holidays
or after 5:00 p.m. Central Time shall be deemed received on the next business
day.
Section 13. Successors and Transferees. Except as otherwise expressly
provided herein, and subject to any shareholder and voting or similar agreement
entered into by any Original Holders and the Corporation, the provisions
applicable to shares of Series A 8% Preferred shall bind and inure to the
benefit of and be enforceable by the Corporation, the respective successors to
the Corporation, and by any record holder of shares of Series A 8% Preferred.
IN WITNESS WHEREOF, Magnum Hunter Resources, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Gary C. Evans,
its President and Morgan F. Johnston, its Secretary, this 29th day of January,
1999.
GARY C. EVANS
President and Chief Executive Officer
MORGAN F. JOHNSTON
Vice President and Secretary
STATE OF TEXAS)
COUNTY OF
This instrument was acknowledged before me on January 29th, 1999, by GARY
C. EVANS of MAGNUM HUNTER RESOURCES, INC., a Nevada corporation, on behalf of
said corporation.
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NOTARY PUBLIC, STATE OF TEXAS
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(printed name)
My Commission Expires:
- ---------------------
9
STOCK PURCHASE AGREEMENT
AMONG
ONEOK RESOURCES COMPANY
And
MAGNUM HUNTER RESOURCES, INC.
Dated: February 3, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this 3rd
day of February, 1999, by and between ONEOK RESOURCES COMPANY, a Delaware
corporation (the "Purchaser"), MAGNUM HUNTER RESOURCES, INC., a Nevada
corporation (the "Company"), MAGNUM HUNTER PRODUCTION, INC., a Texas corporation
("Production"), GRUY PETROLEUM MANAGEMENT COMPANY, a Texas corporation
("Management"), HUNTER GAS GATHERING, INC., a Texas corporation ("Gathering")
and BLUEBIRD ENERGY, INC., an Oklahoma corporation ("Bluebird"). (Production,
Management, Gathering and Bluebird hereinafter collectively referred to as the
"Subsidiaries")
RECITALS:
A. The Company has authorized the sale of an aggregate of 50,000 newly
issued shares of the Company's 1999 Series A 8% Convertible Preferred Stock, par
value $.001 per share (the "Preferred Stock") in order to repay Senior bank
indebtedness, to provide working capital for general corporate purposes and to
finance acquisitions;
B. Purchaser desires to purchase the Preferred Stock on the terms and
conditions set forth herein and enter into the Collateral Agreements (as
hereinafter defined); and
C. The Company desires to issue and sell the Preferred Stock to the
Purchaser on the terms and conditions set forth herein and enter into the
Collateral Agreements:
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises and agreements of the parties set forth herein, the parties agree as
follows:
I. PURCHASE OF PREFERRED STOCK.
A. Preferred Stock Purchase.
1. At the Closing, and under the terms and conditions of this Agreement,
the Company will sell and deliver 50,000 shares of the Company's Preferred Stock
and Purchaser will purchase and accept such Preferred Stock from the Company.
The purchase price for such Preferred Stock (the "Purchase Price") shall be
Fifty Million Dollars ($50,000,000) or One Thousand Dollars ($1,000) per share.
2. The Purchase Price shall be paid to the Company at the Closing by wire
transfer in immediately available funds in the amounts and to the account to be
specified by the Company.
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3. The Preferred Stock shall be issued by the Company with the rights,
voting powers, preferences and restrictions as set forth on the Certificate of
Designations attached as Exhibit A (the "Certificate of Designations").
B. Delivery of Shares of Preferred Stock.
1. The Company has reserved sufficient shares of its authorized but
unissued Preferred Stock for the purpose of the transactions contemplated by
this Agreement and shall cause such shares to be transferred to Purchaser on the
Closing Date. The Company has additionally reserved and authorized sufficient
shares of the Company's common stock in order to allow Purchaser to convert each
share of the Preferred Stock into 190.476 shares of the Company's Common Stock.
C. Closing Date. The closing of the transactions contemplated herein (the
"Closing") shall take place on February 3, 1999, or on such other date as the
Company and the Purchaser may mutually agree (the "Closing Date") at a place
mutually agreed to by the parties.
D. Securities Law Compliance.
1. Purchaser represents to the Company, that the Preferred Stock being
purchased by the Purchaser is being acquired for the Purchaser's own separate
account, for investment only, and not with a view to, or for sale in connection
with, any distribution of the Preferred Stock in violation of the Securities Act
of 1933, as amended (the "Securities Act"), or any rule or regulation under the
Securities Act. The Purchaser further represents and agrees not to take, or
cause to be taken, any action that would deem it to be an underwriter (as
defined in the Securities Act) of the Preferred Stock. The Purchaser understands
and agrees that (a) the Preferred Stock may not be transferred or sold for value
in the absence of registration or qualification or an exemption from
registration or qualification under the Securities Act, and the securities or
Blue Sky laws of any state, as required, (b) a stop transfer instruction will be
issued with respect to the Preferred Stock, and (c) the following legend will be
placed on the certificates representing the Preferred Stock to be received :
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, THE NEVADA SECURITIES ACT OR OKLAHOMA
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR
QUALIFICATION OF THEM UNDER THE SECURITIES ACT OF 1933, THE NEVADA SECURITIES
ACT AND THE SECURITIES OR BLUE SKY LAWS OF ANY OTHER STATE, AS REQUIRED, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION
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OR QUALIFICATION IS NOT REQUIRED UNDER SUCH ACTS AND/OR LAWS.
In addition, the Purchaser shall deliver such documents and other information as
the Company shall reasonably require to verify their its status as an
"Accredited Investor" for purposes of Regulation D of the Securities and
Exchange Commission. .
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
A. Organization and Standing; Charter and Bylaws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Nevada and is in good standing under such laws. The Company
has the requisite corporate power to own and operate its properties and assets,
and to carry on its businesses as presently conducted and as proposed to be
conducted. The Company is qualified, licensed or domesticated as a foreign
corporation in any jurisdiction where the failure to be so qualified could
reasonably be expected to have a material adverse effect on the business, assets
or financial condition of the Company and the Subsidiaries considered as a whole
(a "Material Adverse Effect"). The Company has furnished the Purchaser with
copies of its certificate of incorporation and bylaws. Said copies are true,
correct and complete and contain all amendments through the date of this
Agreement.
B. Corporate Power. The Company has all requisite legal and corporate power
to enter into this Agreement and to carry out and perform its obligations under
the terms of this Agreement. Neither the certificate of incorporation nor bylaws
of the Company, nor any other material instrument to which the Company is a
party, or by which the Company is bound, nor any court order or any governmental
law, rule or regulation, will be violated by the Company's execution and
consummation of this Agreement; subject, however, to the Company's obtainment of
the consents referred to in Sections VI.F and G.
C. Affiliates. Except as set forth in Disclosure Schedule II, Item C, the
Company does not own, directly or indirectly, 10% or more of the issued and
outstanding shares of stock or other interests in any corporation, limited
liability company, partnership, joint venture, or other entity.
D. Capitalization. The authorized capital stock of the Company is listed on
Disclosure Schedule II. D., attached hereto. The issued and outstanding shares
of the Company's common stock are listed on Disclosure Schedule II.D., attached
hereto. The existing issued and outstanding shares of all series of the
Company's preferred stock are as set forth on Disclosure Schedule II.D. Such
common stock and all series of the Company's preferred stock have been duly
authorized and were or will be validly issued, fully paid and nonassessable and
were or will be issued in compliance with all applicable state and federal laws
concerning the issuance of securities. Other than as set forth on Disclosure
Schedule II.D., there are no outstanding rights, options, warrants, conversion
rights, or
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agreements for the purchase or acquisition from the Company of any shares of its
capital stock. The Company owns 100% of all issued and outstanding stock of each
of the Subsidiaries.
E. Authorization. All corporate action on the part of the Company and its
directors and shareholders necessary for the transaction contemplated in this
Agreement have been taken . This Agreement is a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting enforcement of
creditors' rights, and except as limited by application of legal principles
affecting the availability of equitable remedies.
F. Financial Statements. The balance sheet of the Company and related
statement of earnings for the fiscal year ended December 31, 1997, and the
balance sheet as of the Interim Date, as defined below (collectively, the
"Financial Statements of the Company") have been supplied to the Purchaser, have
been prepared in accordance with the principles described therein, and fairly
present the financial condition and results of operations of the Company as of
the dates and for the periods thereof. The term "Interim Date" as used in this
Agreement shall mean September 30, 1998.
G. Changes in Financial Condition. Except as set forth on Disclosure
Schedule II, Item G, since the Interim Date: (a) The Company has not entered
into any transaction which was not in the ordinary course of business; (b) there
has been no adverse change in the condition (financial or otherwise), business,
property, assets, or liabilities of the Company that could reasonably be
expected to have a Material Adverse Effect, other than changes as a result of
drilling or other customary oil and gas operations which have been consistent
with the past practices (including changes in production rates on producing
wells) or as a result of general industry conditions (including prices) or other
changes in the ordinary course of business; (c) there has been no damage to,
destruction of or loss of physical property (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse Effect ;
(d) the Company has not declared or paid any dividend or made any distribution
on its common or preferred stock, redeemed, purchased or otherwise acquired any
of its stock, granted any options to purchase shares of its stock except in
accordance with past practices, or issued any shares of its stock; (e) the
Company has not materially increased the compensation of any officer, or the
rate of pay of its employees as a group, except as part of regular compensation
increases in the ordinary course of business; (f) the Company has not received
notice that there has been a loss of any of its major gas purchasers; (g) there
has been no resignation or termination of employment of any key officer or key
employee of the Company and the Company does not know of the impending
resignation or termination of employment of any of its officers or employees
that if consummated could reasonably be expected to have a Material Adverse
Effect ; (h) there has been no labor dispute involving the Company or its
employees and none is pending or, to the Company's knowledge, threatened; (i)
there has been no write down of any of the Company's oil and gas reserves or
other assets; and (j) to the knowledge of the Company, there has been no other
event or condition of any character pertaining to or affecting the asserts,
business, properties or liabilities of the Company that could reasonably be
expected to have a Material Adverse Effect.
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<PAGE>
H. Material Contracts and Commitments. All material contracts, commitments,
agreements, and instruments (the "Contracts") to which the Company is a party
are legal, valid, binding, and in full force and effect in all material respects
and enforceable in accordance with their terms, except (i) as limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws of general
application affecting enforcement of creditors' rights, (ii) as limited by
application of legal principles affecting the availability of equitable
remedies, and (iii) where enforceability would not have a Material Adverse
Effect. For purposes of this Section II.H., a contract, commitment, agreement or
instruments shall be considered "material" if it extends for a duration longer
than thirty (30) days or involves consideration in excess of $10,000 in the
aggregate. The Company is not in material default under any of the Contracts.
The Company has made available to Purchaser originals or copies of the Contracts
for review by Purchaser.
I. Compliance with Other Instruments, None Burdensome, etc. The Company is
not in violation of any term of its articles of incorporation or bylaws, or in
any material respect of any of the Contracts, or, to the knowledge of the
Company, any judgment, decree or order, or any material statute, rule, or
regulation applicable to it. Except as set forth on Disclosure Schedule II, Item
I, the execution, delivery, and performance by the Company of this Agreement,
and the transfer of the securities pursuant hereto, will not result in any such
violation or be in conflict with or constitute a default under any such term, or
cause the acceleration of maturity of any loan, indenture or material obligation
to which the Company is a party or by which it is bound or with respect to which
it is an obligor or guarantor or result in the creation or imposition of any
material lien, claim, charge, restriction, or encumbrance of any kind whatsoever
upon, or, to the knowledge of the Company after due inquiry, give to any other
person any interest or right (including any right of termination or
cancellation) in or with respect to any of the material properties, assets,
business or agreements of the Company.
J. Litigation. Except as set forth on Disclosure Schedule II, Item J, there
are no claims, demands, actions, proceedings, or investigations pending which,
either in any case or in the aggregate, would, if adversely determined, result
in any Material Adverse Effect on the business, conditions, affairs, or
operations of the Company or in any of its properties and assets taken in the
aggregate, or in any material impairment of the right or ability of the Company
to carry on its business as presently conducted, or in any material liability on
the part of the Company, or which question the validity of this Agreement or any
action taken or to be taken in connection herewith.
K. Governmental Consents. No consent, approval, or authorization of, or
designation, declaration, or filing with, any governmental unit is required on
the part of the Company in connection with the valid execution and delivery of
this Agreement or the consummation of the trans actions contemplated hereby,
except for such filings as have been made or are to be made under the
Hart-Scott-Rodino Act of 1976, as amended (the "HSR Act") and Form D under the
Securities Act.
L. Insurance. The Company has currently in force liability insurance with
insurance companies or associations, and under policies listed and described in
Disclosure Schedule II, Item L attached hereto, during the periods described
therein, and, except as set forth on Disclosure Schedule
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II, Item L, the Company is not aware of any claims for personal injuries, death
or property damage for any reason now pending or threatened against the Company
and knows of no material damage to personal property by the Company or its
agents, servants or employees, which might give rise to such claims, or if any
such routine claims have arisen they are adequately covered by such liability
insurance.
M. Intellectual Property. There are no patents, patent applications,
registered trademarks, trademark applications, trade names, and registered
copyrights under which the Company operates, except as disclosed on Disclosure
Schedule II, Item M. The Company has not received any notice or claim of
infringement of any patent, invention, right, trademark, trade name or copyright
of others with respect to any process, method, formula or procedure used by the
Company in the present conduct of its business.
N. Title to and Condition of Properties. The Company has good and
defensible title to all of its tangible and intangible property and assets
(other than the Oil and Gas Properties defined in Sub-Section U below),
including those reflected in the Financial Statements of the Company (except
such property or assets as have since the Interim Date been sold or otherwise
disposed of in the ordinary course of business). Except as set forth in
Disclosure Schedule II, Item N or as disclosed in the Financial Statements of
the Company such property and assets are subject to no mortgage or security
interest, conditional sales contract, charge, lien or encumbrance (except liens
for current taxes not yet due and payable, mechanic's, materialmen's and other
statutory liens and such imperfections of title, easements and encumbrances, if
any, as are not substantial in character, amount or extent and do not materially
detract from the value of, or interfere with the present use of the pro perties
subject thereto or affected thereby, or otherwise materially impair the business
operations of the Company). Subsequent to the Interim Date, the Company has not
sold or disposed of any of its property and assets or obligated itself to do so
except in the ordinary course of business. Except for such minor defects as are
not substantial in character and which do not have a materially adverse effect
upon the validity thereof, all material personal property leases to which the
Company is a party are valid and effective, and there is not under any such
lease any existing material default or event which, with notice or lapse of time
or both, would constitute a material default and in respect of which the Company
has not taken reasonable steps to prevent such a default from occurring.
O. Taxes. Except for the 1997 Federal Tax Return (for which no tax is
owing), the Company has timely filed all tax returns that are required to have
been filed prior to the date of this Agreement with all appropriate federal,
state, county and local governmental agencies or instrumen talities for the
Company, and each of the returns correctly reflects the income and tax liability
required to be shown therein. The Company has paid all income, franchise, and
other taxes due by it as reflected on the returns. There is no pending dispute
with any taxing authority relating to any of the returns which, if determined
adversely to the taxpayer, would result in the assertion by any taxing authority
of any valid deficiency in a material amount for taxes against the Company.
Federal income tax returns of the Company and its predecessors in interest have
never been audited by the Internal Revenue Service.
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P. Environmental Matters.
1. As used in this Agreement, "Environmental Laws" means all local, state,
and federal environmental, health, and safety laws, rules, ordinances and
regulations in all jurisdictions in which the Company has done business or owned
property, including, without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Clean Water Act, the Federal Clean Air Act, and the
Federal Occupational Safety and Heath Act.
2. Except as set forth on Disclosure Schedule II, Item P, neither the
conduct nor operation of the Company nor any condition of any property owned or
leased or ever owned or leased and operated by the Company, and to the knowledge
of the Company, any oil and gas property owned or leased or ever owned or leased
but not operated by the Company: (i) violates or violated Environmental Laws in
any respect that would have a Material Adverse Effect; and (ii) no condition or
event has occurred with respect to the Company or any such property that, with
notice or the passage of time, or both, would constitute a violation requiring
action by the Company to remedy, stabilize, neutralize, clean up or otherwise
alter the environmental condition of any such property where the aggregate cost
of such actions would have a Material Adverse Effect. The Company has not
received any notice from any governmental agency or any other person or entity
that the operation of any facilities or any property ever owned, leased, or
operated by it, is or was in violation of any Environmental Laws or is
responsible (or potentially responsible) for remedying, establishing,
neutralizing, or cleaning up any pollutants, contaminants, or hazardous or toxic
waste, substances or materials at, on, or beneath any such property where the
aggregate cost thereof would have a Material Adverse Effect.
3. Except as set forth on Disclosure Schedule II, Item P, the Company has
obtained or applied for all environmental, health and safety permits and
authorizations (collectively "Environmental Permits") necessary for the
construction of its facilities and the operation of its business, as presently
conducted for the use, storage, treatment, transportation, release, emission and
disposal of raw materials, by-products, wastes and other substances used or
produced by or otherwise relating to its business except to the extent failure
to obtain or apply for such permit or authorization would not in the aggregate
have a Material Adverse Effect, and all such permits are in good standing and in
all material respects in full force and effect or, where applicable, a renewal
application has been timely filed, and agency approval is expected to be
obtained, and the Company is in compliance in all material respects with all
terms and conditions of all such Environmental Permits, except to the extent
failure to comply with such Environmental Permits would not in the aggregate
have a Material Adverse Effect.
Q. Compliance with the Law. Except as set forth on Disclosure Schedule II,
Item P, the Company (i) has all licenses, franchises, permits, and other
governmental authorizations of a material nature that are legally required to
enable it to conduct its business in all material respects, and (ii) is in
substantial compliance in all material respects with all applicable laws, rules
and regulations except
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to the extent failure to comply therewith or failure to obtain such license,
franchise, permit or authorization would not in the aggregate have a Material
Adverse Effect.
R. Benefit Plans and ERISA Compliance. Except as set forth on Disclosure
Schedule II, Item R, the Company has no employee benefit plans or employment
contracts. Except with respect to the employee benefit plans set forth in
Disclosure Schedule II, Item R, the Company is not subject to the requirements
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and contributions or other material payments are required to be made by the
Company under ERISA. No event has occurred or would reasonably be expected to
subject the Company to any liability under EISA, the Internal Revenue Code of
1986, as amended (the "Code") or similar or other applicable laws, rules or
regulations in respect to any Company benefit plans, and no reportable event has
occurred that would reasonably expect to result in material liability to the
Company. The Company is not a party to any collective bargaining agreement or
other labor agreement.
S. Condition of Assets. To the knowledge of the Company, the buildings,
plants, structures, and equipment owned by the Company and which are material to
the operations of the Company are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, plants, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost to the Company.
T. Accounts Receivable. All accounts receivable of the Company represent or
will represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid prior to the
Closing, the accounts receivable of the Company are or will be, as of the
Closing, reasonably expected to be collectible in all material respects, subject
only to allowance for doubtful accounts, and calculated consistently with past
practice. There is no contest, claim or asserted right of set-off, under any
contract or with any obligor of a material account receivable relating to the
amount or validity of such account receivable.
U. Oil and Gas Properties. The Oil and Gas Properties, as hereinafter
defined, are subject to no mortgage, security interests, or liens created by the
Company except for Permitted Encumbrance, as hereinafter defined. The Company
has either good title or is the owner of or has rights consistent with industry
practice to use its Oil and Gas Properties, if any. The term "Oil and Gas
Properties", as used herein means all of the Company's right, title, interest
and estate, real or personal, recorded or unrecorded, movable or immovable,
tangible or intangible, in and to: (i) oil, gas and mineral leases, subleases
and other leaseholds, royalties, overriding royalties, net profits interests,
mineral fee interests, carried interests, and other interests in oil and gas
(the "Leases") and any and all oil, gas, water or injection wells thereon (the
"Wells"), (ii) any pools or units which include all or a part of any Lease or
include any Well (the "Units") and including all right, title and interest of
the Company in production from any such pool or Unit, whether such pool or Unit
production comes from wells located on or off of a Lease, and all tenements,
hereditaments and appurtenances belonging to the Leases and Units, (iii)
interests under or derived from all presently existing contracts, agreements and
instruments by which such properties are bound, to the extent applicable to such
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properties, including, but not limited to, operating agreements, unitization,
pooling and communitization agreements, declarations and orders, joint venture
agreements, and farmin and farmout agreements, (iv) easements, permits,
licenses, servitudes, rights-of-way, surface leases and other surface rights
appurtenant to, and used or held for use solely in connection with the
properties, and (v) equipment, machinery, fixtures, and other tangible personal
property and improvements located on such properties. As used herein, the term
"Permitted Encumbrances" means: (i) matters described without material omission
in Disclosure Schedule II, Item N, or reflected in the Financial Statements of
the Company (ii) royalties, overriding royalties, net profits interests,
production payments and other burdens on production which do not reduce the
Company's net revenue interest in any of the Oil and Gas Properties to less than
the Company's interest; (iii) liens for taxes, assessments, labor and materials
where payment is not due, (iii) operating agreements, unit agree ments,
unitization and pooling designations and declarations, gathering and
transportation agreements, processing agreements, gas, oil and liquids purchase,
sale and exchange agreements, and other similar agreements provided (A) they
contain terms and conditions customary in the oil and gas industry, (B) they do
not adversely affect or burden the ownership of the Oil and Gas Properties (C)
all amounts due and payable by the Company have been paid in full, and (D) the
Company is not in material default thereunder, (iv) regulatory authority of
governmental agencies not presently or previously violated, easements, surface
leases and rights, plat restrictions and similar encumbrances, provided that
they do not materially detract from the value, or materially increase the cost
of operation of any of the Oil and Gas Properties or otherwise adversely affect
the operation thereof, and (v) liens, charges, encumbrances and irregularities
in the chain of title which, because of remoteness in or passage of time,
statutory cure periods, marketable title acts or other similar reasons, have not
affected or interrupted, and are not reasonably expected to affect or interrupt
in any material way, the claimed ownership of the Company or the receipt of
production revenues from the Oil and Gas Properties affected thereby.
V. Disclosure. This Agreement and the exhibits hereto, as they apply to the
Company, Disclosure Schedule II, the Financial Statements of the Company, and
all certificates delivered to the Purchaser pursuant to this Agreement, when
read together, do not contain any untrue statement of a material fact and do not
omit to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
III. REPRESENTATIONS AND WARRANTIES OF SUBSIDIARIES.
The Subsidiaries, individually and not jointly, join in the execution of
this Agreement for the purpose of making the representations and warranties to
the Purchaser as follows, with each Subsidiary representing only as to itself:
A. Organization and Standing, Charter and By-Laws. Each of the
Subsidiaries, except Bluebird, is a Texas corporation duly organized and validly
existing under and by virtue of the laws of the State of Texas and is in good
standing under such laws. Bluebird is an Oklahoma corporation duly organized and
validly existing under and by virtue of the laws of the State of Oklahoma. Each
of the Subsidiaries have the requisite corporate power to own and operate their
properties and assets,
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and to carry on their businesses as presently conducted and as proposed to be
conducted. Each of the Subsidiaries is qualified, licensed or domesticated as a
foreign corporation in any jurisdiction where the nature of its activities and
of properties owned or leased by it makes such qualification, licensing or
domestication necessary at this time, except where failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect. Each of the
Subsidiaries have furnished the Purchaser with copies of their certificates of
incorporation and bylaws. Said copies are true, correct and complete and contain
all amendments through the date of this Agreement.
B. Corporate Power. Each of the Subsidiaries has all requisite legal and
corporate power to enter into this Agreement and to carry out and perform their
obligations under the terms of this Agreement. Neither the certificate of
incorporation nor bylaws of any of the Subsidiaries, nor any other material
instrument to which any of the Subsidiaries are a party, or by which any of the
Subsidiaries are bound, nor any court order or any governmental law, rule or
regulation, will be violated by the Subsidiaries' execution and consummation of
this Agreement; subject, however, to the obtainment of the consents referred to
in Sections VI.F and G.
C. Subsidiaries and Affiliates. Except as set forth in Disclosure Schedule
III, Item C, each Subsidiary does not own, directly or indirectly, 10% or more
of the issued and outstanding shares of stock or other interests in any
corporation, limited liability company, partnership, joint venture, or other
entity.
D. Capitalization. The authorized capital stock of each of the Subsidiaries
is listed on Disclosure Schedule III. D., attached hereto. The issued and
outstanding shares of the Subsidiaries' common stock are listed on Disclosure
Schedule III.D., attached hereto. None of the Subsidiaries have any issued and
outstanding shares of preferred stock. All common stock of each of the
Subsidiaries has been duly authorized and was validly issued, fully paid and
nonassessable and was issued in compliance with all applicable state and federal
laws concerning the issuance of securities. Other than as set forth on
Disclosure Schedule III.D., there are no outstanding rights, options, warrants,
conversion rights, or agreements for the purchase or acquisition from any of the
Subsidiaries of any shares of their respective capital stock.
E. Authorization. All corporate action on the part of each of the
Subsidiaries and their directors necessary for the transaction contemplated in
this Agreement has been taken. This Agreement is a legal, valid and binding
obligation of each of the Subsidiaries, enforceable against each of the
Subsidiaries in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting enforcement of creditors' rights, and except as limited by application
of legal principles affecting the availability of equitable remedies.
F. Changes in Financial Condition. Except as set forth on Disclosure
Schedule III, Item F, since the Interim Date: (a) Each of the Subsidiaries have
not entered into any transaction which was not in the ordinary course of
business; (b) there has been no materially adverse change in the condition
(financial or otherwise), business, property, assets, or liabilities of each of
the Subsidiaries
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that could reasonably be expected to have a Material Adverse Effect, other than
changes as a result of drilling or other customary oil and gas operations which
have been consistent with the past practices (including changes in production
rates on producing wells) or as a result of general industry conditions
(including prices) or other changes in the ordinary course of business; (c)
there has been no damage to, destruction of or loss of physical property
(whether or not covered by insurance) that could reasonably be expected to have
a Material Adverse Effect; (d) each of the Subsidiaries has not declared or paid
any dividend or made any distribution on its common stock, redeemed, purchased
or otherwise acquired any of their stock, granted any options to purchase shares
of their stock, or issued any shares of their stock; (e) each of the
Subsidiaries have not materially increased the compensation of any officer, or
the rate of pay of their employees as a group, except as part of regular
compensation increases in the ordinary course of business; (f) each of the
Subsidiaries have not received notice that there has been a loss of any of its
major gas purchasers; (g) there has been no resignation or termination of
employment of any key officer or key employee of the Subsidiaries and the
Subsidiaries do not know of the impending resignation or termination of
employment of any of their officers or employees that if consummated that could
reasonably be expected to have a Material Adverse Effect; (h) there has been no
labor dispute involving each of the Subsidiaries or its employees and none is
pending or, to the knowledge of any of the Subsidiaries threatened; (i) there
has been no write down of any of the Subsidiaries' oil and gas reserves or other
assets; and (j) to the knowledge of each of the Subsidiaries, there has been no
other event or condition of any character pertaining to and affecting the
assets, business, properties or liabilities of the Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
G. Material Contracts and Commitments. All material contracts, commitments,
agreements, and instruments (the "Subsidiaries' Contracts") to which any of the
Subsidiaries are a party are legal, valid, binding, and in full force and effect
in all material respects and enforceable in accordance with their terms, except
(i) as limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws of general application affecting enforcement of creditors' rights, (ii) as
limited by application of legal principles affecting the availability of
equitable remedies, and (iii) where the lack of enforceability would not have a
Material Adverse Effect. For purposes of this Section III.G., a contract,
commitment, agreement or instruments shall be considered "material" if it
extends for a duration longer than thirty (30) days or involves consideration in
excess of $10,000 in the aggregate. None of the Subsidiaries is in material
default under any of the Subsidiaries' Contracts. Each of the Subsidiaries has
made available to Purchaser originals or copies of the material Subsidiaries'
Contracts for review by Purchaser.
H. Compliance with Other Instruments, None Burdensome, etc. Each of the
Subsidiaries is not in violation of any term of its certificates of
incorporation or bylaws, or in any material respect of any of the Subsidiaries'
Contracts to which such Subsidiary is a party, or, to the knowledge of any of
the Subsidiaries, any judgment, decree or order, or any material statute, rule,
or regulation applica ble to it. Except as set forth on Disclosure Schedule III,
Item H, the execution, delivery, and performance by each of the Subsidiaries of
this Agreement will not result in any such violation or be in conflict with or
constitute a default under any such term, or cause the acceleration of maturity
of any loan, indenture or material obligation to which any of the Subsidiaries
are a party or by which any
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of the Subsidiaries are bound or with respect to which they are an obligor or
guarantor or result in the creation or imposition of any material lien, claim,
charge, restriction, or encumbrance of any kind whatsoever upon, or, to the
knowledge of any of the Subsidiaries after due inquiry, give to any other person
any interest or right (including any right of termination or cancellation) in or
with respect to any of the material properties, assets, business or agreements
of the Company and the Subsidiaries taken as a whole.
I. Litigation. Except as set forth on Disclosure Schedule III, Item I,
there are no claims, demands, actions, proceedings, or investigations pending
which, either in any case or in the aggregate, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, or in any material
impairment of the right or ability of any of the Subsidiaries to carry on their
respective business as presently conducted, or in any material liability on the
part of each of the Subsidiaries, or which question the validity of this
Agreement or any action taken or to be taken in connection herewith.
J. Governmental Consents. No consent, approval, or authorization of, or
designation, declaration, or filing with, any governmental unit is required on
the part of any of the Subsidiaries in connection with the valid execution and
delivery of this Agreement or the consummation of the trans actions contemplated
hereby.
K. Insurance. Each of the Subsidiaries has currently in force (or the
Company currently maintains in force for its benefits)liability insurance with
insurance companies or associations, and under policies listed and described in
Disclosure Schedule III, Item K attached hereto, during the periods described
therein, and, except as set forth on Disclosure Schedule II, Item K, each of the
Subsidiaries is not aware of any claims for personal injuries, death or property
damage for any reason now pending or threatened against any of the Subsidiaries
and know of no material damage to personal property by any of any of the
Subsidiaries or their agents, servants or employees, which might give rise to
such claims, or if any such routine claims have arisen they are adequately
covered by such liability insurance.
L. Intellectual Property. There are no patents, patent applications,
registered trademarks, trademark applications, trade names, and registered
copyrights under which any of the Subsidiaries operate, except as disclosed on
Disclosure Schedule III, Item L. The Subsidiaries have not received any notice
or claim of infringement of any patent, invention, right, trademark, trade name
or copyright of others with respect to any process, method, formula or procedure
used by the Subsidiaries in the present conduct of their business.
M. Title to and Condition of Properties. Each of the Subsidiaries has good
and defensible title to all of its tangible and intangible property and assets
(other than the Oil and Gas Properties defined in Sub-Section U below),
including those reflected in the Financial Statements of the Subsidiaries
(except such property or assets as have since the Interim Date been sold or
otherwise disposed of in the ordinary course of business). Except as set forth
in Disclosure Schedule III, Item M, or as disclosed in the Financial Statements
of the Company such property and assets are subject
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to no mortgage or security interest, conditional sales contract, charge, lien or
encumbrance (except liens for current taxes not yet due and payable mechanic's,
materialmen's and other statutory liens and such imperfections of title,
easements and encumbrances, if any, as are not substantial in charac ter, amount
or extent and do not materially detract from the value of, or interfere with the
present use of the properties subject thereto or affected thereby, or otherwise
materially impair the business operations of the Subsidiaries). Subsequent to
the Interim Date, none of the Subsidiaries has sold or disposed of any of their
property and assets or obligated themselves to do so except in the ordinary
course of business. Except for such minor defects as are not substantial in
character and which do not have a materially adverse effect upon the validity
thereof, all material personal property leases to which any of the Subsidiaries
is a party are valid and effective, and there is not under any such lease any
existing material default or event which, with notice or lapse of time or both,
would constitute a material default and in respect of which any of the
Subsidiaries have not taken reasonable steps to prevent such a default from
occurring.
N. Environmental Matters.
1. Except as set forth on Disclosure Schedule III, Item M, neither the
conduct nor operation of any of the Subsidiaries nor any condition of any
property owned or leased or ever owned or leased and operated by any of the
Subsidiaries, and to the knowledge of any of the Subsidiaries, any oil and gas
property owned or leased or ever owned or leased but not operated by any of the
Subsidiaries: (i) violates or violated Environmental Laws in any respect that
would have a Material Adverse Effect ; and (ii) no condition or event has
occurred with respect to any of the Subsidiaries or any such property that, with
notice or the passage of time, or both, would constitute a violation requiring
action by any of the Subsidiaries to remedy, stabilize, neutralize, clean up or
otherwise alter the environmental condition of any such property where the
aggregate cost of such actions would have a Material Adverse Effect. The
Subsidiaries have not received any notice from any governmental agency or any
other person or entity that the operation of any facilities or any property ever
owned, leased, or operated by it as of the date hereof, is or was in violation
of any Environmental Laws or is responsible (or potentially responsible) for
remedying, establishing, neutralizing, or cleaning up any pollutants,
contaminants, or hazardous or toxic waste, substances or materials at, on, or
beneath any such property where the aggregate cost thereof would have a Material
Adverse Effect.
2. Except as set forth on Disclosure Schedule III, Item N, each of the
Subsidiaries has obtained or applied for all environmental, health and safety
permits and authorizations (collectively "Environmental Permits") necessary for
the construction of its facilities and the operation of its business, as
presently conducted for the use, storage, treatment, transportation, release,
emission and disposal of raw materials, by-products, wastes and other substances
used or produced by or otherwise relating to its business except to the extent
failure to obtain or apply for such permit or authorization would not in the
aggregate have a Material Adverse Effect, and all such permits are in good
standing and in all material respects in full force and effect or, where
applicable, a renewal application has been timely filed, and agency approval is
expected to be obtained, and the Subsidiaries are in compliance in all material
respects with all terms and conditions of all such Environmental
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Permits except to the extent failure to comply with such Environmental Permits
would not in the aggregate have a Material Adverse Effect..
O. Compliance with the Law. Each of the Subsidiaries (i) has all licenses,
franchises, permits, and other governmental authorizations of a material nature
that are legally required to enable it to conduct its business in all material
respects, and (ii) are in substantial compliance in all material respects with
all applicable laws, rules and regulations except to the extent failure to
comply therewith or failure to obtain such license, franchise, permit or
authorization would not in the aggregate have a Material Adverse Effect.
P. Benefit Plans and ERISA Compliance. Except as set forth on Disclosure
Schedule III, Item P, each of the Subsidiaries has no employee benefit plans or
employment contracts. Except with respect to the employee benefit plans set
forth in Disclosure Schedule III, Item P, each of the Subsidiaries is not
subject to the requirements of the ERISA and no contributions or other material
payments are required to be made by the Subsidiaries under ERISA. No event has
occurred or would reasonably be expected to subject any of the Subsidiaries to
any liability under ERISA, the Code or similar or other applicable laws, rules
or regulations in respect to any of the Subsidiaries' benefit plans, and no
reportable event has occurred that would reasonably expect to result in material
liability to any of the Subsidiaries. Each of the Subsidiaries is not a party to
any collective bargaining agreement or other labor agreement.
Q. Condition of Assets. To the knowledge of each of the Subsidiaries, the
buildings, plants, structures, and equipment owned by each of the Subsidiaries
and which are material to the operations of each of the Subsidiaries are
structurally sound, in good operating condition and repair, and adequate for the
uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost to the Company and the Subsidiaries taken as a whole.
R. Accounts Receivable. All accounts receivable of each of the Subsidiaries
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing, the accounts receivable of each of the Subsidiaries are or
will be, as of the Closing, reasonably expected to be collectible in all
material respects, subject only to allowance for doubtful accounts, and
calculated consistently with past practice. There is no contest, claim or
asserted right of set-off, under any contract or with any obligor of a material
account receivable relating to the amount or validity of such account
receivable.
S. Oil and Gas Properties. The Subsidiaries' Oil and Gas Properties, as
hereinafter defined, are subject to no mortgage, security interests, or liens
created by any of the Subsidiaries, except for Subsidiaries' Permitted
Encumbrance, as hereinafter defined. Each of the Subsidiaries has either good
title or is the owner of or has the right to use, consistent with industry
practice its respective Subsidiaries' Oil and Gas Properties, if any. The term
"Subsidiaries' Oil and Gas Properties", as used herein means for each of the
Subsidiaries their respective right, title, interest and estate, real or
personal, recorded or unrecorded, movable or immovable, tangible or intangible,
in and
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to: (i) oil, gas and mineral leases, subleases and other leaseholds, royalties,
overriding royalties, net profits interests, mineral fee interests, carried
interests, and other interests (the "Subsidiaries' Leases") and any and all oil,
gas, water or injection wells thereon (the "Subsidiaries' Wells"), (ii) any
pools or units which include all or a part of any Subsidiaries' Lease or include
any Subsidiaries' Well (the "Subsidiaries' Units") and including all right,
title and interest of the Subsidiaries in production from any such pool or
Subsidiaries' Unit, whether such pool or Subsidiaries' Unit production comes
from wells located on or off of a Subsidiaries' Lease, and all tenements,
hereditaments and appurtenances belonging to the Subsidiaries' Leases and
Subsidiaries' Units; (iii) interests under or derived from all presently
existing contracts, agreements and instruments by which such properties are
bound, to the extent applicable to such properties, including, but not limited
to, operating agreements, unitization, pooling and communitization agreements,
declarations and orders, joint venture agreements, and farmin and farmout
agreements, (iv) easements, permits, licenses, servitudes, rights-of-way,
surface leases and other surface rights appurtenant to, and used or held for use
solely in connection with the properties, and (v) equipment, machinery,
fixtures, and other tangible personal property and improvements located on such
properties. As used herein, the term "Subsidiaries' Permitted Encumbrances"
means: (i) matters described without material omission in Disclosure Schedule
III, Item S, (ii) any pools or units which include all or a part of any
Subsidiaries' Lease or include any Subsidiaries' Well (the "Subsidiaries'
Units") and including all right, title and interest of the Subsidiaries in
production from any such pool or Subsidiaries' Unit, whether such pool or
Subsidiaries' Unit production comes from wells located on or off of a
Subsidiaries' Lease, and all tenements, hereditaments and appurtenances
belonging to the Subsidiaries' Leases and Subsidiaries' Units, (iii) liens for
taxes, assessments, labor and materials where payment is not due, (iv) operating
agreements, unit agreements, unitization and pooling designations and
declarations, gathering and transportation agreements, processing agreements,
gas, oil and liquids purchase, sale and exchange agreements, and other similar
agreements and which, if material to the value of the Subsidiaries' Oil and Gas
Properties taken as a whole, contain terms and conditions customary in the oil
and gas industry.
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company as follows:
A. Organization and Standing. Purchaser is a corporation duly organized and
existing under, and by virtue of, the laws of the State of Oklahoma and is in
good standing under its laws. Purchaser is qualified, licensed, or domesticated
as a foreign corporation in each jurisdiction where the nature of its activities
or the properties owned or leased by it makes such qualification, licensing, or
domestication necessary at this time.
B. Corporate Powers. Purchaser has all requisite legal and corporate power
to enter into this Agreement and to carry out and perform its respective
obligations under the terms of this Agreement. Neither the certificate of
incorporation nor bylaws of Purchaser, nor any other instrument to which the
Purchaser is a party, or by which Purchaser is bound, nor any court order or
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any governmental law, rule or regulation, will be violated by Purchaser's
execution and consummation of this Agreement.
C. No Restriction. Purchaser is not subject to any order, judgment or
decree, or the subject of any litigation, claim or proceeding, pending or
threatened, or any other restriction of any kind or character known to
Purchaser, which would affect its ability to carry out the transactions
contemplated by this Agreement.
D. Authorization. All corporate action on the part of Purchaser, its
directors, and stockholders necessary for the transactions contemplated by this
Agreement shall have been taken on or before the execution of this Agreement.
This Agreement is a legal, valid, and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting enforcement of creditors' rights, and except as limited by
application of legal principles affecting the availability of equitable
remedies.
E. Governmental Consent, etc. No consent, approval, or authorization of, or
designation, declaration, or filing with, any governmental unit is required on
the part of Purchaser in connection with the valid execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
F. Litigation, etc. There are no actions, proceedings, or investigations
pending or, to Purchaser's knowledge, any basis therefor thereof, which question
the validity of this Agreement or any other action taken or to be taken in
connection herewith or which would have a material adverse effect on Purchaser.
G. Purchaser's Ownership of Stock of Company. Prior to the Closing,
Purchaser does not own any other equity securities or debt instruments issued by
the Company, including, but not limited to any of the Company's Common Stock and
10% Senior Notes.
H. Disclosure. This Agreement and the exhibits and schedules hereto, as
they apply to Purchaser, when read together, do not contain any untrue statement
of a material fact and do not omit to state a material fact necessary in order
to make the statements contained therein or herein not misleading.
V. OTHER AGREEMENTS.
A. The Shareholder Agreement. At the Closing, the Company and the Purchaser
shall execute the Shareholder and Voting Agreement (the "Shareholder
Agreement"), a copy of which is attached hereto as Exhibit B, which shall
include, among other things, provisions relating to Purchaser's right to
nominate two members to the Company's Board of Directors.
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B. Registration Rights Agreement. At the Closing, the Company and the
Purchaser shall execute the Registration Rights Agreement (the "Registration
Rights Agreement"), a copy of which is attached hereto as Exhibit C.
C. Participation Agreement. On or before the Closing, the Company and the
Purchaser shall execute the Participation Agreement (the "Participation
Agreement") attached hereto as Exhibit D.
D. Marketing Agreement. On or before the Closing, the Company and the
Purchaser shall execute the Marketing Agreement (the "Marketing Agreement"),
attached hereto as Exhibit E.
E. Collateral Agreements. For the purposes of this Agreement, "Collateral
Agreements" shall mean the Shareholder Agreement, Registration Rights Agreement,
Participation Agreement and Marketing Agreement.
VI. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligations of the Company to close this transaction on the Closing
Date are subject, unless waived by the Company, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions:
A Representations, Warranties and Covenants. All representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Purchaser shall have performed in all material respects all agreements and
covenants required hereby to be performed by the Purchaser prior to or at the
Closing Date.
B. Consents. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit the Company to carry out the
transactions as contemplated by this Agreement shall have been obtained.
C. No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to adversely affect the transactions contemplated
hereunder.
D. Corporate Approvals. The Board of Directors and shareholders, if
necessary, of the Company shall have approved this Agreement, the Collateral
Agreements and the transactions contemplated thereby, including adoption of the
Certificate of Designations in conjunction with issuance of the Preferred Stock.
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E. HSR Act Compliance. Expiration of the applicable waiting period and
receipt of any necessary approvals of the transactions contemplated by this
Agreement by the Federal Trade Commission and Department of Justice under the
HSR Act.
F. Amendment of the Company's Senior Credit Facility. On or before the
Closing, the Company shall have received an amendment or waiver, in form
reasonably satisfactory to the Purchaser under the Second Amended and Restated
Credit Agreement, dated as of June 1, 1998, as amended, entered into among the
Company and certain banks, including Bankers Trust Company as Administrative
Agent and Issuing Bank, authorizing payment of cash dividends by the Company on
the Preferred Stock being purchased by the Purchaser.
G. Amendment to Indenture for Senior Notes. On or before the Closing, the
Company shall have received an amendment or waiver under the Indenture dated as
of May 29, 1997 for the 10% Senior Notes due 2007, authorizing payment of cash
dividends by Company on the Preferred Stock being purchased by the Purchaser, in
form reasonably satisfactory to the Purchaser.
H. Opinion. Receipt by the Company of an opinion from BT Wolfensohn in form
and content satisfactory to the Company's Board of Directors confirming the
fairness to the Company, from a financial point of view, of the Purchase Price,
as of the Closing Date.
I. Collateral Agreements. Execution and delivery by the Company, the
Purchaser and any other parties to the Collateral Agreements.
VII. CONDITIONS TO PURCHASER'S OBLIGATIONS.
The obligations of Purchaser to close the transaction on the Closing Date
are subject, unless waived by Purchaser to the satisfaction, on or before the
Closing Date, of each of the following conditions:
A. Representations, Warranties and Covenants. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and the
Company shall have performed in all material respects all agreements and
covenants required hereby to be performed by the Company prior to or at the
Closing Date.
B. Consents. All consents, approvals and waivers from governmental
authorities and other parties necessary to permit the Purchaser to carry out the
transactions as contemplated hereby shall have been obtained by the Closing
Date.
C. No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to adversely affect the transactions contemplated
hereunder.
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D. Due Diligence. Completion by the Purchaser of reasonable due diligence
of the Company by the Purchaser.
E. Corporate Approvals. The Board of Directors of the Purchaser shall have
approved this Agreement, the Collateral Agreements and the transactions
contemplated thereby.
F. HSR Act Compliance. Expiration of the applicable waiting period and
receipt of any necessary approvals of the transactions contemplated by this
Agreement by the Federal Trade Commission and the Department of Justice under
the HSR Act.
G. Collateral Agreements. Execution and delivery by the Company, the
Purchaser and any other parities of the Collateral Agreements.
H. Reservation of Conversion Shares. Sufficient shares of common stock of
the Company have been duly authorized and reserved for issuance upon conversion
by Purchaser of the Preferred Stock to the Company's common stock.
VIII. THE CLOSING PROCEDURE.
A. Closing Documents.
1. At the Closing, the Company shall deliver or cause to be delivered to
the Purchaser:
a. A certified copy of the resolutions of the Company's Board of Directors,
as required for valid approval of the execution and delivery of this Agreement
and the Collateral Agreements and the consummation of the transactions
contemplated hereby, including, but not limited to issuance of the Preferred
Stock.
b. A certificate signed by an appropriate officer of the Company stating
that the warranties and representations of the Company under this Agreement are
true and correct in all material respects as of the Closing Date and the Company
has complied in all material respects with all of its obligations and agreements
required to be performed prior to the Closing.
c. Copies of the Collateral Agreements executed by the Company or
Subsidiary, as appropriate.
d. A certified copy of the Certificate of Designation as filed with the
Secretary of State of Nevada.
e. A duly authorized and issued certificate representing the Preferred
Stock.
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2. At the Closing, the Purchaser shall deliver to the Company:
a. A certified copy of the resolutions of Purchaser's Board of Directors as
required for valid approval of the execution of this Agreement, the Collateral
Agreements, and the consummation of the transactions contemplated hereby.
b. Certificate signed by an appropriate officer of the Purchaser stating
that the warranties and representations of the Purchaser under this Agreement
are true and correct in all material respects as of the Closing Date and
Purchaser has complied in all material respects with all of its obligations and
agreements required to be performed prior to the Closing.
c. Copies of the Collateral Agreements executed by the Purchaser.
3. In addition, at the Closing or thereafter, the parties shall execute and
deliver such other documents and take such other actions as are required by this
Agreement or as any party may reasonably require.
IX. PAYMENT OF EXPENSES.
All costs and expenses, including, without limitation, legal fees and
taxes, incurred by each party hereto, in negotiating this Agreement or in
consummating the transactions contemplated hereby shall be paid by such party;
provided, however, that, at the Closing, the Company shall pay to the Purchaser
a fee of $905,000.00 in consideration for Purchaser's purchase of the Preferred
Stock. The parties shall share on an equal basis the cost of the filing fees
associated with the HSR Act.
X. INDEMNIFICATION.
A. By The Company.
1. Notwithstanding any investigation conducted before or after the Closing,
the Company shall indemnify and hold harmless the Purchaser in respect to any
and all monies, losses, damages, liabilities and expenses (including, without
limitation, settlement costs and any legal, accounting and other expenses for
investigating or defending any actions or threatened actions) (herein after
"Damages") reasonably incurred by the Purchaser in connection with each and all
of the following (a "Claim"):
(a) The breach of any representation or warranty made by the Company in
this Agreement or any document or instrument delivered pursuant to this
Agreement; and
(b) The breach of any agreement or obligation of the Company contained in
this Agreement or any documents or instruments delivered pursuant to this
Agreement.
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2. Anything to the contrary herein not withstanding, the Company shall only
be liable to the Purchaser for any Claims to the extent the Purchaser shall have
given written notice thereof in the manner provided in Section XI.C. below no
later than two (2) years after the Closing Date, except that as to any tax
claim, the notice shall be given prior to the expiration of the applicable
statute of limitations, without extensions, for assessment of taxes under the
Code (the "Release Date").
3. The indemnification obligations of the Company pursuant to this Article
X shall be subject to the following limitations and other provisions set forth
herein:
(a) No indemnification shall be required to be made by the Company pursuant
to this Article X with respect to any Claims except to the extent that the
aggregate amount of Damages incurred by the Purchaser with respect to all Claims
(whether asserted, resulting, imposed, or incurred before, on, or after the
Closing Date) exceeds $500,000.
(b) THE INDEMNIFICATION OBLIGATIONS OF THE COMPANY PURSUANT TO THIS ARTICLE
X SHALL BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE INCIDENTAL,
CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES.
B By Purchaser.
1. Purchaser shall indemnify and hold harmless the Company in respect of
any and all Damages reasonably incurred by the Company in connection with each
and all of the following (a "Claim"):
(a) The breach of any representation or warranty made by the Company in
this Agreement or any document or instrument delivered pursuant to this
Agreement; and
(b) The breach of any agreement or obligation of the Company contained in
this Agreement or any documents or instruments delivered pursuant to this
Agreement.
2. Anything to the contrary herein notwithstanding, the Purchaser shall
only be liable for Claims to the extent the Company has given written notice
thereof in the manner provided in Section XI.C. below no later than two (2)
years after the Closing Date (the "Release Date").
3. The indemnification obligations of the Purchaser pursuant to this
Article X shall be subject to the following limitations and other provisions set
forth herein:
(a) No indemnification shall be required to be made by the Purchaser
pursuant to this Article X with respect to any Claims except to the extent that
the aggregate amount of Damages incurred by the Company with respect to all
Claims (whether asserted, resulting, imposed, or incurred before, on, or after
the Closing Date) exceeds $500,000.
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(b) THE INDEMNIFICATION OBLIGATIONS OF THE PURCHASER PURSUANT TO THIS
ARTICLE X SHALL BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE INCIDENTAL,
CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES.
C. Procedures.
1. If, prior to the Release Date, a party shall receive notice of the
existence of any Claim for which such party claims indemnity hereunder (the
"Indemnitee"), the Indemnitee shall promptly give written notice thereof to the
other party (the "Indemnitor"). The Indemnitee shall furnish to the Indemnitor
in reasonable detail such information as the Indemnitee may have with respect
thereto (including in any case, copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same); provided,
however, that no failure or delay by the Indemnitee in the performance of the
foregoing prior to the Release Date shall reduce or otherwise affect the
obligation of the Indemnitor to indemnify and hold the Indemnitee harmless,
except to the extent that such failure or delay shall have actually impaired the
Indemnitor's ability to defend against, settle or satisfy such liability,
damage, loss, claim or demand, or increased the cost thereof.
2. In the event of asserted liabilities to and claims and demands of third
parties, including any action, suit or proceeding related thereto, which would
serve as a basis for a Claim, unless within fifteen (15) business days after
notice the Indemnitor elects to assume the defense thereof with counsel selected
by the Indemnitor and reasonably acceptable to Indemnitee, the Indemnitee shall
have the right to pay, compromise, settle or otherwise dispose of any claim or
conduct the defense or settlement of any action, suit or proceeding as the
Indemnitee shall deem appropriate; provided, however, that if the Indemnitee or
Indemnitor shall pay any claim or settle any suit, action or proceeding without
the written consent of the other, the right of the Indemnitee to make any claim
against the Indemnitor shall neither be deemed conclusively established nor
conclusively denied. The party not responsible for the defense shall have the
right to be represented by advisory counsel and accountants (at its own expense)
in connection with any action, suit or proceeding, and shall be kept reasonably
informed by the defending party of such action, suit or proceeding at reasonable
times at all stages thereof, whether or not such party is so represented.
Subject to any legal privilege, the Indemnitee and Indemnitor agree to make
available to each other, their counsel all information and documents reasonably
available to them which relate to such action, suit or proceeding, and
Indemnitee and Indemnitor agree to render to each other such assistance as they
may reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
3. Notwithstanding anything in this Agreement to the contrary, any
liabilities of the Indemnitor on account of any indemnification hereunder shall
be satisfied solely by exercise of the Indemnitee's rights under this Agreement,
provided that nothing in this Agreement shall be deemed to limit any right or
remedy of the Indemnitee or any other person against any other person for the
fraud or criminal activity of such other person.
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XI. MISCELLANEOUS.
A. Waivers. At any time prior to the Effective Date, the Company, the
Purchaser and the Subsidiaries may, to the extent legally allowed, extend the
time for performance of any obligations or other acts of the other parties
hereto, waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and waive performance of any
of the covenants or agreements or satisfaction of any of the conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereof shall not operate or be construed as a waiver of
any prior or subsequent breach of the same or any other provision hereof.
B. Amendment. This Agreement may not be amended except by a written
instrument signed on behalf of each of the parties hereto.
C. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Oklahoma as such laws are applied to agreements between
Oklahoma residents entered into and to be performed entirely within Oklahoma.
D. Successors . Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors of the parties hereto. No party hereto shall assign this Agreement,
or any rights thereto, without the prior written consent of the other parties
hereto.
E. Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties hereto with re gard to the subjects hereof and thereof.
F. Notices, etc. All notices and other communications required or permitted
hereunder shall be in writing and shall be effective on the first day following
the day when delivered or received personally, by facsimile or by registered or
certified mail (postage pre-paid, return receipt requested) (1) if to the
Purchaser, at the address or telecopy set forth below, or at such other address
or telecopy as the Purchaser shall have furnished to the Company in writing, (2)
if to the Company, at the address or telecopy set forth below or at such other
address or telecopy as the Company shall have furnished to the Purchaser in
writing.
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(a) ONEOK RESOURCES COMPANY
P.O. Box 871
Tulsa, OK 74102-0871
ATTN: J. D. Holbird Vice President
Telephone (918) 588-7930 Facsimile (918) 588-7961
with copy to:
Gable & Gotwals
100 West Fifth Street, Ste. 1000
Tulsa, Oklahoma 74103-4219
Telephone (918) 588-7800
Facsimile (918) 588-7873
Attn: John R. Barker, Esq.
Attn: Donald A. Kohl, Esq.
(b) MAGNUM HUNTER RESOURCES, INC. and the Subsidiaries
600 East Las Colinas Boulevard
Suite 1200
Irving, Texas 75039
ATTN: Gary C. Evans
President and Chief Executive Officer
Telephone (972) 401-0752
Facsimile (972) 401-3110
G. Separability. In case any provision of this Agreement not material to
the benefits intended to be conferred hereby shall be determined to be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
H. Finders' Fees.
1. The Company (i) represents and warrants that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement
except B. T. Wolfensohn and J. W. Brown and (ii) agrees to indemnify and to hold
the Purchaser and its respective officers, directors, and controlling persons,
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of
24
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its employees or representatives, are responsible. The Company will pay all
fees and commissions associated with its retention of B. T. Wolfensohn and J. W.
Brown.
2 The Purchaser (i) represents and warrants that it has retained no finder,
broker or others in connection with the transactions contemplated by this
Agreement except Bear Stearns and Larry Akers and (ii) agrees to indemnify and
to hold the Company, harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Purchaser, or any of its employees or representatives,
are responsible. The Purchaser will pay all fees and commissions associated with
its retention of Bear Stearns and Larry Akers.
I. Other Documents. The parties to this Agreement shall in good faith
execute such other and further instruments, assignments or documents as may be
necessary or advisable to carry out the transactions contemplated by this
Agreement.
J. Public Disclosure. After the Closing, the parties hereto shall
coordinate any public release of information regarding the matters contemplated
herein.
K. Titles and Subtitles. The titles of the Articles, Sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. References herein to exhibits and
schedules to this Agreement shall be deemed to incorporate such exhibits by
reference.
L. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument, and which shall become effective when there exist
copies signed by all of the parties hereto.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives, effective as of the date set
forth on the first page hereof.
ONEOK RESOURCES COMPANY,
a Delaware corporation
By:_____________________________
David L. Kyle, President
"PURCHASER"
25
<PAGE>
MAGNUM HUNTER RESOURCES, INC.,
a Nevada corporation
By:______________________________
Gary C. Evans, President and
Chief Executive Officer
"COMPANY"
MAGNUM HUNTER PRODUCTION, INC.,
a Texas corporation
By: _______________________________
Gary C. Evans, Chief Executive
Officer
GRUY PETROLEUM MANAGEMENT COMPANY,
a Texas corporation
By: _______________________________
Gary C. Evans, Chief Executive
Officer
HUNTER GAS GATHERING, INC.
a Texas corporation
By: _______________________________
Gary C. Evans, Chief Executive
Officer
BLUEBIRD ENERGY, INC.
an Oklahoma corporation
By: _______________________________
Gary C. Evans, Chief Executive
Officer
"SUBSIDIARIES"
26
[GRAPHIC OMITTED]
Magnum Hunter Resources, Inc.
600 East Las Colinas Blvd., Suite 1200, Irving, TX 75039
Phone (972) 401-0752 Fax (972) 401-3110
Internet Address: http://www.magnumhunter.com
NEWS
FOR IMMEDIATE RELEASE
American Stock Exchange
o Common - MHR
o Bonds - MHR.B
- --------------------------------------------------------------------------------
MAGNUM HUNTER CLOSES PLACEMENT OF
$50 MILLION OF CONVERTIBLE PREFERRED STOCK
Irving, Texas, February 3, 1999, Magnum Hunter Resources, Inc. ("Magnum Hunter")
announced today that definitive agreements have been executed with ONEOK, Inc.
(NYSE: OKE), the eighth largest natural gas distributor in the United States,
relating to ONEOK's purchase of $50 million of Convertible Preferred Stock of
Magnum Hunter in a private placement. The new agreements also include ONEOK's
ability to market certain of Magnum Hunter's natural gas production in the state
of Oklahoma and ONEOK's ability to participate in future acquisitions of Magnum
Hunter in the state of Oklahoma.
The Preferred Stock will have a liquidation value of $50 million and will be
convertible into Magnum Hunter's common stock at $5.25 per share. Dividends on
the Preferred Stock will be payable in cash at the rate of 8% per annum and will
be cumulative. Magnum Hunter will use the net proceeds from the transaction to
repay senior bank indebtedness, to provide working capital for general corporate
purposes and to finance acquisitions, as determined by Magnum Hunter's Board of
Directors. ONEOK will nominate two new members to Magnum Hunter's existing Board
of Directors.
ONEOK, Inc. is engaged in natural gas intrastate distribution and transmission,
gas processing, gas marketing and gas production. ONEOK has approximately 31.6
million shares of common stock outstanding.
####
Magnum Hunter Resources, Inc. is one of the nation's fastest growing independent
exploration and development companies engaged in three principal activities: (1)
the acquisition, production and sale of crude oil, condensate and natural gas;
(2) the gathering, transmission and marketing of natural gas; and (3) the
managing and operating of producing oil and natural gas properties for interest
owners.
FOR FURTHER INFORMATION CONTACT: MICHAEL P. MCINERNEY,
INVESTOR RELATIONS (972) 401-0752
