<PAGE> 1
================================================================================
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
AUGUST 29, 1996
Date of Report (Date of earliest event reported)
NATIONAL ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19136 58-1922764
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4925 GREENVILLE AVENUE, SUITE 1400
DALLAS, TEXAS 75206
(Address of principal executive offices and zip code)
(214) 692-9211
(Registrant's telephone number,
including area code)
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 29, 1996, National Energy Group, Inc. (the "Company")
completed the previously announced acquisition of Alexander Energy Corporation
("Alexander"). The transaction consisted of a merger (the "Merger") of
Alexander with and into National Energy Group of Oklahoma, Inc., formerly known
as NEG-OK, Inc., a wholly-owned subsidiary of the Company ("NEG-OK"). Pursuant
to the Merger, (a) the separate corporate existence of Alexander terminated and
NEG-OK, as the surviving corporation of the Merger, continues as a wholly-owned
subsidiary of the Company with the combined assets and liabilities of Alexander
and NEG-OK, (b) each share of Alexander common stock, par value $.03 per share
("Alexander Common Stock"), together with all rights associated with the
Alexander Common Stock pursuant to the Rights Agreement dated December 15, 1994
(the "Rights Agreement"), between Alexander and Liberty Bank & Trust Company of
Oklahoma City, N.A., and all related documents, outstanding immediately before
the Merger, were converted into 1.7 shares of the Company's Common Stock
("Common Stock") and (c) all outstanding options and warrants to purchase
Alexander Common Stock were assumed by the Company and converted into options
and warrants to purchase Common Stock. In lieu of fractional shares, Alexander
shareholders otherwise entitled to receive fractional shares of Common Stock
will be paid in cash an amount equal to $4.375 multiplied by the fraction of a
share of Common Stock to be received.
The Merger and the Agreement and Plan of Merger, as amended, by and
among the Company, NEG-OK and Alexander are described more fully in the Joint
Proxy Statement and Prospectus of the Company and Alexander dated August 9,
1996 (the "Proxy Statement"), filed with the Securities and Exchange Commission
(the "Commission") as part of, or in conjunction with, the Registration
Statement on Form S-4 (Registration No. 33-39045), as amended, originally filed
with the Commission on July 29, 1996, and declared effective on August 8, 1996.
Information concerning the Merger contained in the Proxy Statement is
incorporated herein by reference.
As of August 30, 1996, there are approximately 33,555,863 shares of
Common Stock outstanding.
ITEM 5. OTHER EVENTS
AMENDMENT OF CERTIFICATE OF INCORPORATION
In connection with the Merger, the Company filed an Amendment to its
Certificate of Incorporation (the "Certificate of Amendment") to eliminate the
authorization of the Class B Common Stock, to change the name of the Class A
Common Stock to "Common Stock," to increase the number of authorized shares of
Common Stock from 50,000,000 to 100,000,000 shares, to clarify the powers of
the Board of Directors of the Company to issue Preferred Stock without
shareholder approval and to extend from June 14, 1997 to June 14, 1999, the
period during which the Company may not redeem the Company's Series B Preferred
Stock and the Company's Series C Preferred Stock.
EQUITY PRIVATE PLACEMENT
On August 29, 1996, the Company also closed the sale for $10.0 million
to High River Limited Partnership ("High River") of 100,000 shares of its
Convertible Preferred Stock, Series D, $1.00 par value per share (the "Series D
Preferred Stock") and warrants to purchase 700,000 shares of Common Stock
exercisable immediately at $2.50 per share, which warrants expire five years
from their date of issuance. High River is a Delaware limited partnership whose
general partner, Riverdale Investors Corp., Inc., is owned by Carl C. Icahn.
The rights and preferences of the Series D Preferred Stock are described in the
Certificate of Designations of the Series D Preferred Stock and include the
immediate right to convert all the shares of the Series D Preferred Stock into
4,444,444 shares of Common Stock, based upon the initial conversion price of
$2.25 per share.
- 2 -
<PAGE> 3
The holders of the Series D Preferred Stock are entitled to one vote
for each share when entitled to vote as described below and as to matters upon
which by law they are entitled to vote as a class. The holders of Series D
Preferred Stock will have the right to appoint one member to the Board of
Directors. The Company may not, without the consent of the director appointed
by the holders of Series D Preferred Stock, voluntarily file for protection
under federal or other bankruptcy laws. In addition, the holders of Series D
Preferred Stock will have the right to choose to appoint one-half of the
members of the Board of Directors plus one member (including the member
appointed by the Series D Preferred Stock holders) if the Series D Preferred
Stock contingent voting rights are triggered and the holders of the Series D
Preferred Stock exercise their rights. Thereafter, such holders will control
the Board of Directors.
The right of the holders of the Series D Preferred Stock to choose to
appoint one-half of the Board of Directors plus one member (including the
member appointed by the holders of the Series D Preferred Stock) is triggered
by the following events: (i) if an involuntary case under federal bankruptcy
laws or other applicable federal or state insolvency laws is commenced against
the Company (including a case for the appointment of a receiver, liquidator,
custodian, trustee or similar official for the Company or its assets) which
does not seek emergency or expedited relief if such case is not dismissed or
stayed within 15 days or, if such case seeks emergency or expedited relief if
such case is not dismissed or stayed within 15 days or, if such case seeks
emergency or expedited relief against Series D Preferred Stock an opinion of
counsel which states that the Company, without condition, will prevail on the
petition for permanent relief, or (ii) if a default shall have occurred under
notes or other evidences of indebtedness of the Company where the aggregate
outstanding principal amount exceeds $ 10.0 million, and one of the following
three circumstances exists. First, such indebtedness is due in full by reason
of failure to pay such indebtedness and the default is not cured within 30
days. Second, such indebtedness is accelerated and such acceleration is not
rescinded within 15 days. Third, notice of foreclosure on collateral securing
such indebtedness has been given to the Company and has not been rescinded
after five days or the proposed date of the sale of the collateral is less than
five days away.
On August 29, 1996, simultaneously with the closing of the sale for
$10.0 million of the Series D Preferred Stock to High River, the Company also
closed the sale for $5.0 million to two insurance companies and four affiliates
of Kayne, Anderson Investment Management, Inc. ("KAIM"), a registered
investment adviser, of 50,000 shares of Convertible Preferred Stock, Series E,
$1.00 par value per share (the "Series E Preferred Stock") and warrants to
purchase 350,000 shares of the Common Stock exercisable immediately at $2.50
per share, which warrants expire five years from their date of issuance. The
Series E Preferred Stock has the rights and preferences described in the
Certificate of Designations of the Series E Preferred Stock which include the
immediate right to convert all of the shares of the Series E Preferred Stock
into 2,222,222 shares of the Common Stock, based upon the initial conversion
price of $2.25 per share. The Series E Preferred Stock will vote together with
the Common Stock on all matters submitted to the holders of Common Stock and
shall have that number of votes per share equal to the number of shares of
Common Stock into which such share is convertible as of the record date for the
vote.
Information concerning the Equity Private Placement contained in the
Proxy Statement is incorporated herein by reference.
NEW CREDIT FACILITY -
On August 29, 1996, the Company, NEG-OK and Boomer Marketing
Corporation ("Boomer") entered into a credit facility (the "New Credit
Facility") with Bank One, Texas, N.A. ("Bank One"), as Bank and
Administrative Agent, and Credit Lyonnais New York Branch ("Credit Lyonnais"),
as Bank and Syndication Agent (collectively, the "Banks"), The New Credit
Facility consists of up to a $100.0 million reducing revolving line of credit
(the "Reducing Revolver"), with an initial borrowing base of $60.0 million, and
a $5.0 million term loan (the "Term Loan"). The borrowing base for the Reducing
Revolver will be determined at least semi-annually and will be reduced monthly
by an amount determined by the Banks, which amount is initially $1.0 million
per month. The principal under the Reducing Revolver will be due on August 29,
2000. Interest under the Reducing Revolver is payable monthly and is calculated
at the Bank One Base Rate (as determined from time to time by Bank One which
- 3 -
<PAGE> 4
increases by.25% if the outstanding loan balance is greater than 75% of the
borrowing base). Once the Term Loan is repaid in full, the Company may elect to
calculate interest on the Reducing Revolver based on the EuroDollar Rate, as
defined in the New Credit Facility. Interest on the Term Loan is payable
monthly at a rate equal to the Bank One Base Rate plus 2%, and the principal of
the Term Loan is due on February 28, 1997.
To secure the New Credit Facility, the Company has granted to the
Banks first priority liens on certain of its oil and gas properties and NEG-OK
has granted to the Banks first priority liens on a minimum of 90% of the
present net worth of NEG-OK's oil and gas properties, whether currently owned
or later acquired, and both the Company and NEG-OK have granted the Banks a
negative pledge on all other oil and gas properties. The New Credit Facility
contains customary representations, warranties and events of default and
requires the Company to comply with certain affirmative and negative covenants.
AGREEMENT WITH PRUDENTIAL SECURITIES INCORPORATED
In November 1994 the Board of Directors of Alexander entered into an
agreement with Prudential Securities Incorporated ("Prudential Securities")
which provided for Prudential Securities to act as Alexander's financial
advisor in connection with any transaction in which the control of or a
material interest in Alexander or its business, assets or properties was sold.
Such agreement provided for Prudential Securities to receive a fee of 1% of the
total consideration received by Alexander shareholders in such a transaction.
The Company, in connection with the Merger, negotiated an arrangement with
Prudential Securities which provided for Prudential Securities to receive, in
lieu of the 1% provided in its agreement with Alexander, $500,000 in cash, the
number of shares of Common Stock equal to $500,000 divided by the average
closing price of Common Stock for the ten trading days immediately prior to the
date of closing of the Merger (the "NEG Average Price"), a warrant for 100,000
shares of Common Stock at an exercise price of the NEG Average Price, and
out-of-pocket expenses. Such agreement also provided for the registration for
immediate sale of the Common Stock received by Prudential Securities (including
those shares received upon exercise of the warrants). As a result of the
Merger, the Company has paid Prudential Securities the cash consideration
provided for in its agreement, issued to Prudential Securities. 122,324 shares
of Common Stock, reimbursed it for its out-of-pocket expenses and issued
Prudential Securities a warrant to purchase 100,000 shares of Common Stock at
an exercise price of $4.09 per share.
GAINES BERLAND, INC. WARRANTS
Gaines Berland, Inc. ("Gaines Berland") acted as investor advisor to
the Company prior to the Merger. For services rendered by Gaines Berland in
connection with the Merger and the equity private placement described above,
the Company has issued warrants to Gaines Berland for the purchase of 700,000
shares and 300,000 shares, respectively, of Common Stock at an exercise price
of $2.875 per share. These warrants are exercisable for a period of five years
after their issuance and provide registration rights to Gaines Berland.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following financial statements included in the Proxy
Statement filed with the Commission, as part of, or in
conjunction with, the Registration Statement on Form S-4
(Registration No. 333-9045), as amended, originally filed with
the Commission on July 29, 1996, and declared effective on
August 8, 1996, are incorporated herein by reference:
- 4 -
<PAGE> 5
<TABLE>
<CAPTION>
PAGE NUMBERS IN THE
PROXY STATEMENT/PROSPECTUS
--------------------------
<S> <C>
Audited consolidated balance sheets of Alexander Energy
Corporation as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholders' equity
and cash flows for each of the three years and the period
ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . Pages F-31 through F-53
</TABLE>
The following financial statements included in the Quarterly
Report on Form 10-Q of Alexander Energy Corporation, for the
quarter ended June 30, 1996 filed with the Commission on
August 14, 1996, are incorporated herein by reference:
<TABLE>
<CAPTION>
PAGE NUMBERS IN THE
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
<S> <C>
Unaudited condensed consolidated balance sheet of Alexander
Energy Corporation as of June 30, 1996, and the related
unaudited condensed consolidated statements of operations for
the three and six-month periods ended June 30, 1995 and 1996
and the unaudited condensed consolidated statements of cash
flows for the six-month periods ended June 30, 1995 and 1996 . . . . . Pages 1 through 4
</TABLE>
(b) Pro Forma Financial Information
It is impracticable at this time to provide the required pro
forma financial statements but it is anticipated that such
required financial statements will be filed on or before
November 12, 1996, as an amendment to this Current Report on
Form 8-K.
(c) Exhibits
The following materials are filed as exhibits to this Current
Report on Form 8-K:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 Agreement and Plan of Merger dated as of June 6, 1996 by and
among the Registrant, NEG-OK and Alexander(1)
2.2 First Amendment to Agreement and Plan of Merger dated as of
June 20, 1996 by and among the Registrant, NEG-OK and
Alexander(1)
2.3 Mutual Waiver Agreement dated as of August 29, 1996 by and
among the Registrant, NEG-OK and Alexander(2)
3.1 Certificate of Incorporation of the Registrant, which includes
the Certificate of Incorporation of the Registrant filed with
the Secretary of State of Delaware on November 20, 1990(3),
the Certificate of Elimination of the Redeemable Convertible
Preferred Stock, Series A of the Registrant, filed with the
office of
- 5 -
<PAGE> 6
the Secretary of State of the State of Delaware on June 2,
1994(2), the Certificate of Amendment of Certificate of
Incorporation of the Registrant, filed herewith as Exhibit
3.2, the Certificate of Designations of the Registrant of 10%
Cumulative Convertible Preferred Stock, Series B(4), the
Certificate of Designations of the Registrant of 10-1/2%
Cumulative Convertible Preferred Stock, Series C(5), the
Certificate of Designations of the Registrant of Convertible
Preferred Stock, Series D, filed herewith as Exhibit 4.1, and
the Certificate of Designations of the Registrant of
Convertible Preferred Stock, Series E, filed herewith as
Exhibit 4.2
3.2 Certificate of Amendment of Certificate of Incorporation of
the Registrant, filed with the office of the Secretary of
State of the State of Delaware on August 29, 1996(2)
4.1 Certificate of Designations of the Registrant of Convertible
Preferred Stock, Series D(2)
4.2 Certificate of Designations of the Registrant of Convertible
Preferred Stock, Series E(2)
4.3 Note Agreement dated as of April 25, 1989, by and among AEJH
1989 Limited Partnership, Alexander and John Hancock Mutual
Life Insurance (10 1/2% Senior Secured Notes)(6)
4.4 Letter dated August 29, 1996 between Alexander and John
Hancock Mutual Life Insurance Company relating to the payment
of the 1989 Notes(2)
10.29 Prudential Securities Incorporated Warrant to purchase 100,000
Shares of Common Stock, dated August 29, 1996(2)
10.30 Gaines Berland, Inc. Warrant to purchase 300,000 Shares of
Common Stock, dated August 29, 1996(2)
10.31 Gaines Berland, Inc. Warrant to purchase 700,000 Shares of
Common Stock, dated August 29, 1996(2)
10.34 Stock Purchase Agreement dated August 7, 1996 between the
Registrant and High River Limited Partnership(1)
10.35 High River Limited Partnership Warrant to purchase 700,000
Shares of Common Stock, dated August 29, 1996(2)
10.36 Stock Purchase Agreement dated as of August 26, 1996, between
the Registrant and Foremost Insurance Company, Arbco
Associates, L.P., Kayne, Anderson Nontraditional Investments
L.P., Offense Group Associates, L.P., Topa Insurance Company
and Kayne, Anderson Offshore Limited (the "Series E
Investors")(2)
10.37 Form of Series E Investors' Warrants to purchase an aggregate
350,000 Shares of Common Stock, dated August 29, 1996(7)
- 6 -
<PAGE> 7
10.38 Agreement dated as of August 29, 1996 by and between the
Registrant and Prudential Securities Incorporated(2)
10.39 Certificate of Merger with respect to the merger of Alexander
with and into NEG-OK, filed with the offices of the Secretary
of State of the State of Delaware and the Secretary of State
of the State of Oklahoma on August 29, 1996(2)
10.40 Restated Loan Agreement dated August 29, 1996 among Bank One
and Credit Lyonnais and the Registrant, NEG-OK and Boomer(2)
10.41 $50,000,000 Revolving Note dated August 29, 1996 payable to
Bank One(2)
10.42 $50,000,000 Revolving Note dated August 29, 1996 payable to
Credit Lyonnais(2)
10.43 $2,500,000 Term Note dated August 29, 1996 payable to Bank
One(2)
10.44 $2,500,000 Term Note dated August 29, 1996 payable to Credit
Lyonnais(2)
10.45 Unlimited Guaranty of NEG-OK dated August 29, 1996 for the
benefit of Bank One(2)
10.46 Unlimited Guaranty of NEG-OK, dated August 29, 1996 for the
benefit of Credit Lyonnais(2)
10.47 Unlimited Guaranty of Boomer dated August 29, 1996 for the
benefit of Bank One(2)
10.48 Unlimited Guaranty of Boomer dated August 29, 1996 for the
benefit of Credit Lyonnais(2)
10.49 Form of Deeds of Trust, Mortgages, Security Agreements,
Assignments of Production and Financing Statements covering
oil and gas properties of the Registrant and NEG-OK, dated
August 29, 1996(8)
10.50 Sale and Purchase Agreement dated September 26, 1994 by and
among JMC Exploration, Inc., Ted Bowman, Chris Webb and John
Abrahamson and Alexander(9)
10.51 First Amendment to Sale and Purchase Agreement dated October
26, 1994 by and among JMC Exploration, Inc., Ted Bowman, Chris
Webb and John Abrahamson and Alexander(9)
10.52 Alexander Energy Corporation 1986 Incentive Stock Option Plan,
as amended(10)
10.53 Alexander Energy Corporation 1993 Stock Option Plan(11)
10.54 Agreement of Limited Partnership of AEJH 1985 Limited
Partnership by and between Alexander and John Hancock Mutual
Life Insurance Company, together with all amendments
thereto(12)
- 7 -
<PAGE> 8
10.55 Agreement of Limited Partnership of AEJH 1987 Limited
Partnership by and between Alexander and John Hancock Mutual
Life Insurance Company, together with all amendments
thereto(12)
10.56 Agreement of Limited Partnership of AEJH 1989 Limited
Partnership by and between Alexander and John Hancock Mutual
Life Insurance Company dated April 25, 1989(6)
10.57 Limited Partnership Agreement of Energy and Environmental
Services Limited Partnership dated May 15, 1991 by and between
Energy and Environmental Services, Inc., as general partner,
and Alexander Energy Corporation and REP, Inc., as limited
partners(12)
10.58 Warrant Purchase Agreement among Alexander, Hanifen, Imhoff
Inc. and The Principal/Eppler, Guerin & Turner, Inc.(13)
10.59 Purchase Option Agreement (warrants) between ANEC and Gaines,
Berland, Inc. dated September 14, 1993(6)
10.60 Form of Special Severance Agreements between Alexander and the
technical support staff of Alexander, currently in effect
between NEG-OK and Cyndy Burris and John Christofferson,
respectively(6)
10.61 Separation Policy of Alexander dated December 8, 1994(6)
23.1 Consent of Ernst & Young LLP, independent auditors(2)
23.2 Consent of Coopers & Lybrand L.L.P., independent accountants(2)
- ----------------------------
(1) Incorporated by reference to the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 (No. 333-9045), dated August 7,
1996.
(2) Filed herewith.
(3) Incorporated by reference to the Registrant's Registration Statement
on Form S-4 (No. 33-38331), dated April 23, 1991.
(4) Incorporated by reference to the Registrant's Current Report on Form
8-K, dated June 17, 1994.
(5) Incorporated by reference to the Registrant's Current Report on Form
8-K, dated July 17, 1995.
(6) Incorporated by reference to Alexander's Form 10-K for the fiscal year
ended December 31, 1994.
(7) Filed herewith. See the attached Schedule A listing substantially
identical contracts in all material respects, which differ only in the
names of the Series E Investors and the amounts of each warrant.
(8) Filed herewith. See the attached Schedule B listing substantially
identical contracts in all material respects, which relate to liens
granted in certain oil and gas properties owned by the Registrant
- 8 -
<PAGE> 9
and NEG-OK and vary only as to grantor of the liens, the specific
properties covered thereby, the states in which such documents were
filed and immaterial state law differences in form.
(9) Incorporated by reference to Alexander's Current Report on Form 8-K,
dated November 14, 1994.
(10) Incorporated by reference to Alexander's Registration Statement (No.
33-20425), dated March 22, 1988.
(11) Incorporated by reference to Alexander's Proxy Statement for the 1993
Annual Meeting of Stockholders.
(12) Incorporated by reference to Alexander's Form 10-K for the fiscal year
ended December 31, 1991.
(13) Incorporated by reference to Alexander's Amendment No. 1 to
Registration Statement (No. 33-57142), dated February 26, 1993.
- 9 -
<PAGE> 10
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 thereunto duly authorized.
NATIONAL ENERGY GROUP, INC.
By: /s/ MILES D. BENDER
---------------------------------------
Miles D. Bender, President and Chief
Executive Officer
Date: September 12, 1996
- 10 -
<PAGE> 11
SCHEDULE A TO FORM 8-K
OF
NATIONAL ENERGY GROUP, INC.
AUGUST 29, 1996
1. Foremost Insurance Company Warrant to purchase 105,000 shares of
Common Stock, dated August 29, 1996.
2. Arbco Associates, L.P. Warrant to purchase 96,250 shares of Common
Stock, dated August 29, 1996.
3. Kayne, Anderson Nontraditional Investments L.P., Warrant to purchase
56,000 shares of Common Stock, dated August 29, 1996.
4. Offense Group Associates, L.P. Warrant to purchase 47,250 shares of
Common Stock, dated August 29, 1996.
5. Topa Insurance Company Warrant to purchase 28,000 shares of Common
Stock, dated August 29, 1996.
6. Kayne, Anderson Offshore Limited Warrant to purchase 17,500 shares of
Common Stock, dated August 29, 1996.
- 11 -
<PAGE> 12
SCHEDULE B TO FORM 8-K
OF
NATIONAL ENERGY GROUP, INC.
AUGUST 29, 1996
1. Amended and Restated Deeds of Trust, Mortgages, Security Agreements,
Assignments of Production and Financing Statements from the Registrant
to William Mark Cranmer, Trustee, for the benefit of the
Administrative Agent covering properties located in Ector, Irion,
Nueces, Rusk, and Young Counties, Texas
2. Amended and Restated Deed of Trust, Mortgage, Security Agreement,
Assignment of Production and Financing Statement from the Registrant
to William Mark Cranmer, Trustee, for the benefit of the
Administrative Agent covering property located in Sweetwater County,
Wyoming
3. Amended and Restated Mortgage, Security Agreement, Assignment of
Production and Financing Statement from the Registrant to the
Administrative Agent covering property located in Eddy County, New
Mexico
4. Deeds of Trust, Security Agreements, Assignments of Production and
Financing Statements from NEG-OK to William Mark Cranmer for the
benefit of the Administrative Agent covering properties located in
Fayette, Harrison, and Hemphill Counties, Texas
5. Mortgages, Deeds of Trust, Security Agreements, Assignments of
Production and Financing Statements from NEG-OK to the Administrative
Agent covering properties located in Crawford, Franklin, Johnson,
Logan, Pope, and Sebastian Counties, Arkansas
6. Mortgages, Security Agreements, Assignments of Production and
Financing Statements from NEG-OK to the Administrative Agent covering
properties located in Alfalfa, Beckham, Blaine, Caddo, Canadian,
Carter, Coal, Custer, Dewey, Ellis Garfield, Garvin, Grady, Harper,
Haskell, Kingfisher, Latimer, Logan, Love, Major, Oklahoma, Pittsburg,
Roger Mills, Sequoyah, Washita, Woods, and Woodward Counties, Oklahoma
- 12 -
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of June 6, 1996 by and among the Registrant, NEG-OK and
Alexander(1)
2.2 First Amendment to Agreement and Plan of Merger dated as of June 20, 1996 by and among the Registrant,
NEG-OK and Alexander(1)
2.3 Mutual Waiver Agreement dated as of August 29, 1996 by and among the Registrant, NEG-OK and
Alexander(2)
3.1 Certificate of Incorporation of the Registrant, which includes the Certificate of Incorporation of the
Registrant filed with the Secretary of State of Delaware on November 20, 1990(3), the Certificate of
Elimination of the Redeemable Convertible Preferred Stock, Series A of the Registrant, filed with the
office of the Secretary of State of the State of Delaware on June 2, 1994(2), the Certificate of
Amendment of Certificate of Incorporation of the Registrant, filed herewith as Exhibit 3.2, the
Certificate of Designations of the Registrant of 10% Cumulative Convertible Preferred Stock, Series
B(4), the Certificate of Designations of the Registrant of 10-1/2% Cumulative Convertible Preferred
Stock, Series C(5), the Certificate of Designations of the Registrant of Convertible Preferred Stock,
Series D, filed herewith as Exhibit 4.1, and the Certificate of Designations of the Registrant of
Convertible Preferred Stock, Series E, filed herewith as Exhibit 4.2
3.2 Certificate of Amendment of Certificate of Incorporation of the Registrant, filed with the office of
the Secretary of State of the State of Delaware on August 29, 1996(2)
4.1 Certificate of Designations of the Registrant of Convertible Preferred Stock, Series D(2)
4.2 Certificate of Designations of the Registrant of Convertible Preferred Stock, Series E(2)
4.3 Note Agreement dated as of April 25, 1989, by and among AEJH 1989 Limited Partnership, Alexander and
John Hancock Mutual Life Insurance (10 1/2% Senior Secured Notes)(6)
4.4 Letter dated August 29, 1996 between Alexander and John Hancock Mutual Life Insurance Company relating
to the payment of the 1989 Notes(2)
10.29 Prudential Securities Incorporated Warrant to purchase 100,000 Shares of Common Stock, dated August 29,
1996(2)
10.30 Gaines Berland, Inc. Warrant to purchase 300,000 Shares of Common Stock, dated August 29, 1996(2)
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
10.31 Gaines Berland, Inc. Warrant to purchase 700,000 Shares of Common Stock, dated August 29, 1996(2)
10.34 Stock Purchase Agreement dated August 7, 1996 between the Registrant and High River Limited
Partnership(1)
10.35 High River Limited Partnership Warrant to purchase 700,000 Shares of Common Stock, dated August 29,
1996(2)
10.36 Stock Purchase Agreement dated as of August 26, 1996, between the Registrant and Foremost Insurance
Company, Arbco Associates, L.P., Kayne, Anderson Nontraditional Investments L.P., Offense Group
Associates, L.P., Topa Insurance Company and Kayne, Anderson Offshore Limited (the "Series E
Investors")(2)
10.37 Form of Series E Investors' Warrants to purchase an aggregate 350,000 Shares of Common Stock, dated
August 29, 1996(7)
10.38 Agreement dated as of August 29, 1996 by and between the Registrant and Prudential Securities
Incorporated(2)
10.39 Certificate of Merger with respect to the merger of Alexander with and into NEG-OK, filed with the
offices of the Secretary of State of the State of Delaware and the Secretary of State of the State of
Oklahoma on August 29, 1996(2)
10.40 Restated Loan Agreement dated August 29, 1996 among Bank One and Credit Lyonnais and the Registrant,
NEG-OK and Boomer(2)
10.41 $50,000,000 Revolving Note dated August 29, 1996 payable to Bank One(2)
10.42 $50,000,000 Revolving Note dated August 29, 1996 payable to Credit Lyonnais(2)
10.43 $2,500,000 Term Note dated August 29, 1996 payable to Bank One(2)
10.44 $2,500,000 Term Note dated August 29, 1996 payable to Credit Lyonnais(2)
10.45 Unlimited Guaranty of NEG-OK dated August 29, 1996 for the benefit of Bank One(2)
10.46 Unlimited Guaranty of NEG-OK dated August 29, 1996 for the benefit of Credit Lyonnais(2)
10.47 Unlimited Guaranty of Boomer dated August 29, 1996 for the benefit of Bank One(2)
10.48 Unlimited Guaranty of Boomer dated August 29, 1996 for the benefit of Credit Lyonnais(2)
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
10.49 Form of Deeds of Trust, Mortgages, Security Agreements, Assignments of Production and Financing
Statements covering oil and gas properties of the Registrant and NEG-OK, dated August 29, 1996(8)
10.50 Sale and Purchase Agreement dated September 26, 1994 by and among JMC Exploration, Inc., Ted Bowman,
Chris Webb and John Abrahamson and Alexander(9)
10.51 First Amendment to Sale and Purchase Agreement dated October 26, 1994 by and among JMC Exploration,
Inc., Ted Bowman, Chris Webb and John Abrahamson and Alexander(9)
10.52 Alexander Energy Corporation 1986 Incentive Stock Option Plan, as amended(10)
10.53 Alexander Energy Corporation 1993 Stock Option Plan(11)
10.54 Agreement of Limited Partnership of AEJH 1985 Limited Partnership by and between Alexander and John
Hancock Mutual Life Insurance Company, together with all amendments thereto(12)
10.55 Agreement of Limited Partnership of AEJH 1987 Limited Partnership by and between Alexander and John
Hancock Mutual Life Insurance Company, together with all amendments thereto(12)
10.56 Agreement of Limited Partnership of AEJH 1989 Limited Partnership by and between Alexander and John
Hancock Mutual Life Insurance Company dated April 25, 1989(6)
10.57 Limited Partnership Agreement of Energy and Environmental Services Limited Partnership dated May 15,
1991 by and between Energy and Environmental Services, Inc., as general partner, and Alexander Energy
Corporation and REP, Inc., as limited partners(12)
10.58 Warrant Purchase Agreement among Alexander, Hanifen, Imhoff Inc. and The Principal/Eppler, Guerin &
Turner, Inc.(13)
10.59 Purchase Option Agreement (warrants) between ANEC and Gaines, Berland, Inc. dated September 14, 1993(6)
10.60 Form of Special Severance Agreements between Alexander and the technical support staff of Alexander,
currently in effect between NEG-OK and Cyndy Burris and John Christofferson, respectively(6)
10.61 Separation Policy of Alexander dated December 8, 1994(6)
23.1 Consent of Ernst & Young LLP, independent auditors(2)
23.2 Consent of Coopers & Lybrand L.L.P., independent accountants(2)
</TABLE>
- -----------------------------
(1) Incorporated by reference to the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 (No. 333-9045), dated August 7,
1996.
<PAGE> 16
(2) Filed herewith.
(3) Incorporated by reference to the Registrant's Registration Statement
on Form S-4 (No. 33-38331), dated April 23, 1991.
(4) Incorporated by reference to the Registrant's Current Report on Form
8-K, dated June 17, 1994.
(5) Incorporated by reference to the Registrant's Current Report on Form
8-K, dated July 17, 1995.
(6) Incorporated by reference to Alexander's Form 10-K for the fiscal year
ended December 31, 1994.
(7) Filed herewith. See the attached Schedule A listing substantially
identical contracts in all material respects, which differ only in the
names of the Series E Investors and the amounts of each warrant.
(8) Filed herewith. See the attached Schedule B listing substantially
identical contracts in all material respects, which relate to liens
granted in certain oil and gas properties owned by the Registrant and
NEG-OK and vary only as to grantor of the liens, the specific
properties covered thereby, the states in which such documents were
filed and immaterial state law differences in form.
(9) Incorporated by reference to Alexander's Current Report on Form 8-K,
dated November 14, 1994.
(10) Incorporated by reference to Alexander's Registration Statement (No.
33-20425), dated March 22, 1988.
(11) Incorporated by reference to Alexander's Proxy Statement for the 1993
Annual Meeting of Stockholders.
(12) Incorporated by reference to Alexander's Form 10-K for the fiscal year
ended December 31, 1991.
(13) Incorporated by reference to Alexander's Amendment No. 1 to
Registration Statement (No. 33-57142), dated February 26, 1993.
<PAGE> 1
EXHIBIT 2.3
MUTUAL WAIVER AGREEMENT
This Mutual Waiver Agreement (this "Agreement") is entered into on
August 29, 1996, by and among National Energy Group, Inc., a Delaware
corporation ("NEG"), NEG-OK, Inc., a Delaware corporation ("Acquisition"), and
Alexander Energy Corporation, an Oklahoma corporation ("Alexander").
WHEREAS, NEG, Acquisition and Alexander entered into that certain
Agreement and Plan of Merger dated June 6, 1996, as amended by the First
Amendment to Agreement and Plan of Merger, dated as of June 20, 1996, by and
among NEG, Acquisition and Alexander (the "Merger Agreement"); and
WHEREAS, each of the parties believes that the Merger is in the best
interests of their respective shareholders and desire to proceed with the
Closing and consummate the Merger; and
WHEREAS, in connection with such Closing, the parties desire to hereby
(i) waive certain breaches of the covenants set forth in Article IV of the
Merger Agreement, (ii) waive all conditions to closing set forth in Article V
of the Merger Agreement which have not been satisfied as of immediately prior
to the Effective Time, and (iii) waive certain breaches of the representations
and warranties set forth in Articles II and III of the Merger Agreement; and
WHEREAS, NEG, Acquisition and Alexander acknowledge that this
Agreement does not supersede any term, condition or obligation set forth in the
Merger Agreement or any agreement contemplated thereby except as expressly set
forth herein;
NOW, THEREFORE, the parties agree as follows:
1. Defined Terms. Unless otherwise defined herein all terms
used with initial capital letters will have the meanings assigned to them in
the Merger Agreement.
2. Waivers by Alexander. Alexander hereby agrees to waive any
and all non-compliance or breaches by NEG or Acquisition of the terms and
conditions set forth in Sections 4.2(c)(iii), 4.2(c)(vii), 4.2(c)(viii),
4.2(c)(xi), 4.09 and 4.10 of the Merger Agreement, including without limitation
the following actions by NEG or Acquisition: (a) NEG's agreement to issue stock
options for 5,000 shares of NEG Common Stock to Larry Douglas, as a bonus
incentive for such person to accept employment with NEG, (b) NEG amendment of
its charter pursuant to the form of Certificate of Amendment to the NEG
Certificate of Incorporation attached hereto as Exhibit A, (iii) NEG's increase
of the compensation of Connie Binz and Tammy Sims, (iv) the expired letter of
intent in which NEG entered into in June, 1996 to purchase 100% of the
interests in properties located in Lafourche Parish, Louisiana for $8.25
million payable in shares of NEG Common Stock, (v) NEG's increase, immediately
after the Effective Time of the Merger, of the size of the NEG board of
directors to eleven, (vi) NEG's failure to deliver at Closing the options and
warrants to be issued to holders of Alexander options and warrants, and
<PAGE> 2
(vii) NEG's sale of 33 marginal properties for approximately $100,000.
Alexander hereby acknowledges that NEG and Acquisition have updated certain of
their Schedules to the Merger Agreement, and Alexander hereby approves such
updated Schedules and waives any and all breaches of NEG's or Acquisition's
representations and warranties in the Merger Agreement which may have resulted
from information which has been corrected in such updated Schedules. Alexander
hereby waives any and all conditions to closing set forth in Sections 5.01 and
5.03 of the Merger Agreement, which have not been satisfied as of immediately
prior to the Effective Time.
3. Waivers by NEG and Acquisition. Each of NEG and Acquisition
hereby agrees to waive any and all non- compliance or breaches by Alexander of
the terms and conditions set forth in Section 4.01(c) of the Merger Agreement,
including without limitation the following actions by Alexander: (i) the
reinstatement of the three limited partnerships for which Alexander acts as
general partner. NEG and Acquisition hereby acknowledge that Alexander has
updated certain of its Schedules to the Merger Agreement, and NEG and
Acquisition hereby approve such updated Schedules and waive any and all
breaches of Alexander's representations and warranties in the Merger Agreement
which may have resulted from information which has been corrected in such
updated Schedules. NEG hereby waives any and all conditions to closing set
forth in Sections 5.02 and 5.03 of the Merger Agreement, which have not been
satisfied as of immediately prior to the Effective Time.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-----------------------------------
Miles D. Bender, President
NEG-OK, INC.
By: /s/ Miles D. Bender
-----------------------------------
Miles D. Bender, President
ALEXANDER ENERGY CORPORATION
By: /s/ Bob G. Alexander
-----------------------------------
Bob G. Alexander, President
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF ELIMINATION
OF
NATIONAL ENERGY GROUP, INC.
National Energy Group, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of National Energy
Group, Inc. resolutions were duly adopted setting forth the proposed
elimination of the Redeemable convertible Preferred Stock, Series A as set
forth herein:
RESOLVED, that no shares of the Redeemable Convertible
Preferred Stock, Series A, are outstanding and none will be
issued.
FURTHER RESOLVED, that a Certificate of Elimination be
executed, which shall have the effect when filed and recorded
in Delaware of eliminating from the Certificate of
Incorporation all reference to the Redeemable convertible
Preferred Stock, Series A.
SECOND: None of the authorized shares of the Redeemable Convertible
Preferred Stock, Series A, are outstanding and none will be issued.
THIRD: In accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation is hereby amended to eliminate all reference to Redeemable
Convertible Preferred Stock, Series A.
IN WITNESS WHEREOF, said National Energy Group, Inc. has caused this
certificate to be signed by Miles D. Bender, its President and Chief Executive
Officer and attested by Randall A. Carter, its General Counsel and Secretary,
this 2nd day of June 1994.
By: /s/ Miles D. Bender
----------------------------------
Miles D. Bender, President
and Chief Executive Officer
ATTEST:
/s/ Randall A. Carter
- ----------------------------------
Randall A. Carter, General Counsel
and Secretary
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NATIONAL ENERGY GROUP, INC.
The undersigned officer of National Energy Group, Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify as follows:
1. That the Board of Directors of the Corporation, in accordance
with Section 242 of the General Corporation Law of the State of Delaware,
adopted resolutions proposing that certain provisions of the Certificate of
Incorporation of the Corporation, be amended as set forth below (the
"Amendment"), and directed that the Amendment be submitted to the stockholders
of the Corporation entitled to vote thereon for their consideration and
approval:
A. Article FOURTH of the Certificate of Incorporation of
the Corporation shall be deleted and replaced to read in its entirety as
follows:
"The total number of shares of stock which the
Corporation shall have authority to issue is 101,000,000
shares, consisting of 100,000,000 shares of Common Stock, $.01
par value per share, and 1,000,000 shares of Preferred Stock,
$1.00 par value per share, issuable in series.
The Board of Directors of the Corporation is
expressly authorized to cause the Preferred Stock to be issued
from time to time, in one or more series, and in connection
with each such series to determine and fix by the resolution
or resolutions providing for the creation and issuance of such
shares of Preferred Stock the number and designation thereof,
the powers (including without limitation any type of voting
powers - special, no or otherwise), designations, preferences,
conversion rights, cumulative, relative, participating,
optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, to the full
extent permitted by the General Corporation Law of Delaware.
The Certificate of Designations of National Energy Group, Inc.
of 10% Cumulative Convertible Preferred Stock, Series B and
the Certificate of Designations of National Energy Group, Inc.
of 10 1/2% Cumulative Convertible Preferred Stock, Series C,
filed with the Delaware Secretary of State on June 2, 1994 and
June 14, 1995, respectively, are each incorporated herein by
reference.
<PAGE> 2
B. The first paragraph of Section 2(vi), Redemption
Rights, of the Certificate of Designation of National Energy Group, Inc. of 10%
Cumulative Convertible Preferred Stock, Series B shall be deleted and replaced
to read in its entirety as follows:
"(vi) Redemption Rights. The Series B may not be
redeemed before June 14, 1999. Thereafter, the Company, at
the option of the Board of Directors, may redeem, in cash, the
whole or any part of the shares of Series B at the time
outstanding, upon notice given as hereinafter specified, at
the following redemption prices: from June 14, 1999, to June
14, 2000, $110 per share of Series B and, thereafter, $100 per
share of Series B, together with all accrued and unpaid
dividends to the redemption date."
C. The first paragraph of Section 2(vi), Redemption
Rights, of the Certificate of Designation of National Energy Group, Inc. of 10
1/2% Cumulative Convertible Preferred Stock, Series C shall be deleted and
replaced to read in its entirety as follows:
"(vi) Redemption Rights. The Series C may not be
redeemed before June 14, 1999. Thereafter, the Company, at
the option of the Board of Directors, may redeem, in cash, the
whole or any part of the shares of Series C at the time
outstanding, upon notice given as hereinafter specified, at
the following redemption prices: from June 14, 1999, to June
14, 2000, $110 per share of Series C and, thereafter, $100 per
share of Series C, together with all accrued and unpaid
dividends to the redemption date. No shares of Series B shall
be redeemed by the Company unless and until all outstanding
shares of Series C have been redeemed by the Company."
D. All references to the Class A Common Stock or Class A
of the Corporation in the Certificate of Incorporation or the Certificate of
Designations shall be deemed to be a reference to the Common Stock, $.01 par
value per share, of the Corporation.
2. That a majority of the outstanding stock of the Corporation
entitled to vote thereon approved and adopted the Amendment at the annual
meeting of stockholders on August 29, 1996, in accordance with Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned officer of the Corporation does
hereby certify under penalties of perjury that this Certificate of Amendment is
the act and deed of the Corporation and the facts stated herein are true and
accordingly have hereunto set my hand this 29th day of August, 1996.
/s/ Miles D. Bender
---------------------------------------
Miles D. Bender, President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
OF
NATIONAL ENERGY GROUP, INC.
OF
CONVERTIBLE PREFERRED STOCK, SERIES D
Pursuant to the provisions of the General Corporation Law of Delaware,
the undersigned, Miles D. Bender, being the President of National Energy Group,
Inc., a Delaware corporation (the "Company"), hereby certifies that:
1. The name of the Company is National Energy Group, Inc.
2. The following resolutions establishing and designating the
Convertible Preferred Stock, Series D, of the Company, were duly adopted by the
Board of Directors at a meeting of the Board of Directors on August 29, 1996.
RESOLVED, that pursuant to authority expressly granted to the Board of
Directors by the provisions of the Certificate of Incorporation of the Company,
as amended, the Board of Directors hereby creates a class of Convertible
Preferred Stock, Series D, having a par value of $1.00 per share, and hereby
fixes the powers (including without limitation any type of voting powers -
special, no or otherwise), designations, preferences, conversion rights,
cumulative, relative, participating, optional and other rights, if any, and the
qualifications, limitations or restrictions applicable to such Convertible
Preferred Stock, Series D as follows:
(i) Serial Designation. The distinctive serial
designation of this series shall be Convertible Preferred Stock, Series D
(hereinafter called "Series D"). Shares of Series D shall have a stated value
of $100.00 per share.
(ii) Authorized Shares. The number of authorized shares
in Series D shall be 100,000. Shares of Series D purchased by the Company or
converted into Common Stock shall be canceled and shall revert to authorized
but unissued Preferred Stock undesignated as to Series, and such shares shall
not be deemed to be outstanding for purposes hereof.
(iii) Dividends. Holders of the Series D shall not be
entitled to receive dividends except in the event the Company shall declare a
distribution, whether in cash, in kind or otherwise, with respect to the Common
Stock, $.01 par value, of the Company (the "Common Stock"), and then, in each
such case, the holders of the Series D shall be entitled to a proportionate
share of any such distribution as though the holders of the Series D were the
holders of the number of shares of Common Stock of the Company into which their
shares of Series D are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Company entitled to receive
such distribution.
<PAGE> 2
(iv) Ranking.
(a) Ranking as to Dividends. The Series D, with
respect to dividends, (1) ranks junior to the 10% Cumulative Convertible
Preferred Stock, Series B (the "Series B"), the 10 1/2% Cumulative Convertible
Preferred Stock, Series C (the "Series C") and any series of Preferred Stock of
the Company, the terms of which specifically provide that such series ranks
senior to the Series D (the "Senior Stock"); (2) ranks pari passu with the
Convertible Preferred Stock, Series E (the "Series E") and with any other
series of Preferred Stock of the Company, the terms of which specifically
provide that such series ranks pari passu with the Series D (the "Parity
Stock"); (3) ranks senior to any series of Preferred Stock of the Company, the
terms of which specifically provide that such series ranks junior and
subordinate to the Series D or the terms of which do not specify its rank with
respect to the Series D; and (4) participates as if the Series D had been fully
converted into Common Stock, pari passu with the Common Stock, the Series E and
with any other series or class of capital stock of the Company that provides
such series ranks pari passu with the Common Stock with respect to dividends.
(b) Ranking Upon Liquidation, Dissolution, or
Winding Up. The Series D, upon liquidation, dissolution, or winding up of the
Company, ranks (1) junior to the Series B, Series C and to any other series of
Preferred Stock of the Company, the terms of which specifically provide that
such series is Senior Stock upon liquidation, dissolution or winding up of the
Company; (2) pari passu with the Series E and any other series of Preferred
Stock of the Company, the terms of which specifically provide that such series
is Parity Stock with the Series D upon liquidation, dissolution or winding up
of the Company; (3) senior to any series of Preferred Stock of the Company, the
terms of which specifically provide that such series ranks junior and
subordinate to the Series D or the terms of which do not specify its rank with
respect to the Series D; and (4) senior to the Common Stock.
(v) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, holders of
Series D are entitled to receive out of the assets of the Company available for
distribution to shareholders the liquidation preference of $100.00 per share,
plus an amount equal to any accrued and unpaid dividends, and no more, before
any payment or distribution is made to the holders of Common Stock, or any
series or class of the Company's stock hereafter issued that ranks junior as to
liquidation rights to the Series D. The holders of Series D, the Series E and
any Parity Stock hereafter issued that ranks on a parity as to liquidation
rights with the Series D, will be entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
which is not sufficient to pay in full the aggregate of the amounts payable
thereon. After payment in full of the liquidation preference of the shares of
the Series D, the holders of such shares will not be entitled to any further
participation in any distribution of assets by the Company. Neither a
consolidation, merger or other business combination of the Company with or into
another corporation or other entity nor a sale, lease, or exchange or transfer
of all or part of the Company's assets for cash, securities or other property
will be considered a liquidation, dissolution or winding up of the Company so
long as such sale, lease, exchange or transfer is not in connection with a plan
of liquidation or in contemplation of a plan of liquidation, it being
-2-
<PAGE> 3
assumed that any such sale, lease, exchange or transfer that occurs within 90
days of the adoption of a plan of liquidation is in contemplation of a plan of
liquidation.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company which will involve the distribution of assets
other than cash, the Company shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the
holders of shares of Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Company. The Company shall, upon receipt of
such appraiser's valuation, give prompt written notice to each holder of shares
of Series D of the appraiser's valuation.
(vi) Redemption Rights. Neither the Company nor the
holders of the Series D shall have any right to require the redemption of the
Series D.
(vii) Conversion Rights. The holders of shares of Series D
shall have the rights, at their option, to convert such shares into Common
Stock of the Company at any time as provided below, subject to the following
terms and conditions:
(a) The shares of Series D shall be convertible
at the principal office of the Company, and at such other office or offices, if
any, as the Board of Directors may designate in writing in accordance with the
notice provisions of subparagraph 2(xii) hereof, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Company, at the conversion price of $2.25
per share of Common Stock subject to adjustment as described below (the
"Conversion Price"), with each share of Series D being taken at $100.00 for the
purposes of such conversion.
(b) In order to convert shares of Series D into
Common Stock the holder thereof shall surrender at the office hereinabove
mentioned the certificate or certificates therefor, duly endorsed or assigned
to the Company or in blank, accompanied by written notice to the Company at
said office that it elects to convert such shares.
Conversion shall be deemed to have been effected on the date
when such delivery is made (herein called the "Conversion Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
conversions shall be treated for all purposes as the record holder of such
Common Stock on the applicable Conversion Date. As promptly as practicable on
or after the applicable Conversion Date, the Company shall issue and shall
deliver at said office (or by mail if so requested by the person converting), a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with a check for cash in lieu of any
fraction of a share, as hereinafter provided, to the person entitled to receive
the same. Upon conversion of only a portion of the number of shares of Series
D represented by a certificate surrendered for conversion, the Company shall
issue and deliver to or upon the written order of the holder of the certificate
so surrendered for conversion, a new certificate covering the number of shares
of Common Stock representing the unconverted portion of the certificate so
surrendered.
-3-
<PAGE> 4
(c) No fractional shares of Common Stock shall be
issued upon conversion of shares of Series D, but, instead of any fraction
which would otherwise be issuable in respect of the aggregate number of shares
of Series D surrendered for conversion at one time by the same holder, the
Company shall pay a cash adjustment in an amount equal to the same fraction of
the Closing Price (as hereinafter defined) on the applicable Conversion Date,
or, if such date is not a Trading Day (as hereinafter defined), on the next
Trading Day.
(d) The holder of the shares of Series D shall
pay any and all issue and similar (e.g., documentary stamp) taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series D pursuant hereto.
(e) The number of shares of Common Stock into
which the Series D may be converted and the Conversion Price from time to time
in effect shall be adjusted from time to time as follows:
(A) In case the Company shall (i)
subdivide its shares of outstanding Common Stock into a larger number of shares
of Common Stock, or (ii) combine shares of its outstanding Common Stock into a
smaller number of shares of Common Stock; then the holder of any shares of
Series D after the close of business on the effective date of such subdivision
or combination, as the case may be (the close of business time being
hereinafter in this clause (A) referred to as "such record date"), shall be
entitled to receive, upon actual conversion of the shares of Series D, the
aggregate number and kind of shares of capital stock of the Company which, if
such shares of Series D had been converted immediately prior to such record
date at the Conversion Price then in effect, it would have been entitled to
receive by virtue of such subdivision or combination and the Conversion Price
shall be deemed to have been adjusted after such record date to apply to such
aggregate number and kind of shares. Such adjustment shall be made whenever
any of the events listed above shall occur.
(B) No notification to the holders of
any adjustment in the conversion price otherwise required by this subparagraph
(vii) to be made must be made, if such adjustment (plus any other adjustments
not heretofore made) would not require any increase or decrease of 5% or more
in the Conversion Price; provided, however, that upon presentment of shares of
Series D for conversion, all adjustments shall be made in calculating the
conversion rights of such holder. Whenever the Conversion Price is adjusted by
5% or more since the time of the last notice to holders of an adjustment, if
any, as herein provided, the Company shall promptly mail to each registered
holder of shares of Series D a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(C) In the event that at any time, as a
result of an adjustment, the holder of any shares of Series D thereafter
surrendered for conversion shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon conversion of such shares of Series D
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares
of Common Stock contained in clauses
-4-
<PAGE> 5
(A) and (B), above, and the other provisions of this subparagraph (e) with
respect to the shares of Common Stock shall apply on like terms to any such
other shares.
(D) In case of any reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value), any consolidation of the Company
with, or merger of the Company into, any other person, any merger of any person
into the Company (other than a merger that does not result in any
reclassification of, or change in the outstanding shares of Common Stock), any
sale or transfer of all or substantially all of the assets of the Company
(other than a sale-lease back, collateral assignment, mortgage or other similar
financing transaction), or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or other properties, then the
holder of each share of Series D then outstanding shall have the right
thereafter, during the period such share of Series D shall be convertible, to
convert such share into the kind and amount of securities, cash or other
property receivable upon such reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
into which such share of Series D might have been converted immediately prior
to such reclassification, consolidation, merger, sale, transfer or share
exchange.
(E) In case the Company, at any time
while any shares of Series D are outstanding, shall issue shares of Common
Stock, warrants or rights to acquire Common Stock or securities convertible
into Common Stock (excluding (i) those issued as a dividend or distribution
with respect to the Common Stock or the Series E as to which the Series D
participates pursuant to subparagraph (iii) above, (ii) those issued as a
dividend or distribution with respect to the Series B or Series C so long as
the securities are additional shares of Series B or Series C, and (iii) and
options or shares of Common Stock or other common stock issued to officers,
employees or directors so long as the number issued to officers, employees and
directors in any one year does not exceed five percent of the number of shares
of Common Stock outstanding on January 1st of such year) at a price per Common
Stock share purchased, purchasable, or issuable upon conversion that is less
than the Conversion Price, then the Conversion Price at which each share of
Series D shall thereafter be convertible shall be reduced by multiplying the
Conversion Price in effect on the date of issuance of such shares, warrants,
rights or convertible securities by a fraction, of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, warrants, rights or
convertible securities plus the number of additional shares of Common Stock,
issued, offered for subscription or purchase or issuable upon conversion, and
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
warrants, rights or convertible securities plus the number of shares of Common
Stock that the aggregate offering price of the total number of shares so
offered, issued, or issuable, or, with respect to convertible securities, the
aggregate consideration received by the Company for the convertible securities,
would purchase at the prior Conversion Price. Such adjustment shall be made
whenever shares, warrants, rights or convertible securities are issued, and
shall become effective immediately after such issuance date. However, upon the
expiration of any warrant, right or conversion right to purchase Common Stock,
the issuance of which resulted in an adjustment in the Conversion Price of the
shares of Series D pursuant to this clause (E), if any such warrant, right or
-5-
<PAGE> 6
convertible rights shall expire and shall not have been exercised, the
Conversion Price per share of Common Stock at which each share of Series D
shall thereafter be convertible shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section (vii)(e) after
the issuance of such warrants, rights or convertible securities) had the
adjustment of the Conversion Price made upon the issuance of such warrants,
rights or convertible securities been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of the warrants or rights actually exercised or the
conversion of the convertible securities actually converted. For purposes of
this subsection (e), the term Common Stock shall include (i) any common equity
security into which the Common Stock is reclassified or for which it is
exchanged, or (ii) any common equity security of the Company that has equal or
superior voting rights with the Common Stock.
(F) In case:
1. the Company shall declare a redemption of its Common
Stock; or
2. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
3. the approval of any stockholders of the Company shall
be required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is party or any
sale or transfer of all or substantially all of the assets of
the Company, or
4. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to the
holders of record of the shares of Series D at their last addresses as they
shall appear upon the stock books of the Company, a notice stating (x) the date
on which a record is to be taken for the purpose of such redemption, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such redemption, rights or warrants
are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(G) In case at any time conditions shall
arise by reason of action taken by the Company, which, in the opinion of the
Board of Directors of the Company, are not
-6-
<PAGE> 7
adequately covered by the other provisions hereof and which might materially
and adversely affect the rights of the holders of shares of Series D, or in
case at any time any such conditions are expected to arise by reason of any
action contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the adjustment,
if any (not inconsistent with the standards established in this section (vii)),
of the Conversion Price (including, if necessary, any adjustment as to the
securities into which shares of Series D may thereafter be convertible) which
is or would be required to preserve without dilution the rights of the holders
of shares of Series D. The Board of Directors of the Company may, in its
judgment, make the adjustment recommended upon the receipt of such opinion;
provided, however, that no adjustment pursuant to this subsection (G) of the
Conversion Price shall be made which in the opinion of the accountant or firm
of accountants giving the aforesaid opinion would result in an increase of the
Conversion Price to more than the Conversion Price then in effect.
(f) The Company shall at all times after August
29, 1996, reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the shares of Series D, the full number of shares
of Common Stock then deliverable upon the conversion of all shares of Series D
then outstanding. The Company covenants and agrees that all shares which may
be issued upon the exercise of the rights represented by the Series D will,
upon issuance, be legally and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges of any nature whatsoever.
(g) As used in this subparagraph (vii), the term
"Closing Price" on any day shall mean the reported closing sales price per
share of Common Stock on the principal national securities exchange or the
Nasdaq National Market on which the shares of Common Stock are at the time
listed or traded on such day. In case no such sale takes place on a day, the
Closing Price shall be the average of the reported closing bid and asked
prices, or, if the shares of Common Stock shall not be so listed, the average
of the high bid and low ask prices in the over-the-counter market as reported
by the National Association of Securities Dealers' Automated Quotation System,
or, if not so reported, as reported by the National Quotation Bureau,
Incorporated, or any successor thereof, or, if not so reported, the average of
the closing bid and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. The term "Trading Day" shall mean a day on which the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange or the Nasdaq National
Market, a Monday, Tuesday, Wednesday, Thursday, or Friday on which banking
institutions in the City of Dallas, State of Texas, are not authorized or
obligated by law or executive order to close.
(h) Upon conversion of Series D, the rights of
holders of shares so converted will be limited to the right to receive shares
of Common Stock at the Conversion Price then in effect, plus an amount equal to
any accrued and unpaid dividends.
-7-
<PAGE> 8
(viii) Mandatory Conversion. The Series D shall be automatically
converted into Common Stock in the event that High River Limited Partnership, a
Delaware limited partnership, and any other person or entity controlled by,
under common control with or controlling High River (collectively, the "High
River Affiliates"), own less than 7.5% of the Common Stock on a fully diluted
basis. To determine the percentage that the High River Affiliates own as of
any day, the number of shares of Common Stock owned by the High River
Affiliates on a fully diluted basis (assuming conversion of all preferred stock
of the Company owned by the High River Affiliates and exercise of all
outstanding options and warrants exercisable for Common Stock owned by the High
River Affiliates) as of such day shall be divided by 49,322,275 (the
"Denominator"); provided, however, that prior to making such calculations, the
Denominator shall be adjusted in accordance with the applicable adjustment
provisions of all the preferred stock (including, in the case of the Series D,
the applicable provisions of section (vii)(e)), options and warrants, if any
events triggering the application of such antidilution provisions have occurred
since such date that resulted in an adjustment to the number of shares of
Common Stock on a fully diluted basis owned by the High River Affiliates.
(ix) Voting Rights.
(a) The holders of Series D shall not be entitled
to vote except as required by applicable law or as provided herein.
(b) Holders of a majority of the outstanding
shares of Series D (voting together as one class) shall be entitled to appoint
one member to the Company's Board of Directors.
(c) The Company may not, without the affirmative
vote or consent of the director designated by the holders of Series D, file a
voluntary petition under federal or state bankruptcy laws.
(d) Holders of a majority of the outstanding
shares of Series D (voting together as one class) shall have the right, upon
written notice to the Company sent in accordance with Section (xii), to choose
to appoint up to that number of directors that would equal one-half ( 1/2) of
the directors, plus one member, of the Company's Board of Directors (including
the director previously appointed by such holders pursuant to subsection (b)
above) and to fill any vacancies that may later occur in such positions by
reason of the death, disability, resignation or removal of such directors;
(A) If an involuntary case under federal
bankruptcy laws or any other applicable federal or state insolvency or similar
law is commenced against the Company (including a case for the appointment of a
receiver, liquidator, custodian, trustee or similar official for the Company or
its assets) which does not seek emergency or expedited relief and such case is
not dismissed or stayed within fifteen (15) days of the commencement thereof,
or if a petition is filed under such laws seeking emergency or expedited relief
against the Company, provided, however, that a filing shall be deemed not to
have occurred with respect to any
-8-
<PAGE> 9
emergency or expedited relief petition for purposes of this clause: (i) if the
Company prevails on such petition, or (ii) if temporary relief is granted with
respect to such petition but no permanent relief is granted, in the event the
Company provides to holders within ten (10) business days of the grant of such
temporary relief, an opinion of counsel (being a firm of substantial size and
of good repute) which, without reservation, states that the Company will
prevail on the petition for permanent relief. In the event that Company
counsel should withdraw its opinion or should the Company thereafter not
prevail on the petition for permanent relief, the filing will be deemed to have
taken place for purposes of this clause; or
(B) If a default shall have occurred
under any note or other evidence of indebtedness of the Company with a
principal amount outstanding in any one case of at least $10,000,000 or if
defaults shall have occurred under more than one note or other evidences of
indebtedness of the Company with outstanding principal amounts aggregating at
least $10,000,000, and one of the following events shall have occurred: (i)
such indebtedness is already due and payable in full by reason of failure to
pay the indebtedness and such default shall not have been cured for a period of
thirty (30) days after occurrence of the default; (ii) the Company has received
notice of the acceleration of the maturity of such indebtedness and such
acceleration notice has not been rescinded within fifteen (15) days of the
receipt by the Company of such notice of acceleration; or (iii) the Company has
received a notice of foreclosure on the collateral granted as security to the
creditor of such indebtedness, and such notice of foreclosure has not been
rescinded within five (5) days of the receipt by the Company of such notice or
the scheduled date of sale in such notice is less than five (5) days after the
date of receipt of such notice of foreclosure.
The Company shall promptly give written notice to the holders of
Series D of the occurrence of any events that trigger the rights of the holders
to elect one-half of the directors, plus one member, of the Company's Board of
Directors, although the failure to give such notice shall not be determinative
of whether any such event has occurred.
(e) So long as any shares of Series D are
outstanding, the Company shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of a
majority of the shares of Series D outstanding, voting separately as a class,
to (i) amend, alter or repeal any provision of the Certificate of Incorporation
or the Bylaws of the Company so as to adversely affect the relative rights,
preferences, qualifications, limitations or restrictions of the Series D,
including but not limited to amending the Certificate of Incorporation or
Bylaws to provide that actions by the Board of Directors require more than the
vote of a majority of the members of the Board of Directors, (ii) authorize or
issue, or increase the authorized number of shares of, the Series D, any
additional class or series of stock, or any security convertible into stock of
such class or series, ranking senior or equal to the Series D upon liquidation
or winding up of the Company except as is permitted by the Certificate of
Designations of the Series B Preferred Stock and Series C Preferred Stock of
the Company, or (iii) effect any reclassification of the Series D; provided,
however, that no such consent of the holders of Series D shall be required if,
at or prior to the time when such amendment, alteration, or reclassification is
to take effect, provision is made for the redemption of all shares of Series D
at the time outstanding. Subject to these limitations, additional classes
-9-
<PAGE> 10
of preferred stock may be designated and issued from time to time in one or
more series with such designations, voting powers, or other preferences and
relative rights or qualifications as are determined by the Board of Directors.
(x) No Preemptive Rights. The holders of shares of
Series D shall have no preemptive rights with respect to any securities of the
Company.
(xi) Other Rights. The shares of Series D shall not have
any relative, participating, optional or other special rights and powers other
than as set forth herein.
(xii) Notices. Except as otherwise provided in the event
of conversion of shares of Series D under subparagraph (vii)(b) hereof, all
notices or other communications required hereby shall be in writing and shall
be sent either (a) by courier, or (b) by telecopy as well as by registered or
certified mail, and shall be regarded as properly given in the case of a
courier upon actual delivery to the proper place of address; in the case of
telecopy, on the day following the date of transmission if properly addressed
and sent without transmission error to the correct number and receipt is
confirmed by telephone within 48 hours of the transmission; in the case of a
letter for which a telecopy could not be successfully transmitted or receipt of
which could not be confirmed as herein provided, three (3) days after the
registered or certified mailing date if the letter is properly addressed and
postage prepaid; and shall be regarded as properly addressed if sent to the
parties or their representatives at the addresses given below:
To the Company: 4925 Greenville Ave., Ste. 1400
Dallas, TX 75206
Attn: Miles D. Bender
Phone: (214) 692-9211
Facsimile: (214) 692-9310
To the Holder: High River Limited Partnership
c/o Icahn Associates Corp.
114 West 47th Street
Suite 1925
New York, NY 10036
Attention: Mr. Carl C. Icahn
Facsimile: (212) 921-3359
With Copy to: Mr. Marc Weitzen
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
-10-
<PAGE> 11
IN WITNESS WHEREOF, I have signed this certificate on the 29th day of
August, 1996, and I acknowledge and affirm that the instrument is the act and
deed of the Company, and that the facts contained herein are true.
NATIONAL ENERGY GROUP, INC.,
a Delaware corporation
By: /s/ Miles D. Bender
----------------------------------
Miles D. Bender
President and Chief Executive
Officer
-11-
<PAGE> 1
CERTIFICATE OF DESIGNATIONS EXHIBIT 4.2
OF
NATIONAL ENERGY GROUP, INC.
OF
CONVERTIBLE PREFERRED STOCK, SERIES E
Pursuant to the provisions of the General Corporation Law of Delaware,
the undersigned, Miles D. Bender, being the President of National Energy Group,
Inc., a Delaware corporation (the "Company"), hereby certifies that:
1. The name of the Company is National Energy Group, Inc.
2. The following resolutions establishing and designating the
Convertible Preferred Stock, Series E, of the Company, were duly adopted by the
Board of Directors at a meeting of the Board of Directors on August 29, 1996.
RESOLVED, that pursuant to authority expressly granted to the Board of
Directors by the provisions of the Certificate of Incorporation of the Company,
as amended, the Board of Directors hereby creates a class of Convertible
Preferred Stock, Series E, having a par value of $1.00 per share, and hereby
fixes the powers (including without limitation any type of voting powers -
special, no or otherwise), designations, preferences, conversion rights,
cumulative, relative, participating, optional and other rights, if any, and the
qualifications, limitations or restrictions applicable to such Convertible
Preferred Stock, Series E as follows:
(i) Serial Designation. The distinctive serial
designation of this series shall be Convertible Preferred Stock, Series E
(hereinafter called "Series E"). Shares of Series E shall have a stated value
of $100.00 per share.
(ii) Authorized Shares. The number of authorized shares
in Series E shall be 50,000. Shares of Series E purchased by the Company or
converted into Common Stock shall be canceled and shall revert to authorized
but unissued Preferred Stock undesignated as to Series, and such shares shall
not be deemed to be outstanding for purposes hereof.
(iii) Dividends. Holders of the Series E shall not be
entitled to receive dividends except in the event the Company shall declare a
distribution, whether in cash, in kind or otherwise, with respect to the Common
Stock, $.01 par value, of the Company (the "Common Stock"), and then, in each
such case, the holders of the Series E shall be entitled to a proportionate
share of any such distribution as though the holders of the Series E were the
holders of the number of shares of Common Stock of the Company into which their
shares of Series E are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Company entitled to receive
such distribution.
<PAGE> 2
(iv) Ranking.
(a) Ranking as to Dividends. The Series E, with
respect to dividends, (1) ranks junior to the 10% Cumulative Convertible
Preferred Stock, Series B (the "Series B"), the 10 1/2% Cumulative Convertible
Preferred Stock, Series C (the "Series C") and any series of Preferred Stock of
the Company, the terms of which specifically provide that such series ranks
senior to the Series E (the "Senior Stock") with respect to dividends; (2)
ranks pari passu with the Convertible Preferred Stock, Series D (the "Series
D") and with any other series of Preferred Stock of the Company, the terms of
which specifically provide that such series ranks pari passu with the Series E
(the "Parity Stock") with respect to dividends; (3) ranks senior to any series
of Preferred Stock of the Company, the terms of which specifically provide that
such series ranks junior and subordinate to the Series E with respect to
dividends or the terms of which do not specify its rank with respect to the
Series E; and (4) participates as if the Series E had been fully converted into
Common Stock, pari passu with the Common Stock, the Series D and with any other
series or class of capital stock of the Company that provides such series ranks
pari passu with the Common Stock with respect to dividends.
(b) Ranking Upon Liquidation, Dissolution, or
Winding Up. The Series E, upon liquidation, dissolution, or winding up of the
Company, (1) ranks junior to the Series B, Series C and to any other series of
Preferred Stock of the Company, the terms of which specifically provide that
such series is Senior Stock upon liquidation, dissolution or winding up of the
Company; (2) ranks pari passu with the Series D and any other series of
Preferred Stock of the Company, the terms of which specifically provide that
such series is Parity Stock upon liquidation, dissolution or winding up of the
Company; (3) ranks senior to any series of Preferred Stock of the Company, the
terms of which specifically provide that such series ranks junior and
subordinate to the Series E or the terms of which do not specify its rank with
respect to the Series E; and (4) senior to the Common Stock.
(v) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, holders of
Series E are entitled to receive out of the assets of the Company available for
distribution to shareholders the liquidation preference of $100.00 per share,
plus an amount equal to any accrued and unpaid dividends, and no more, before
any payment or distribution is made to the holders of Common Stock, or any
series or class of the Company's stock hereafter issued that ranks junior as to
liquidation rights to the Series E. The holders of Series E, the Series D and
any Parity Stock hereafter issued that rank on a parity as to liquidation
rights with the Series E, will be entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
which is not sufficient to pay in full the aggregate of the amounts payable
thereon. After payment in full of the liquidation preference of the shares of
the Series E, the holders of such shares will not be entitled to any further
participation in any distribution of assets by the Company. Neither a
consolidation, merger or other business combination of the Company with or into
another corporation or other entity nor a sale, lease, or exchange or transfer
of all or part of the Company's assets for cash, securities or other property
will be considered a liquidation, dissolution or winding up of the Company so
long as such sale, lease, exchange or transfer is not in connection with a plan
of liquidation or in contemplation of a plan of liquidation, it being
-2-
<PAGE> 3
assumed that any such sale, lease, exchange or transfer that occurs within 90
days of the adoption of a plan of liquidation is in contemplation of a plan of
liquidation.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company which will involve the distribution of assets
other than cash, the Company shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the
holders of shares of Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Company. The Company shall, upon receipt of
such appraiser's valuation, give prompt written notice to each holder of shares
of Series E of the appraiser's valuation.
(vi) Redemption Rights. Neither the Company nor the
holders of the Series E shall have any right to require the redemption of the
Series E.
(vii) Conversion Rights. The holders of shares of Series E
shall have the right, at their option, to convert such shares into Common Stock
of the Company at any time as provided below, subject to the following terms
and conditions:
(a) The shares of Series E shall be convertible
at the principal office of the Company, and at such other office or offices, if
any, as the Board of Directors may designate in writing in accordance with the
notice provisions of subparagraph 2(xii) hereof, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Company, at the conversion price of $2.25
per share of Common Stock subject to adjustment as described below (the
"Conversion Price"), with each share of Series E being taken at $100.00 for the
purposes of such conversion.
(b) In order to convert shares of Series E into
Common Stock the holder thereof shall surrender at the office hereinabove
mentioned the certificate or certificates therefor, duly endorsed or assigned
to the Company or in blank, accompanied by written notice to the Company at
said office that it elects to convert such shares.
Conversion shall be deemed to have been effected on the date
when such delivery is made (herein called the "Conversion Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such
Common Stock on the applicable Conversion Date. As promptly as practicable on
or after the applicable Conversion Date, the Company shall issue and shall
deliver at said office (or by mail if so requested by the person converting), a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with a check for cash in lieu of any
fraction of a share, as hereinafter provided, to the person entitled to receive
the same. Upon conversion of only a portion of the number of shares of Series
E represented by a certificate surrendered for conversion, the Company shall
issue and deliver to or upon the written order of the holder of the certificate
so surrendered for conversion, a new certificate covering the number of shares
of Common Stock representing the unconverted portion of the certificate so
surrendered.
-3-
<PAGE> 4
(c) No fractional shares of Common Stock shall be
issued upon conversion of shares of Series E, but, instead of any fraction
which would otherwise be issuable in respect of the aggregate number of shares
of Series E surrendered for conversion at one time by the same holder, the
Company shall pay a cash adjustment in an amount equal to the same fraction of
the Closing Price (as hereinafter defined) on the applicable Conversion Date,
or, if such date is not a Trading Day (as hereinafter defined), on the next
Trading Day.
(d) The holder of the shares of Series E shall
pay any and all issue and similar (e.g., documentary stamp) taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series E pursuant hereto.
(e) The number of shares of Common Stock into
which the Series E may be converted and the Conversion Price from time to time
in effect shall be adjusted from time to time as follows:
(A) In case the Company shall (i)
subdivide its shares of outstanding Common Stock into a larger number of shares
of Common Stock, or (ii) combine shares of its outstanding Common Stock into a
smaller number of shares of Common Stock; then the holder of any shares of
Series E after the close of business on the effective date of such subdivision
or combination, as the case may be (the close of business time being
hereinafter in this clause (A) referred to as "such record date"), shall be
entitled to receive, upon actual conversion of the shares of Series E, the
aggregate number and kind of shares of capital stock of the Company which, if
such shares of Series E had been converted immediately prior to such record
date at the Conversion Price then in effect, it would have been entitled to
receive by virtue of such subdivision or combination; and the Conversion Price
shall be deemed to have been adjusted after such record date to apply to such
aggregate number and kind of shares. Such adjustment shall be made whenever
any of the events listed above shall occur.
(B) No notification to the holders of
any adjustment in the conversion price otherwise required by this subparagraph
(vii) to be made must be made, if such adjustment (plus any other adjustments
not heretofore made) would not require any increase or decrease of 5% or more
in the Conversion Price; provided, however, that upon presentment of shares of
Series E for conversion, all adjustments shall be made in calculating the
conversion rights of such holder. Whenever the Conversion Price is adjusted by
5% or more since the time of the last notice to holders of an adjustment, if
any, as herein provided, the Company shall promptly mail to each registered
holder of shares of Series E a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(C) In the event that at any time, as a
result of an adjustment, the holder of any shares of Series E thereafter
surrendered for conversion shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon conversion of such shares of Series E
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares
of Common Stock contained in clauses
-4-
<PAGE> 5
(A) and (B), above, and the other provisions of this subparagraph (e) with
respect to the shares of Common Stock shall apply on like terms to any such
other shares.
(D) In case of any reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value), any consolidation of the Company
with, or merger of the Company into, any other person, any merger of any person
into the Company (other than a merger that does not result in any
reclassification of, or change in the outstanding shares of Common Stock), any
sale or transfer of all or substantially all of the assets of the Company
(other than a sale-lease back, collateral assignment, mortgage or other similar
financing transaction), or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or other properties, then the
holder of each share of Series E then outstanding shall have the right
thereafter, to convert such share into the kind and amount of securities, cash
or other property receivable upon such reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Common
Stock into which such share of Series E might have been converted immediately
prior to such reclassification, consolidation, merger, sale, transfer or share
exchange.
(E) In case the Company at any time
while any shares of Series E are outstanding shall issue shares of Common
Stock, warrants or rights to acquire Common Stock or securities convertible
into Common Stock (excluding those issued as a dividend or distribution with
respect to the Common Stock as to which the Series E participates pursuant to
subparagraph (iii) above and options or shares of Common Stock or other common
stock issued to officers, employees or directors so long as the number issued
to officers, employees and directors in any one year does not exceed five
percent of the number of shares of Common Stock outstanding on January 1st of
such year) at a price per share of Common Stock purchased, purchasable, or
issuable upon conversion that is less than the Conversion Price, then the
Conversion Price at which each share of Series E shall thereafter be
convertible shall be reduced by multiplying the Conversion Price in effect on
the date of issuance of such shares, warrants, rights or convertible securities
by a fraction, of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance
of such shares, warrants, rights or convertible securities plus the number of
additional shares of Common Stock, issued, offered for subscription or purchase
or issuable upon conversion, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such shares, warrants, rights or convertible securities
plus the number of shares of Common Stock that the aggregate offering price of
the total number of shares so offered, issued, or issuable, or, with respect to
convertible securities, the aggregate consideration received by the Company for
the convertible securities, would purchase at the prior Conversion Price. Such
adjustment shall be made whenever shares, warrants, rights or convertible
securities are issued, and shall become effective immediately after such
issuance date. However, upon the expiration of any warrant, right or
conversion right to purchase Common Stock, the issuance of which resulted in an
adjustment in the Conversion Price of the shares of Series E pursuant to this
subparagraph (E), if any such warrant, right or convertible rights shall expire
and shall not have been exercised, the Conversion Price per share of Common
Stock at which each share of Series E shall thereafter
-5-
<PAGE> 6
be convertible shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section (vii)(e) after the issuance of
such warrants, rights or convertible securities) had the adjustment of the
Conversion Price made upon the issuance of such warrants, rights or convertible
securities been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
the warrants or rights actually exercised or the conversion of the convertible
securities actually converted. For purposes of this subsection (e), the term
Common Stock shall include (i) any common equity security into which the Common
Stock is reclassified or for which it is exchanged, or (ii) any common equity
security of the Company that has equal or superior voting rights with the
Common Stock.
(F) In case:
1. the Company shall declare a redemption of its Common
Stock; or
2. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any other rights; or
3. the approval of any stockholders of the Company shall
be required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is party or any
sale or transfer of all or substantially all of the assets of
the Company, or
4. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to the
holders of record of the shares of Series E at their last addresses as they
shall appear upon the stock books of the Company, a notice stating (x) the date
on which a record is to be taken for the purpose of such redemption, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such redemption, rights or warrants
are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(G) In case at any time conditions shall
arise by reason of action taken by the Company, which, in the opinion of the
Board of Directors of the Company, are not adequately covered by the other
provisions hereof and which might materially and adversely affect the rights of
the holders of shares of Series E, or in case at any time any such conditions
-6-
<PAGE> 7
are expected to arise by reason of any action contemplated by the Company, the
Board of Directors of the Company shall appoint a firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company), who shall give their opinion
as to the adjustment, if any (not inconsistent with the standards established
in this section (vii)), of the Conversion Price (including, if necessary, any
adjustment as to the securities into which shares of Series E may thereafter be
convertible) which is or would be required to preserve without dilution the
rights of the holders of shares of Series E. The Board of Directors of the
Company may, in its judgment, make the adjustment recommended upon the receipt
of such opinion; provided, however, that no adjustment pursuant to this
subsection (G) of the Conversion Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Conversion Price to more than the Conversion Price then
in effect.
(f) The Company shall at all times after August
29, 1996, reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the shares of Series E, the full number of shares
of Common Stock then deliverable upon the conversion of all shares of Series E
then outstanding. The Company covenants and agrees that all shares which may
be issued upon the exercise of the rights represented by the Series E will,
upon issuance, be legally and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges of any nature whatsoever.
(g) As used in this subparagraph (vii), the term
"Closing Price" on any day shall mean the higher of (1) reported closing sales
price per share of Common Stock on the principal national securities exchange
or the Nasdaq National Market on which the shares of Common Stock are at the
time listed or traded on such day or (2) the average of the closing sales
prices for the twenty Trading Days prior to such day. In case no such sale
takes place on a day, the Closing Price shall be the average of the reported
closing bid and asked prices, or, if the shares of Common Stock shall not be so
listed, the average of the high bid and low ask prices in the over-the-counter
market as reported by the National Association of Securities Dealers' Automated
Quotation System, or, if not so reported, as reported by the National Quotation
Bureau, Incorporated, or any successor thereof, or, if not so reported, the
average of the closing bid and asked prices as furnished by any member of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. The term "Trading Day" shall mean a day on which
the principal national securities exchange or the Nasdaq National Market on
which the shares of Common Stock are listed or admitted to trading is open for
the transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange or the Nasdaq National
Market, a Monday, Tuesday, Wednesday, Thursday, or Friday on which banking
institutions in the City of Dallas, State of Texas, are not authorized or
obligated by law or executive order to close.
(h) Upon conversion of Series E, the rights of
holders of shares so converted will be limited to the right to receive shares
of Common Stock at the Conversion Price then in effect, plus an amount equal to
any accrued and unpaid dividends.
-7-
<PAGE> 8
(viii) Mandatory Conversion. If at any time after nine
months after the issuance of the Series E, partnerships or accounts managed by
Kayne, Anderson Investment Management, Inc., a Delaware corporation
(collectively, the "KAIM Affiliates"), own less than 7.5% of the Common Stock
on a fully diluted basis the Series E shall be automatically converted into
Common Stock at the Conversion Price; provided, that such conversion shall not
take effect unless and until the shares of Common Stock into which the Series E
will be converted may be resold (i) pursuant to an effective registration
statement under the Securities Act of 1933, as amended or (ii) pursuant to Rule
144(k) under the Securities Act. To determine the percentage that the KAIM
Affiliates own as of any day, the number of shares of Common Stock owned by the
KAIM Affiliates on a fully diluted basis (assuming conversion of all preferred
stock of the Company and exercise of all outstanding options and warrants
exercisable for Common Stock owned by the KAIM Affiliates) as of such day shall
be divided by 49,322,275 (the "Denominator"); provided, however, that prior to
making such calculations, the Denominator shall be adjusted in accordance with
the applicable adjustment provisions of all the preferred stock (including, in
the case of the Series E, the applicable provisions of section (vii)(e)),
options and warrants, if any events triggering the application of such
antidilution provisions have occurred since such date that resulted in an
adjustment to the number of shares of Common Stock on a fully diluted basis
owned by the KAIM Affiliates.
(ix) Voting Rights.
(a) The holders of Series E shall be entitled to
one vote for each share of Series E so held on the record date for the
determination of stockholders entitled to vote, but only as to matters upon
which by law they are entitled to vote as a single class or as hereinafter
provided.
(b) Holders of the Series E shall be entitled to
vote with the Common Stock on all matters presented to holders of the Common
Stock as though the holders of the Series E were the holders of the number of
shares of Common Stock of the Company into which their shares of Series E are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Company entitled to vote with respect to such matters.
(c) So long as any shares of Series E are
outstanding, the Company shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of a
majority of the shares of Series E outstanding, voting separately as a class,
to (i) amend, alter or repeal any provision of the Certificate of Incorporation
or the Bylaws of the Company so as to adversely affect the relative rights,
preferences, qualifications, limitations or restrictions of the Series E, (ii)
authorize or issue, or increase the authorized number of shares of, the Series
E, any additional class or series of stock, or any security convertible into
stock of such class or series, ranking senior or equal to the Series E upon
liquidation, dissolution or winding up of the Company, or (iii) effect any
reclassification of the Series E. Subject to these limitations, additional
classes of preferred stock may be designated and issued from time to time in
one or more series with such designations, voting powers, or other preferences
and relative rights or qualifications as are determined by the Board of
Directors.
-8-
<PAGE> 9
(x) No Preemptive Rights. The holders of shares of
Series E shall have no preemptive rights with respect to any securities of the
Company.
(xi) Other Rights. The shares of Series E shall not have
any relative, participating, optional or other special rights and powers other
than as set forth herein.
(xii) Notices. Except as otherwise provided in the event
of conversion of shares of Series E under subparagraph (vii)(b) hereof, all
notices or other communications required hereby shall be in writing and shall
be sent either (a) by courier, or (b) by telecopy as well as by registered or
certified mail, and shall be regarded as properly given in the case of a
courier upon actual delivery to the proper place of address; in the case of
telecopy, on the day following the date of transmission if properly addressed
and sent without transmission error to the correct number and receipt is
confirmed by telephone within 48 hours of the transmission; in the case of a
letter for which a telecopy could not be successfully transmitted or receipt of
which could not be confirmed as herein provided, three (3) days after the
registered or certified mailing date if the letter is properly addressed and
postage prepaid; and shall be regarded as properly addressed if sent to the
parties or their representatives at the addresses given below:
To the Company: 4925 Greenville Ave., Ste. 1400
Dallas, TX 75206
Attn: Miles D. Bender
Phone: (214) 692-9211
Facsimile: (214) 692-9310
To Arbco Associates L.P., Offense Group Associates, L.P., Kayne,
Anderson Nontraditional Investments L.P. and Kayne, Anderson Offshore
Limited:
KAIM Nontraditional L.P.
1800 Ave. of the Stars, Suite 2000
Los Angeles, CA 90067
Attn: Robert V. Sinnott
Phone: (310) 284-5508
Facsimile: (310) 284-6490
To Foremost Insurance Company:
Foremost Insurance Company
5230 33rd Street S.E.
Grand Rapids, Michigan 49512
Attn: Donald D. Welsh
-9-
<PAGE> 10
To Topa Insurance Company:
Topa Insurance Company
1800 Ave. of the Stars, Suite 1200
Los Angeles, CA 90067
With a copy to (if to any Holder named above):
Baker & Botts, L.L.P.
3000 One Shell Plaza
Houston, Texas 77002
Attention: Ms. Kelly B. Rose
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
IN WITNESS WHEREOF, I have signed this certificate on the 29th day of
August, 1996, and I acknowledge and affirm that the instrument is the act and
deed of the Company, and that the facts contained herein are true.
NATIONAL ENERGY GROUP, INC.,
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President and Chief Executive Officer
-10-
<PAGE> 1
EXHIBIT 4.4
August 29, 1996
Alexander Energy Corporation
701 Cedar Lake Boulevard
Oklahoma City, OK 73114-7800
Attn: Mr. David E. Grose
Chief Financial Officer
Gentlemen:
Reference is made to the Note Agreement between Alexander Energy Corporation
("Alexander") and John Hancock Mutual Life Insurance Company ("Hancock") dated
June 1, 1988, as amended through the date hereof (the "1988 Note" and the "1988
Note Agreement"), and the Note Agreement dated as of April 25, 1989, by and
among AEJH 1989 Limited Partnership, Alexander and Hancock, as amended through
the date hereof (the "1989 Note" and the "1989 Note Agreement").
You have advised us that Alexander has entered into an Agreement and Plan of
Merger dated as of June 6, 1996, as amended by the First Amendment to Agreement
and plan of Merger, dated as of June 20, 1996, by and between Alexander,
National Energy Group, Inc. ("NEG") and NEG-OK, Inc. (the "Merger Agreement"),
with Alexander being merged into NEG-OK, Inc., a wholly owned subsidiary of
NEG. The merger is expected to be effective on August 29, 1996.
Hancock hereby consents to and waives its rights with respect to the merger of
Alexander with and into NEG-OK, Inc. as required by the 1988 and 1989 Note
Agreements, and the Agreements of Limited Partnerships and agrees that the
proposed merger shall not give rise to an Event of Default under the 1988 and
1989 Note Agreements provided that Hancock shall receive on or before August
30, 1996, from Alexander payment in full in immediately available funds of the
1988 Note.
Reference is also made to the Agreements of Limited Partnerships of AEJH 1985
Limited Partnership ("AEJH 1985"), AEJH 1987 Limited Partnership ("AEJH 1987")
and AEJH 1989 Limited Partnership ("AEJH 1989") (collectively, the
"Partnerships"). Hancock hereby agrees to the substitution of NEG-OK as
general partner of the Partnerships and Alexander's assignment and transfer of
all of its interest in and to the Partnerships to NEG-OK in accordance with the
merger. Upon completion of the merger, NEG-OK shall become the substituted
general partner in each Partnership to the extent of Alexander's interest
therein.
In connection with the revival and subsequent liquidation of the Partnerships,
Alexander agrees to (i) retire its outstanding balance on the 1989 Note and
1989 Note Agreement upon final dissolution of the Partnerships, (ii) pay an
estimate of amounts owed to the Partnerships at the
<PAGE> 2
time of the assignment and distribution of Partnership assets to Hancock or its
designated nominee and NEG-OK, and (iii) distribute all cash of the
Partnerships (less amounts necessary to pay estimated final dissolution
expenses) to Hancock or its designated nominee at the time of the assignment
and distribution of Partnership assets.
Please acknowledge your acceptance of the above terms by signing below and
returning a copy to our office.
Very truly yours,
JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY
By: /s/ Daniel R. Revers
--------------------------------
Daniel R. Revers
Investment Officer
Agreed and Accepted:
Alexander Energy Corporation
By: /s/ David E. Grose
--------------------------------
Its: Vice President
--------------------------------
<PAGE> 1
EXHIBIT 10.29
NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE WARRANTS AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT, AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE
ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
Warrant to Purchase
100,000 Shares of
National Energy Group, Inc.
Common Stock
This Warrant (the "Warrant") is issued to Prudential Securities
Incorporated ("Holder") and Holder agrees by acceptance of this Warrant that
this Warrant is subject to the terms and conditions of this Warrant.
This Warrant is a warrant to purchase 100,000 shares of Common Stock,
$0.01 par value (the "Common Stock") of National Energy Group, Inc. (the
"Company") at a price of $4.09 per share (the "Exercise Price").
This Warrant shall expire on August 29, 2001 ("Expiration Date").
This Warrant shall be void and all rights of Holder under this Warrant shall
cease if this Warrant shall not have been duly exercised on or prior to the
Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be adjusted
from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of
outstanding Common Stock into a larger number of shares of Common Stock, (ii)
combine shares of its outstanding Common Stock into a smaller number of shares
of Common Stock or (iii) issue stock as a dividend on its
<PAGE> 2
Common Stock; then Holder, after the close of business on the effective date of
such subdivision, combination or stock dividend, as the case may be (the close
of business times being hereinafter in this subparagraph (A) referred to as
"such record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record date
to apply to such aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise
price otherwise required by this subparagraph (B) to be made must be made, if
such adjustment (plus any other adjustments not heretofore made) would not
require any increase or decrease of 5% or more in the Exercise Price; provided,
however, that upon exercise of this Warrant, all adjustments shall be made in
calculating the exercise rights of Holder. Whenever the Exercise Price is
adjusted by 5% or more, as herein provided, the Company shall promptly mail to
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
notice prepared in good faith shall be conclusive evidence of the correctness
of such adjustment absent manifest error.
(C) In the event that at any time, as a result of an adjustment,
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this subparagraph
(C) with respect to the shares of Common Stock shall apply on like terms to any
such other shares.
(D) In case of any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or change
in the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company (other than a sale-lease back,
collateral assignment, mortgage or other similar financing transaction), or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other properties, then Holder shall have the right
thereafter, during the period this Warrant shall be exercisable, to exercise
this Warrant for the kind and amount of securities, cash or other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
this Warrant might have been exercised immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
-2-
<PAGE> 3
(E) In case the Company at any time while this Warrant is
outstanding shall issue shares of Common Stock, warrants or rights to acquire
Common Stock or securities convertible into Common Stock (excluding options or
shares of Common Stock or other common stock issued to officers, employees or
directors) (i) at a price per Common Stock share purchased, purchasable, or
issuable upon conversion that is less than the Exercise Price, if such Common
Stock shares are the subject of a registered public offering or are subject to
registration rights exercisable within one year, or (ii) at a price per share
that is 10% lower than the Exercise Price, if such shares of Common Stock are
the subject of a private offering and are restricted and are not entitled to
registration rights until after the expiration of one year, or (iii) at a price
per share that is 20% lower than the Exercise Price, if such shares of Common
Stock are the subject of a private offering and are restricted and are not
entitled to registration rights until after the expiration of two years, then
the Exercise Price at which each share of Common Stock at which this Warrant
shall thereafter be exercisable shall be reduced by multiplying the Exercise
Price in effect on the date of issuance of such shares, warrants, rights or
convertible securities by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, warrants, rights or
convertible securities plus the number of additional shares of Common Stock
issued, offered for subscription or purchase or issuable upon conversion, and
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
warrants, rights or convertible securities plus the number of shares of Common
Stock that the aggregate offering price of the total number of shares so
offered, issued, or issuable, or, with respect to convertible securities, the
aggregate consideration received by the Company for the convertible securities,
would purchase at the prior Exercise Price. Such adjustment shall be made
whenever shares, warrants, rights or convertible securities are issued, and
shall become effective immediately after such issuance date. However, upon the
expiration of any warrant, right or conversion right to purchase Common Stock,
the issuance of which resulted in an adjustment in the Exercise Price of this
Warrant pursuant to this subparagraph (E), if any such warrant, right or
convertible rights shall expire and shall not have been exercised, the Exercise
Price per share of Common Stock at which this Warrant shall thereafter be
exercisable shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it would have
been (but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of this subparagraph (E) after the issuance of such warrants,
rights or convertible securities) had the adjustment of the Exercise Price made
upon the issuance of such warrants, rights or convertible securities been made
on the basis of offering for subscription or purchase only that number of
shares of Common Stock actually purchased upon the exercise of the warrants or
rights actually exercised or the conversion of the convertible securities
actually converted. For purposes of this subparagraph (E), the term Common
Stock shall include (i) any common equity security into which the Common Stock
is reclassified or for which it is exchanged, or (ii) any common equity
security of the Company that has equal or superior voting rights with the
Common Stock.
(F) In case the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of earned surplus) or rights to subscribe (excluding those referred to in
subparagraph (E) above) then in each such case the Exercise Price per share of
-3-
<PAGE> 4
Common Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination for stockholders entitled to receive such distribution
by a fraction, of which the denominator shall be the Closing Price of a share
of Common Stock determined as of the record date mentioned above, and of which
the numerator shall be such Closing Price of a share of Common Stock, less the
then fair market value per share (as determined by the Board of Directors of
the Company in good faith, whose determination shall be conclusive if made in
good faith and shall be described in a statement provided to Holder) of the
portion of assets or evidences of indebtedness so distributed or of such
subscription rights. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(G) In case:
1. the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise
than in cash out of its earned surplus; or
2. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
3. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
4. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is party or any sale or transfer of
all or substantially all of the assets of the
Company; or
5. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to Holder at
its last address as it shall appear upon the stock books of the Company, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock
-4-
<PAGE> 5
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
(H) In case at any time conditions shall arise by reason of action
taken by the Company, which, in the opinion of the holder or Board of Directors
of the Company, are not adequately covered by the other provisions hereof and
which might materially and adversely affect the rights of Holder, or in case at
any time any such conditions are expected to arise by reason of any action
contemplated by the Company, the holder and the Board of Directors of the
Company shall appoint a mutually acceptable firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company), who shall give their opinion
as to the adjustment, if any (not inconsistent with the standards herein), of
the Exercise Price (including, if necessary, any adjustment as to the
securities to be received thereafter upon exercise of this Warrant) which is or
would be required to preserve without dilution the rights of Holder. The Board
of Directors of the Company will make the adjustment recommended upon the
receipt of such opinion; provided, however, that no adjustment pursuant to this
subparagraph (H) of the Exercise Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Exercise Price to more than the Exercise Price then in
effect.
As used above, the term "Closing Price" on any day shall mean the
higher of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are at the time listed or traded on such day or (ii)
the average of the closing sales prices for the twenty Trading Days prior to
such day. In case no such sale takes place on a day, the Closing Price shall
be the average of the reported closing bid and asked prices, or, if the shares
of Common Stock shall not be so listed, the average of the high bid and low ask
prices in the over-the-counter market as reported by the National Association
of Securities Dealers' Automated Quotation System, or, if not so reported, as
reported by the National Quotation Bureau, Incorporated, or any successor
thereof, or, if not so reported, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or the Nasdaq National Market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to, trading on any
national securities exchange or the Nasdaq National Market, a Monday, Tuesday,
Wednesday, Thursday, or Friday on which banking institutions in the City of
Dallas, State of Texas, are not authorized or obligated by law or executive
order to close.
The Company shall at all times after August 29, 1996, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise of
this Warrant the full number of shares of Common Stock then deliverable upon
the exercise of this Warrant. The Company covenants and agrees that all shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges of any nature whatsoever.
-5-
<PAGE> 6
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the Company by the Expiration Date, accompanied by
payment of the full applicable Exercise Price. Payment of the Exercise Price
must be made in United States funds (by certified check) payable to the order
of the Company. Common Stock certificates will be issued as soon as
practicable after exercise and payment of the Exercise Price for the shares of
Common Stock so purchased. If the Warrant Exercise Notice is mailed by first
class mail, registered or certified, postage prepaid, and properly addressed to
National Energy Group, Inc., 4925 Greenville Ave., Ste. 1400, Dallas, TX 75206,
or, to such other address as the Company may have specified in a notice duly
given to Holder, then the Warrant Exercise Notice will be presumed to be
received by the Company three business days after the date so mailed.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Holder, in whole or in part (provided
that any partial transfer shall be for a whole number of shares of Common
Stock), and upon delivery of this Warrant to the Company with evidence of such
transfer by Holder reasonably satisfactory to the Company, the Company shall
issue a replacement Warrant in a form similar to this Warrant, in the name of
such transferee (and in the case of such partial transfer, the Company shall
issue a new Warrant to Holder to purchase the balance of the shares of Common
Stock that is not the subject of transfer). Holder shall indemnify the Company
against any loss, claim or damages arising from or related to such transfer and
shall sign a written instrument of indemnity in a form acceptable to the
Company.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: August 29, 1996
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
------------------------------------
Miles D. Bender, President and
Chief Executive Officer
-6-
<PAGE> 7
EXHIBIT 1
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED THIS NOTICE MUST BE
RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated ____________________________ (the
"Notice"), relates to this Warrant, dated August 29, 1996 (the "Warrant"),
issued by National Energy Group, Inc., a Delaware corporation whose address is
4925 Greenville Ave., Ste. 1400, Dallas, TX 75206 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to
purchase, and hereby purchases, ________ shares of the Company's Common Stock,
at a price of $_______ per share, which is the price indicated in this Warrant.
The undersigned acknowledges that the number of shares of Common Stock must be
divisible by 100 for an effective exercise of any portion which is less than
all of this Warrant. The full amount of $__________ in United States funds, by
certified check payable to the order of the Company is attached hereto.
-7-
<PAGE> 8
The undersigned acknowledges that a certificate for the shares of
Common Stock purchased by the undersigned through the exercise of this Warrant
pursuant to this Notice will be delivered to the undersigned, at the address
indicated below (unless the Company has received written notice of a different
address) as soon as practicable after receipt of this notice and the full
payment of the applicable purchase price.
Dated:
--------------------------------
Holder:
---------------------------------
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Social Security or
Taxpayer Identification Number: ----------------------------------------
Business Phone Number:
----------------------------------------
Home Phone Number:
----------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.30
NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE WARRANTS AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT, AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE
ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
Warrant to Purchase
300,000 Shares of
National Energy Group, Inc.
Common Stock
This Warrant (the "Warrant") is issued to Gaines Berland, Inc.
("Holder") and Holder agrees by acceptance of this Warrant that this Warrant is
subject to the terms and conditions of this Warrant.
This Warrant is a warrant to purchase 300,000 shares of Common Stock,
$0.01 par value (the "Common Stock") of National Energy Group, Inc. (the
"Company") at a price of $2.875 per share (the "Exercise Price").
This Warrant shall expire on August 29, 2001 (the "Expiration Date").
This Warrant shall be void and all rights of Holder under this Warrant shall
cease if this Warrant shall not have been duly exercised on or prior to the
Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be adjusted
from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of
outstanding Common Stock into a larger number of shares of Common Stock, (ii)
combine shares of its outstanding Common Stock into a smaller number of shares
of Common Stock or (iii) issue stock as a dividend on its
<PAGE> 2
Common Stock; then Holder, after the close of business on the effective date of
such subdivision, combination or stock dividend, as the case may be (the close
of business times being hereinafter in this subparagraph (A) referred to as
"such record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record date
to apply to such aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise
price otherwise required by this subparagraph (B) to be made must be made, if
such adjustment (plus any other adjustments not heretofore made) would not
require any increase or decrease of 5% or more in the Exercise Price; provided,
however, that upon exercise of this Warrant, all adjustments shall be made in
calculating the exercise rights of Holder. Whenever the Exercise Price is
adjusted by 5% or more, as herein provided, the Company shall promptly mail to
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
notice prepared in good faith shall be conclusive evidence of the correctness
of such adjustment absent manifest error.
(C) In the event that at any time, as a result of an adjustment,
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this subparagraph
(C) with respect to the shares of Common Stock shall apply on like terms to any
such other shares.
(D) In case of any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or change
in the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company (other than a sale-lease back,
collateral assignment, mortgage or other similar financing transaction), or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other properties, then Holder shall have the right
thereafter, during the period this Warrant shall be exercisable, to exercise
this Warrant for the kind and amount of securities, cash or other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
this Warrant might have been exercised immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
(E) In case the Company at any time while this Warrant is
outstanding shall issue shares of Common Stock, warrants or rights to acquire
Common Stock or securities convertible into Common Stock (excluding options or
shares of Common Stock or other common stock
-2-
<PAGE> 3
issued to officers, employees or directors) (i) at a price per Common Stock
share purchased, purchasable, or issuable upon conversion that is less than the
Exercise Price, if such Common Stock shares are the subject of a registered
public offering or are subject to registration rights exercisable within one
year, or (ii) at a price per share that is 10% lower than the Exercise Price,
if such shares of Common Stock are the subject of a private offering and are
restricted and are not entitled to registration rights until after the
expiration of one year, or (iii) at a price per share that is 20% lower than
the Exercise Price, if such shares of Common Stock are the subject of a private
offering and are restricted and are not entitled to registration rights until
after the expiration of two years, then the Exercise Price at which each share
of Common Stock at which this Warrant shall thereafter be exercisable shall be
reduced by multiplying the Exercise Price in effect on the date of issuance of
such shares, warrants, rights or convertible securities by a fraction, of which
the denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
warrants, rights or convertible securities plus the number of additional shares
of Common Stock issued, offered for subscription or purchase or issuable upon
conversion, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance
of such shares, warrants, rights or convertible securities plus the number of
shares of Common Stock that the aggregate offering price of the total number of
shares so offered, issued, or issuable, or, with respect to convertible
securities, the aggregate consideration received by the Company for the
convertible securities, would purchase at the prior Exercise Price. Such
adjustment shall be made whenever shares, warrants, rights or convertible
securities are issued, and shall become effective immediately after such
issuance date. However, upon the expiration of any warrant, right or
conversion right to purchase Common Stock, the issuance of which resulted in an
adjustment in the Exercise Price of this Warrant pursuant to this subparagraph
(E), if any such warrant, right or convertible rights shall expire and shall
not have been exercised, the Exercise Price per share of Common Stock at which
this Warrant shall thereafter be exercisable shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the provisions of this
subparagraph (E) after the issuance of such warrants, rights or convertible
securities) had the adjustment of the Exercise Price made upon the issuance of
such warrants, rights or convertible securities been made on the basis of
offering for subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of the warrants or rights actually
exercised or the conversion of the convertible securities actually converted.
For purposes of this subparagraph (E), the term Common Stock shall include (i)
any common equity security into which the Common Stock is reclassified or for
which it is exchanged, or (ii) any common equity security of the Company that
has equal or superior voting rights with the Common Stock.
(F) In case the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of earned surplus) or rights to subscribe (excluding those referred to in
subparagraph (E) above) then in each such case the Exercise Price per share of
Common Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination for stockholders entitled to receive such distribution
by a fraction, of which the denominator shall
-3-
<PAGE> 4
be the Closing Price of a share of Common Stock determined as of the record
date mentioned above, and (of which the numerator shall be such Closing Price
of a share of Common Stock, less the then fair market value per share (as
determined by the Board of Directors of the Company in good faith, whose
determination shall be conclusive if made in good faith and shall be described
in a statement provided to Holder) of the portion of assets or evidences of
indebtedness so distributed or of such subscription rights. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(G) In case:
1. the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise
than in cash out of its earned surplus; or
2. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
3. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
4. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is party or any sale or transfer of
all or substantially all of the assets of the
Company; or
5. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to Holder at
its last address as it shall appear upon the stock books of the Company, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
-4-
<PAGE> 5
(H) In case at any time conditions shall arise by reason of action
taken by the Company, which, in the opinion of the Board of Directors of the
Company, are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of Holder, or in case at any
time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the adjustment,
if any (not inconsistent with the standards herein), of the Exercise Price
(including, if necessary, any adjustment as to the securities to be received
thereafter upon exercise of this Warrant) which is or would be required to
preserve without dilution the rights of Holder. The Board of Directors of the
Company may, in its judgment, make the adjustment recommended upon the receipt
of such opinion; provided, however, that no adjustment pursuant to this
subparagraph (H) of the Exercise Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Exercise Price to more than the Exercise Price then in
effect.
As used above, the term "Closing Price" on any day shall mean the
higher of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are at the time listed or traded on such day or (ii)
the average of the closing sales prices for the twenty Trading Days prior to
such day. In case no such sale takes place on a day, the Closing Price shall
be the average of the reported closing bid and asked prices, or, if the shares
of Common Stock shall not be so listed, the average of the high bid and low ask
prices in the over-the-counter market as reported by the National Association
of Securities Dealers' Automated Quotation System, or, if not so reported, as
reported by the National Quotation Bureau, Incorporated, or any successor
thereof, or, if not so reported, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or the Nasdaq National Market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to, trading on any
national securities exchange or the Nasdaq National Market, a Monday, Tuesday,
Wednesday, Thursday, or Friday on which banking institutions in the City of
Dallas, State of Texas, are not authorized or obligated by law or executive
order to close.
The Company shall at all times after August 29, 1996, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise of
this Warrant the full number of shares of Common Stock then deliverable upon
the exercise of this Warrant. The Company covenants and agrees that all shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges of any nature whatsoever.
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the
-5-
<PAGE> 6
Company by the Expiration Date, accompanied by payment of the full applicable
Exercise Price. Payment of the Exercise Price must be made in United States
funds (by certified check) payable to the order of the Company. Common Stock
certificates will be issued as soon as practicable after exercise and payment
of the Exercise Price for the shares of Common Stock so purchased. If the
Warrant Exercise Notice is mailed by first class mail, registered or certified,
postage prepaid, and properly addressed to National Energy Group, Inc., 4925
Greenville Ave., Ste. 1400, Dallas, TX 75206, or, to such other address as the
Company may have specified in a notice duly given to Holder, then the Warrant
Exercise Notice will be presumed to be received by the Company three business
days after the date so mailed.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Holder, in whole or in part (provided
that any partial transfer shall be for a whole number of shares of Common
Stock), and upon delivery of this Warrant to the Company with evidence of such
transfer by Holder reasonably satisfactory to the Company, the Company shall
issue a replacement Warrant in a form similar to this Warrant, in the name of
such transferee (and in the case of such partial transfer, the Company shall
issue a new Warrant to Holder to purchase the balance of the shares of Common
Stock that is not the subject of transfer). Holder shall indemnify the Company
against any loss, claim or damages arising from or related to such transfer and
shall sign a written instrument of indemnity in a form acceptable to the
Company.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: August 29, 1996
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender, President and
Chief Executive Officer
-6-
<PAGE> 7
EXHIBIT 1
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED THIS NOTICE MUST BE
RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated ____________________________ (the
"Notice"), relates to this Warrant, dated August 29, 1996 (the "Warrant"),
issued by National Energy Group, Inc., a Delaware corporation whose address is
4925 Greenville Ave., Ste. 1400, Dallas, TX 75206 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to
purchase, and hereby purchases, ________ shares of the Company's Common Stock,
at a price of $_______ per share, which is the price indicated in this Warrant.
The undersigned acknowledges that the number of shares of Common Stock must be
divisible by 100 for an effective exercise of any portion or all of this
Warrant. The full amount of $__________ in United States funds, by certified
check payable to the order of the Company is attached hereto.
-7-
<PAGE> 8
The undersigned acknowledges that a certificate for the shares of
Common Stock purchased by the undersigned through the exercise of this Warrant
pursuant to this Notice will be delivered to the undersigned, at the address
indicated below (unless the Company has received written notice of a different
address) as soon as practicable after receipt of this notice and the full
payment of the applicable purchase price.
Dated:
------------------------------
Holder:
---------------------------------
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
Social Security or
Taxpayer Identification Number:
----------------------------------------
Business Phone Number:
----------------------------------------
Home Phone Number:
----------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.31
NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE WARRANTS AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT, AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE
ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
Warrant to Purchase
700,000 Shares of
National Energy Group, Inc.
Common Stock
This Warrant (the "Warrant") is issued to Gaines Berland, Inc.
("Holder") and Holder agrees by acceptance of this Warrant that this Warrant is
subject to the terms and conditions of this Warrant.
This Warrant is a warrant to purchase 700,000 shares of Common Stock,
$0.01 par value (the "Common Stock") of National Energy Group, Inc. (the
"Company") at a price of $2.875 per share (the "Exercise Price").
This Warrant shall expire on August 29, 2001 (the "Expiration Date").
This Warrant shall be void and all rights of Holder under this Warrant shall
cease if this Warrant shall not have been duly exercised on or prior to the
Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be adjusted
from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of
outstanding Common Stock into a larger number of shares of Common Stock, (ii)
combine shares of its outstanding Common Stock into a smaller number of shares
of Common Stock or (iii) issue stock as a dividend on its
<PAGE> 2
Common Stock; then Holder, after the close of business on the effective date of
such subdivision, combination or stock dividend, as the case may be (the close
of business times being hereinafter in this subparagraph (A) referred to as
"such record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record date
to apply to such aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise
price otherwise required by this subparagraph (B) to be made must be made, if
such adjustment (plus any other adjustments not heretofore made) would not
require any increase or decrease of 5% or more in the Exercise Price; provided,
however, that upon exercise of this Warrant, all adjustments shall be made in
calculating the exercise rights of Holder. Whenever the Exercise Price is
adjusted by 5% or more, as herein provided, the Company shall promptly mail to
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
notice prepared in good faith shall be conclusive evidence of the correctness
of such adjustment absent manifest error.
(C) In the event that at any time, as a result of an adjustment,
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this subparagraph
(C) with respect to the shares of Common Stock shall apply on like terms to any
such other shares.
(D) In case of any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or change
in the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company (other than a sale-lease back,
collateral assignment, mortgage or other similar financing transaction), or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other properties, then Holder shall have the right
thereafter, during the period this Warrant shall be exercisable, to exercise
this Warrant for the kind and amount of securities, cash or other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
this Warrant might have been exercised immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
(E) In case the Company at any time while this Warrant is
outstanding shall issue shares of Common Stock, warrants or rights to acquire
Common Stock or securities convertible into Common Stock (excluding options or
shares of Common Stock or other common stock
-2-
<PAGE> 3
issued to officers, employees or directors) (i) at a price per Common Stock
share purchased, purchasable, or issuable upon conversion that is less than the
Exercise Price, if such Common Stock shares are the subject of a registered
public offering or are subject to registration rights exercisable within one
year, or (ii) at a price per share that is 10% lower than the Exercise Price,
if such shares of Common Stock are the subject of a private offering and are
restricted and are not entitled to registration rights until after the
expiration of one year, or (iii) at a price per share that is 20% lower than
the Exercise Price, if such shares of Common Stock are the subject of a private
offering and are restricted and are not entitled to registration rights until
after the expiration of two years, then the Exercise Price at which each share
of Common Stock at which this Warrant shall thereafter be exercisable shall be
reduced by multiplying the Exercise Price in effect on the date of issuance of
such shares, warrants, rights or convertible securities by a fraction, of which
the denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
warrants, rights or convertible securities plus the number of additional shares
of Common Stock issued, offered for subscription or purchase or issuable upon
conversion, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance
of such shares, warrants, rights or convertible securities plus the number of
shares of Common Stock that the aggregate offering price of the total number of
shares so offered, issued, or issuable, or, with respect to convertible
securities, the aggregate consideration received by the Company for the
convertible securities, would purchase at the prior Exercise Price. Such
adjustment shall be made whenever shares, warrants, rights or convertible
securities are issued, and shall become effective immediately after such
issuance date. However, upon the expiration of any warrant, right or
conversion right to purchase Common Stock, the issuance of which resulted in an
adjustment in the Exercise Price of this Warrant pursuant to this subparagraph
(E), if any such warrant, right or convertible rights shall expire and shall
not have been exercised, the Exercise Price per share of Common Stock at which
this Warrant shall thereafter be exercisable shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the provisions of this
subparagraph (E) after the issuance of such warrants, rights or convertible
securities) had the adjustment of the Exercise Price made upon the issuance of
such warrants, rights or convertible securities been made on the basis of
offering for subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of the warrants or rights actually
exercised or the conversion of the convertible securities actually converted.
For purposes of this subparagraph (E), the term Common Stock shall include (i)
any common equity security into which the Common Stock is reclassified or for
which it is exchanged, or (ii) any common equity security of the Company that
has equal or superior voting rights with the Common Stock.
(F) In case the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of earned surplus) or rights to subscribe (excluding those referred to in
subparagraph (E) above) then in each such case the Exercise Price per share of
Common Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination for stockholders entitled to receive such distribution
by a fraction, of which the denominator shall
-3-
<PAGE> 4
be the Closing Price of a share of Common Stock determined as of the record
date mentioned above, and (of which the numerator shall be such Closing Price
of a share of Common Stock, less the then fair market value per share (as
determined by the Board of Directors of the Company in good faith, whose
determination shall be conclusive if made in good faith and shall be described
in a statement provided to Holder) of the portion of assets or evidences of
indebtedness so distributed or of such subscription rights. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(G) In case:
1. the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise
than in cash out of its earned surplus; or
2. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
3. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
4. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is party or any sale or transfer of
all or substantially all of the assets of the
Company; or
5. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to Holder at
its last address as it shall appear upon the stock books of the Company, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
-4-
<PAGE> 5
(H) In case at any time conditions shall arise by reason of action
taken by the Company, which, in the opinion of the Board of Directors of the
Company, are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of Holder, or in case at any
time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the adjustment,
if any (not inconsistent with the standards herein), of the Exercise Price
(including, if necessary, any adjustment as to the securities to be received
thereafter upon exercise of this Warrant) which is or would be required to
preserve without dilution the rights of Holder. The Board of Directors of the
Company may, in its judgment, make the adjustment recommended upon the receipt
of such opinion; provided, however, that no adjustment pursuant to this
subparagraph (H) of the Exercise Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Exercise Price to more than the Exercise Price then in
effect.
As used above, the term "Closing Price" on any day shall mean the
higher of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are at the time listed or traded on such day or (ii)
the average of the closing sales prices for the twenty Trading Days prior to
such day. In case no such sale takes place on a day, the Closing Price shall
be the average of the reported closing bid and asked prices, or, if the shares
of Common Stock shall not be so listed, the average of the high bid and low ask
prices in the over-the-counter market as reported by the National Association
of Securities Dealers' Automated Quotation System, or, if not so reported, as
reported by the National Quotation Bureau, Incorporated, or any successor
thereof, or, if not so reported, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or the Nasdaq National Market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to, trading on any
national securities exchange or the Nasdaq National Market, a Monday, Tuesday,
Wednesday, Thursday, or Friday on which banking institutions in the City of
Dallas, State of Texas, are not authorized or obligated by law or executive
order to close.
The Company shall at all times after August 29, 1996, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise of
this Warrant the full number of shares of Common Stock then deliverable upon
the exercise of this Warrant. The Company covenants and agrees that all shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges of any nature whatsoever.
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the
-5-
<PAGE> 6
Company by the Expiration Date, accompanied by payment of the full applicable
Exercise Price. Payment of the Exercise Price must be made in United States
funds (by certified check) payable to the order of the Company. Common Stock
certificates will be issued as soon as practicable after exercise and payment
of the Exercise Price for the shares of Common Stock so purchased. If the
Warrant Exercise Notice is mailed by first class mail, registered or certified,
postage prepaid, and properly addressed to National Energy Group, Inc., 4925
Greenville Ave., Ste. 1400, Dallas, TX 75206, or, to such other address as the
Company may have specified in a notice duly given to Holder, then the Warrant
Exercise Notice will be presumed to be received by the Company three business
days after the date so mailed.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Holder, in whole or in part (provided
that any partial transfer shall be for a whole number of shares of Common
Stock), and upon delivery of this Warrant to the Company with evidence of such
transfer by Holder reasonably satisfactory to the Company, the Company shall
issue a replacement Warrant in a form similar to this Warrant, in the name of
such transferee (and in the case of such partial transfer, the Company shall
issue a new Warrant to Holder to purchase the balance of the shares of Common
Stock that is not the subject of transfer). Holder shall indemnify the Company
against any loss, claim or damages arising from or related to such transfer and
shall sign a written instrument of indemnity in a form acceptable to the
Company.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: August 29, 1996
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender, President and
Chief Executive Officer
-6-
<PAGE> 7
EXHIBIT 1
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED THIS NOTICE MUST BE
RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated ____________________________ (the
"Notice"), relates to this Warrant, dated August 29, 1996 (the "Warrant"),
issued by National Energy Group, Inc., a Delaware corporation whose address is
4925 Greenville Ave., Ste. 1400, Dallas, TX 75206 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to
purchase, and hereby purchases, ________ shares of the Company's Common Stock,
at a price of $_______ per share, which is the price indicated in this Warrant.
The undersigned acknowledges that the number of shares of Common Stock must be
divisible by 100 for an effective exercise of any portion or all of this
Warrant. The full amount of $__________ in United States funds, by certified
check payable to the order of the Company is attached hereto.
-7-
<PAGE> 8
The undersigned acknowledges that a certificate for the shares of
Common Stock purchased by the undersigned through the exercise of this Warrant
pursuant to this Notice will be delivered to the undersigned, at the address
indicated below (unless the Company has received written notice of a different
address) as soon as practicable after receipt of this notice and the full
payment of the applicable purchase price.
Dated:
------------------------------
Holder:
---------------------------------
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
Social Security or
Taxpayer Identification Number:
----------------------------------------
Business Phone Number:
----------------------------------------
Home Phone Number:
----------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.35
NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE WARRANTS AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT, AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE
ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
Warrant to Purchase
700,000 Shares of
National Energy Group, Inc.
Common Stock
This Warrant (the "Warrant") is issued to High River Limited
Partnership ("Holder") and Holder agrees by acceptance of this Warrant that
this Warrant is subject to the terms and conditions of this Warrant and that
certain Stock Purchase Agreement dated August 7, 1996 between National Energy
Group, Inc. (the "Company") and Holder.
This Warrant is a warrant to purchase 700,000 shares of Common Stock,
$0.01 par value (the "Common Stock") of the Company at a price of $2.50 per
share (the "Exercise Price"), subject to adjustment as provided herein.
This Warrant shall expire on August 29, 2001 (the "Expiration Date").
This Warrant shall be void and all rights of Holder under this Warrant shall
cease if this Warrant shall not have been duly exercised on or prior to the
Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be adjusted
from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of
outstanding Common Stock into a larger number of shares of Common Stock, (ii)
combine shares of its outstanding Common Stock into a smaller number of shares
of Common Stock or (iii) issue stock as a dividend on its
<PAGE> 2
Common Stock; then Holder, after the close of business on the effective date of
such subdivision, combination or stock dividend, as the case may be (the close
of business time being hereinafter in this subparagraph (A) referred to as
"such record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record date
to apply to such aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise
price otherwise required by this subparagraph (B) to be made must be made, if
such adjustment (plus any other adjustments not heretofore made since the time
of the last notice to Holder of an adjustment, if any) would not require any
increase or decrease of 5% or more in the Exercise Price; provided, however,
that upon exercise of this Warrant, all adjustments shall be made in
calculating the exercise rights of Holder. Whenever the Exercise Price is
adjusted by 5% or more since the time of the last notice to Holder of an
adjustment, if any, as herein provided, the Company shall promptly mail to
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(C) In the event that at any time, as a result of an adjustment,
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this subparagraph
(C) with respect to the shares of Common Stock shall apply on like terms to any
such other shares.
(D) In case of any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or change
in the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company (other than a sale-lease back,
collateral assignment, mortgage or other similar financing transaction), or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other properties, then Holder shall have the right
thereafter, during the period this Warrant shall be exercisable, to exercise
this Warrant for the kind and amount of securities, cash or other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
this Warrant might have been exercised immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
(E) In case the Company, at any time while this Warrant is
outstanding, shall issue shares of Common Stock, warrants or rights to acquire
Common Stock or securities convertible into Common Stock (excluding (i) those
issued as a dividend or distribution with respect to
2
<PAGE> 3
Series B or Series C Preferred Stock so long as the securities are additional
shares of Series B or Series C and (ii) options or shares of Common Stock or
other common stock issued to officers, employees or directors so long as the
number issued to officers, employees and directors in any one year does not
exceed five percent of the number of shares of Common Stock outstanding on
January 1st of such year) at a price per Common Stock share purchased,
purchasable, or issuable upon conversion that is less than the Exercise Price,
then the Exercise Price at which each share of Common Stock at which this
Warrant shall thereafter be exercisable shall be reduced by multiplying the
Exercise Price in effect on the date of issuance of such shares, warrants,
rights or convertible securities by a fraction, of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, warrants, rights or
convertible securities plus the number of additional shares of Common Stock
issued, offered for subscription or purchase or issuable upon conversion, and
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
warrants, rights or convertible securities plus the number of shares of Common
Stock that the aggregate offering price of the total number of shares so
offered, issued, or issuable, or, with respect to convertible securities, the
aggregate consideration received by the Company for the convertible securities,
would purchase at the prior Exercise Price. Such adjustment shall be made
whenever shares, warrants, rights or convertible securities are issued, and
shall become effective immediately after such issuance date. However, upon the
expiration of any warrant, right or conversion right to purchase Common Stock,
the issuance of which resulted in an adjustment in the Exercise Price of this
Warrant pursuant to this subparagraph (E), if any such warrant, right or
convertible rights shall expire and shall not have been exercised, the Exercise
Price per share of Common Stock at which this Warrant shall thereafter be
exercisable shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it would have
been (but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of this subparagraph (E) after the issuance of such warrants,
rights or convertible securities) had the adjustment of the Exercise Price made
upon the issuance of such warrants, rights or convertible securities been made
on the basis of offering for subscription or purchase only that number of
shares of Common Stock actually purchased upon the exercise of the warrants or
rights actually exercised or the conversion of the convertible securities
actually converted. For purposes of this subparagraph (E), the term Common
Stock shall include (i) any common equity security into which the Common Stock
is reclassified or for which it is exchanged, or (ii) any common equity
security of the Company that has equal or superior voting rights with the
Common Stock.
(F) In case the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of earned surplus) or rights to subscribe (excluding those referred to in
subparagraph (E) above) then in each such case the Exercise Price per share of
Common Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination for stockholders entitled to receive such distribution
by a fraction, of which the denominator shall be the Closing Price of a share
of Common Stock determined as of the record date mentioned above, and (of which
the numerator shall be such Closing Price of a share of Common Stock,
3
<PAGE> 4
less the then fair market value per share (as determined by the Board of
Directors of the Company in good faith, whose determination shall be conclusive
if made in good faith and shall be described in a statement provided to Holder)
of the portion of assets or evidences of indebtedness so distributed or of such
subscription rights. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(G) Upon each adjustment of the Exercise Price as provided for
herein, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the adjusted Exercise Price on the date
purchase rights under this Warrant are exercised, the number of shares of
Common Stock determined by (a) multiplying the number of shares purchasable
hereunder immediately prior to the adjustment of the Exercise Price by the
Exercise Price in effect immediately prior to such adjustment, and (b) dividing
the product so obtained by the adjusted Exercise Price in effect on the date of
such exercise.
(H) In case:
1. the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise
than in cash out of its earned surplus; or
2. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
3. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
4. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is party or any sale or transfer of
all or substantially all of the assets of the
Company; or
5. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to Holder at
its last address as it shall appear upon the stock books of the Company, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
4
<PAGE> 5
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(I) In case at any time conditions shall arise by reason of action
taken by the Company, which, in the opinion of the Board of Directors of the
Company, are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of Holder, or in case at any
time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the adjustment,
if any (not inconsistent with the standards herein), of the Exercise Price
(including, if necessary, any adjustment as to the securities to be received
thereafter upon exercise of this Warrant) which is or would be required to
preserve without dilution the rights of Holder. The Board of Directors of the
Company may, in its judgment, make the adjustment recommended upon the receipt
of such opinion; provided, however, that no adjustment pursuant to this
subparagraph (I) of the Exercise Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Exercise Price to more than the Exercise Price then in
effect.
As used above, the term "Closing Price" on any day shall mean the
higher of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are at the time listed or traded on such day or (ii)
the average of the closing sales prices for the twenty Trading Days prior to
such day. In case no such sale takes place on a day, the Closing Price shall
be the average of the reported closing bid and asked prices, or, if the shares
of Common Stock shall not be so listed, the average of the high bid and low ask
prices in the over-the-counter market as reported by the National Association
of Securities Dealers' Automated Quotation System, or, if not so reported, as
reported by the National Quotation Bureau, Incorporated, or any successor
thereof, or, if not so reported, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or the Nasdaq National Market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to, trading on any
national securities exchange or the Nasdaq National Market, a Monday, Tuesday,
Wednesday, Thursday, or Friday on which banking institutions in the City of
Dallas, State of Texas, are not authorized or obligated by law or executive
order to close.
The Company shall at all times after August 29, 1996, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise of
this Warrant the full number of shares of Common Stock then deliverable upon
the exercise of this Warrant. The Company covenants and agrees that all shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
5
<PAGE> 6
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges of any nature whatsoever.
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the Company by the Expiration Date, accompanied by
payment of the full applicable Exercise Price. Payment of the Exercise Price
must be made in United States funds (by certified check) payable to the order
of the Company. Common Stock certificates will be issued as soon as
practicable after exercise and payment of the Exercise Price for the shares of
Common Stock so purchased. If the Warrant Exercise Notice is mailed by first
class mail, registered or certified, postage prepaid, and properly addressed to
National Energy Group, Inc., 4925 Greenville Ave., Ste. 1400, Dallas, TX 75206,
or, to such other address as the Company may have specified in a notice duly
given to Holder, then the Warrant Exercise Notice will be presumed to be
received by the Company three business days after the date so mailed.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Holder, in whole or in part (provided
that any partial transfer shall be for a whole number of shares of Common
Stock), and upon delivery of this Warrant to the Company with evidence of such
transfer by Holder reasonably satisfactory to the Company, the Company shall
issue a replacement Warrant in a form similar to this Warrant, in the name of
such transferee (and in the case of such partial transfer, the Company shall
issue a new Warrant to Holder to purchase the balance of the shares of Common
Stock that is not the subject of transfer). Holder shall indemnify the Company
against any loss, claim or damages arising from or related to such transfer and
shall sign a written instrument of indemnity in a form acceptable to the
Company.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: August 29, 1996
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender, President and
Chief Executive Officer
6
<PAGE> 7
EXHIBIT 1
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED THIS NOTICE MUST BE
RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated _______________ (the "Notice"),
relates to this Warrant, dated August 29, 1996 (the "Warrant"), issued by
National Energy Group, Inc., a Delaware corporation whose address is 4925
Greenville Ave., Ste. 1400, Dallas, TX 75206 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to
purchase, and hereby purchases, ________ shares of the Company's Common Stock,
at the current exercise price of $_______ per share, which is the price, as
adjusted, indicated in this Warrant. The undersigned acknowledges that the
number of shares of Common Stock must be divisible by 100 for an effective
exercise of any portion or all of this Warrant. The full amount of $__________
in United States funds, by certified check payable to the order of the Company
is attached hereto.
7
<PAGE> 8
The undersigned acknowledges that a certificate for the shares of
Common Stock purchased by the undersigned through the exercise of this Warrant
pursuant to this Notice will be delivered to the undersigned, at the address
indicated below (unless the Company has received written notice of a different
address) as soon as practicable after receipt of this notice and the full
payment of the applicable purchase price.
Dated:
-------------------------------
Holder:
---------------------------------
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Social Security or
Taxpayer Identification Number:
----------------------------------------
Business Phone Number:
----------------------------------------
Home Phone Number:
----------------------------------------
8
<PAGE> 1
EXHIBIT 10.36
STOCK PURCHASE AGREEMENT
Dated as of August 26, 1996
By and Among
National Energy Group, Inc.
and
Foremost Insurance Company
Arbco Associates L.P.
Kayne, Anderson Nontraditional Investments L.P.
Offense Group Associates, L.P.
Topa Insurance Company
Kayne, Anderson Offshore Limited
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 References to Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Singular and Plural. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 - PURCHASE AND SALE OF STOCK AND WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Issuance, Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Valid Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Absence of Bankruptcy Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 Commission Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.16 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.18 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.20 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.21 Compliance with Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Absence of Bankruptcy Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
4.8 Accredited Investor, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.9 Information Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5 - AGREEMENTS PENDING CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Investigations; Operation of Business of the Company. . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Taking of Necessary Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6 - CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 The Company's Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Purchasers' Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7 - DELIVERIES AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Deliveries of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Deliveries of Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8 - POST-CLOSING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9 - REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.1 Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.2 Piggy-Back Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.4 Registration Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Indemnification; Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6 Participation in Underwritten Registrations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.7 Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.8 Grant of Registration Rights to Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.8 Binding Effect; Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.9 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-ii-
<PAGE> 4
Schedule A Purchased Shares and Warrants
Exhibit A Certificate of Designation
Exhibit B Warrant Certificate
Exhibit C Opinion of Strasburger & Price, L.L.P.
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of the 26th day of August,
1996, is by and among National Energy Group, Inc., a Delaware corporation (the
"Company"), and each Person whose name appears on the signature page hereof as
a purchaser (collectively, "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to each Purchaser, and
each Purchaser desires to purchase from the Company, in the amount indicated
opposite such Purchaser's name on Schedule A hereto, (i) shares of the
Company's authorized but unissued Convertible Preferred Stock, Series E, par
value $1.00 per share (the "Preferred Stock"), which shares shall have such
rights, preferences, privileges and restrictions as set forth in the
Certificate of Designation of Convertible Preferred Stock, Series E of the
Company attached hereto as Exhibit A (the "Certificate of Designation"), which
rights include, subject to certain conditions, the right to convert the
Preferred Stock into shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock") and (ii) warrants to purchase the Common Stock of
the Company, which warrants shall have the terms set forth in the Warrant
certificate attached hereto as Exhibit B (the "Warrant Certificate"); and
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth in this Agreement, the parties to this
Agreement hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Certain Defined Terms. The following terms, as used in this
Agreement, shall have the following meanings:
"Alexander" shall mean Alexander Energy Corporation, an
Oklahoma corporation.
"Bank One Agreement" shall mean, with respect to all periods
prior to the closing of the Merger and the funding of the loan
described in the Commitment, that certain credit agreement dated as of
June 30, 1995 between Bank One Texas, N.A. and the Company, as
amended, and thereafter, shall mean the credit agreement to be entered
into by the Company with Bank One Texas, N.A. and Credit Lyonnais New
York Branch pursuant to the Commitment.
"Closing" shall be as defined in Section 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder as in effect on the
date hereof.
-1-
<PAGE> 6
"Commission Documents" shall have the meaning assigned to that
term in Section 3.12.
"Commitment" shall mean that certain letter dated June 6, 1996
between the Company and Bank One Texas, N.A. and Credit Lyonnais New
York Branch relating to the funding of a $65 million loan upon
completion of the Merger.
"Company Confidential Material" shall be as defined in Section
5.1(a).
"Environmental Laws" shall be as defined in Section 3.21.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
or any successor statute, as at the time in effect. Reference to a
particular section of such Act shall include a reference to the
comparable section, if any, of such successor statute.
"Financial Statements" shall mean the financial statements of
the Company and its consolidated Subsidiaries, including the notes
thereto, as of and for the year ended December 31, 1995 and as of and
for the six months ended June 30, 1996.
"Form 10-K" shall mean the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995, including all amendments
thereto.
"GAAP" shall mean generally accepted accounting principles, as
set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements of
the Financial Accounting Standards Board or in such opinions and
statements of such other entities as shall be approved by a
significant segment of the accounting profession in the United States
of America.
"Governmental Authority" shall mean (i) the United States of
America or any state within the United States of America and (ii) any
court or any governmental department, commission, board, bureau,
agency or other instrumentality of the United States of America or of
any state within the United States of America.
"High River Stock Purchase Agreement" shall mean that certain
Stock Purchase Agreement dated as of August 8, 1996 by and between the
Company and High River Limited Partnership, pursuant to which the
Series D Preferred Stock will be issued and sold to High River.
"Holder" means the Purchasers and any other holder from time
to time of Preferred Stock (other than the Company or any Subsidiary).
"Inspectors" shall be as defined in Section 9.3(g).
-2-
<PAGE> 7
"Law" shall mean any applicable statute, law, ordinance,
regulation, rule, ruling, order, restriction, requirement, writ,
injunction, decree or other official act of or by any Governmental
Authority.
"Material Adverse Effect" with respect to a Person shall mean
a material and adverse effect on the financial condition, results of
operations, business or properties of such Person and its consolidated
subsidiaries, taken as a whole.
"Merger" means the merger between Alexander and NEG-OK, Inc.,
a wholly-owned subsidiary of the Company, pursuant to the Merger
Agreement.
"Merger Agreement" means that certain Agreement and Plan of
Merger among the Company, Alexander and NEG-OK, Inc., dated June 6,
1996, as amended.
"Person" shall mean an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a
limited liability company, a government or any department or agency of
a government.
"Pollutants" shall be as defined in Section 3.21.
"Pro Forma Financial Statements" shall mean the Pro Forma
Combined Condensed Financial Statements of the Company included in
the Proxy Statement.
"Proxy Statement" shall mean the Joint Proxy and Prospectus of
the Company filed with the SEC with respect to the Merger and other
related transactions.
"Purchase Price" shall be as defined in Section 2.1.
"Purchaser Representatives" shall be as defined in Section
5.1(a).
"Records" shall be as defined in Section 9.3(g).
"Registrable Securities" means (i) any Common Stock issued or
issuable upon the conversion of the Preferred Stock, (ii) any Common
Stock issued as, or issuable upon the conversion or exercise of any
warrant, option, right or other security that is issued or issuable
as, a dividend or other distribution with respect to, or in exchange
for, or in replacement of, the Preferred Stock, and (iii) any Common
Stock issued or issuable upon the exercise of the Warrants.
"Registration Expenses" shall be as defined in Section 9.4.
"Registration Statement" shall be as defined in Section
9.3(a).
"Releases" shall be as defined in Section 3.21.
-3-
<PAGE> 8
"SEC" shall mean the United States Securities and Exchange
Commission or any successor agency.
"Securities Act" shall mean the Securities Act of 1933, or any
successor statute, as at the time in effect. Reference to a
particular section of such Act shall include a reference to the
comparable section, if any, of such successor statute.
"Selling Holder" shall mean a holder of Registrable Securities
who is selling such Registrable Securities pursuant to a registration
statement.
"Series D Preferred Stock" shall mean the Preferred Stock,
Series D of the Company to be issued pursuant to the High River Stock
Purchase Agreement.
"Shares" shall be as defined in Section 2.1.
"Shelf Registration Statement" shall be as defined in Section
9.1(a).
"Subsidiary" means (a) a corporation a majority of whose
voting stock is at the time, directly or indirectly, owned by the
Company, by one or more subsidiaries of the Company or by the Company
and one or more subsidiaries of the Company or (b) any other Person
(other than a corporation) in which the Company, a subsidiary of the
Company or the Company and one or more subsidiaries of the Company,
directly or indirectly, at the date of determination thereof, has (i)
at least a majority ownership or (ii) the power to elect or direct the
election of a majority of the directors or other governing body of
such Person.
"Warrants" shall be as defined in Section 2.1.
1.2 Accounting Terms. For the purposes of this Agreement, all
accounting terms not otherwise defined in this Agreement shall have the
meanings assigned to such terms in accordance with GAAP.
1.3 References to Instruments. Unless the context otherwise
indicates, references in this Agreement to a particular section, exhibit or
schedule are to the corresponding section of, or the corresponding exhibit or
schedule to, this Agreement.
1.4 Singular and Plural. The definitions contained in Section 1.1
are equally applicable to both the singular and plural form of the terms
defined in such Section.
ARTICLE 2 - PURCHASE AND SALE OF STOCK AND WARRANTS
2.1 Issuance, Sale and Purchase. The Company hereby agrees to
issue and sell to each Purchaser, and each Purchaser hereby agrees to purchase
from the Company, upon the terms and conditions set forth herein, the number of
shares of Preferred Stock (the "Shares") and the number of warrants to purchase
Common Stock of the Company (the "Warrants") listed
-4-
<PAGE> 9
on Schedule A at the purchase price listed opposite such Purchaser's name on
Schedule A. The aggregate purchase price that shall be payable by Purchasers
to the Company for the Shares and the Warrants is $5,000,000 (the "Purchase
Price").
2.2 Legend. Each Purchaser agrees that each certificate, if any,
evidencing Shares and Warrants to be issued to the Purchaser by the Company at
the Closing shall bear a legend concerning the restrictions on transfer of such
Shares and Warrants in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION IS AVAILABLE AND SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS OF THE ACT OR APPLICABLE
LAWS.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchasers as of the date of
this Agreement as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company and each of its Subsidiaries is duly qualified or licensed to do
business as a foreign corporation, and in good standing, in every jurisdiction
in which its ownership of property or the conduct of its business requires such
qualification or licensing, except where the failure to be so qualified or
licensed would not have Material Adverse Effect upon the Company and its
Subsidiaries, taken as a whole. Attached hereto as Exhibit A is a true and
complete copy of the Certificate of Designation. True and complete copies of
the Certificate of Incorporation and Bylaws of the Company, each as amended to
date, have been provided to Purchasers. The Company has no Subsidiaries other
than NEG-OK, Inc. and, after the Merger, Boomer Marketing Corporation, AEJH
1985 Limited Partnership, AEJH 1987 Limited Partnership, AEJH 1989 Limited
Partnership and Energy and Environmental Services Limited Partnership, of which
partnerships all but Energy and Environmental Services Limited Partnership are
in liquidation and will be dissolved.
3.2 Authority. The Company has all requisite corporate power and
authority to carry on its business as presently conducted and as contemplated
after the Merger to be conducted and to enter into this Agreement, the
Warrants, the Merger Agreement, the Bank One Agreement and the High River Stock
Purchase Agreement and to perform its obligations contemplated hereunder and
thereunder.
-5-
<PAGE> 10
3.3 Authorization. The execution, delivery and performance of
this Agreement, the Warrants, the Merger Agreement, the Bank One Agreement and
the High River Stock Purchase Agreement and the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
corporate action on the part of the Company and its stockholders.
3.4 Binding Agreement. Each of this Agreement, the Merger
Agreement, the Bank One Agreement and the High River Stock Purchase Agreement
has been duly executed and delivered by the Company and each constitutes a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to applicable bankruptcy and other similar
laws of general application with respect to creditors and subject to principles
of equity and public policy that affect enforceability of agreements generally.
At the Closing, each of the Warrants will be duly executed and delivered by the
Company and will constitute a legal, valid and binding obligation of the
Company enforceable in accordance with its terms, subject to applicable
bankruptcy and other similar laws of general application with respect to
creditors and subject to principles of equity and public policy that affect
enforceability of agreements generally.
3.5 No Conflicts. Neither the execution or delivery of this
Agreement, the Warrants, the Merger Agreement, the Bank One Agreement and the
High River Stock Purchase Agreement nor the consummation of the transactions
contemplated hereby and thereby will result in a breach or violation of, or
constitute a default under, the certificate of incorporation, bylaws or other
governing documents of the Company or its Subsidiaries, or any material
agreement, indenture or other instrument to which any of the Company or its
Subsidiaries is a party or by which any of them is bound or to which any of its
properties are subject, nor will the performance by the Company and its
Subsidiaries of their obligations hereunder and thereunder violate any law or
result in the creation or imposition of any material lien, charge, claim or
encumbrance upon any property or assets of the Company or its Subsidiaries.
Except for the approval of the Merger Agreement, the Merger and certain
amendments to the Company's Certificate of Incorporation by the stockholders of
the Company, no permit, consent, approval, authorization or order of any
Governmental Authority or other Person is required in connection with the
consummation by the Company and its Subsidiaries of the transactions
contemplated by this Agreement, the Warrants, the Merger Agreement, the Bank
One Agreement and the High River Stock Purchase Agreement, except such as have
been obtained and as otherwise contemplated by this Agreement.
3.6 Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of (i) 50,200,000 shares of
common stock, par value $.01 per share, of which 50,000,000 have been
designated as Class A Common Stock, 12,171,182 of which are issued and
outstanding, and 200,000 of which have been designated as Class B Common Stock,
none of which are issued and outstanding, (ii) 1,000,000 shares of preferred
stock, par value $1.00 per share, of which 100,000 have been authorized as 10%
Cumulative Convertible Preferred Stock, Series B, 52,500 of which are issued
and outstanding, and of which 80,000 have been authorized as 10 1/2% Cumulative
Convertible Preferred Stock, Series C, 40,000 of which are issued and
outstanding. As of the date of the Closing, the authorized capital stock of
the Company will consist of (i) 100,000,000 shares of common stock, par value
$.01 per
-6-
<PAGE> 11
share, approximately 33,457,650 of which will be issued and outstanding after
the Merger, and (ii) 1,000,000 shares of preferred stock, par value $1.00 per
share, of which (a) 100,000 have been authorized as 10% Cumulative Convertible
Preferred Stock, Series B, 52,500 of which are issued and outstanding, (b)
80,000 have been authorized as 10 1/2% Cumulative Convertible Preferred Stock,
Series C, 40,000 of which are issued and outstanding, (c) 100,000 will have
been authorized as Convertible Preferred Stock, Series D, 100,000 of which will
be outstanding following the completion of the sale contemplated in connection
with the High River Stock Purchase Agreement and (d) 50,000 of which have been
authorized as Convertible Preferred Stock, Series E, 50,000 of which will be
outstanding. All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights except as set forth in the High River Stock Purchase
Agreement with respect to the holders of Series D Preferred Stock. As of the
date of this Agreement, the Company has a total of 890,000 shares of Common
Stock issuable upon exercise of outstanding options issued to officers,
directors or employees of the Company and, as of the Closing, the Company will
have a total of approximately 1,068,993 shares of Common Stock issuable upon
exercise of outstanding options issued to present and former officers,
directors or employees of the Company and Alexander. In addition, as of the
date of this Agreement, 500,000 shares of Common Stock will be issuable upon
exercise of various outstanding warrants and, as of the Closing approximately
3,046,015 shares of Common Stock will be issuable upon exercise of various
outstanding warrants including the Warrants. Except for the foregoing and as
described on Schedule 3.14, there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character obligating the Company to purchase, redeem, issue, transfer or
deliver any shares of Common Stock, preferred stock or other equity security.
3.7 Valid Issuance.
(a) The issuance, sale and delivery of the Shares and the
Warrants in accordance with this Agreement have been duly authorized
by all necessary corporate action on the part of the Company, and the
Shares when so issued, sold and delivered against payment therefor in
accordance with this Agreement will be duly and validly issued, fully
paid and nonassessable.
(b) The issuance, sale and delivery of the shares of
Common Stock issuable upon conversion of the Preferred Stock and
exercise of the Warrants have been duly authorized by all necessary
corporate action on the part of the Company, and such shares of Common
Stock have been duly reserved for issuance and, when issued upon such
conversion or exercise, will be duly and validly issued, fully paid
and nonassessable.
3.8 Absence of Bankruptcy Proceedings. There are no bankruptcy or
reorganization proceedings pending against, being contemplated by, or to the
knowledge of the Company, threatened against, the Company.
3.9 Brokers. No broker or finder has acted for or on behalf of
the Company in connection with this Agreement or the transactions contemplated
by this Agreement, and no
-7-
<PAGE> 12
broker or finder is entitled to any brokerage or finder's fee or commission in
respect thereof based in any way on agreements, arrangements or understandings
made by or on behalf of the Company.
3.10 Financial Statements. The Financial Statements (i) present
fairly the financial position of the Company and its consolidated Subsidiaries
as of December 31, 1995, and June 30, 1996, (ii) present fairly the results of
operations, cash flows and changes in stockholders' equity of the Company and
its consolidated Subsidiaries for the year ended December 31, 1995 and the six
months ended June 30, 1996, and (iii) were prepared in accordance with GAAP
consistently followed throughout the periods involved, except as otherwise
noted therein. The Pro Forma Financial Statements have been prepared in
accordance with the applicable accounting requirements of Rule 11-02 of
Regulation S-X; the pro forma adjustments reflected in the Pro Forma Financial
Statements have been properly applied to the historical amounts in compilation
of such statements; and the assumptions used in the preparation of the Pro
Forma Financial Statements are, in the opinion of the Company, reasonable. The
Company has no material liabilities, contingent or otherwise, not reflected in
the balance sheet as of December 31, 1995 (or the notes thereto) or the balance
sheet as of June 30, 1996 (or the notes thereto) included in the Financial
Statements, other than any such liabilities incurred in the ordinary course of
business since June 30, 1996 and other than as described in the Proxy
Statement.
3.11 No Material Adverse Change. Except as described in the Proxy
Statement, since December 31, 1995, there has not been any material adverse
change in the financial condition, results of operations, business or
properties of the Company and its Subsidiaries, taken as a whole.
3.12 Commission Documents. The Company and its Subsidiaries have
filed all registration statements, proxy statements, reports and, other
documents required to be filed by them under the Securities Act or the Exchange
Act, and all amendments thereto since January 1, 1993 (collectively, the
"Commission Documents"). Each Commission Document complied as to form when
filed in all material respects with the rules and regulations of the SEC. Each
Commission Document did not, on the date of filing, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.13 Properties.
(a) The Company and its Subsidiaries have good and
defensible title to all of their respective interests in all of their
respective oil and gas leases, free and clear of any encumbrances,
except as described in the Commission Documents and except for liens
under the Bank One Agreement and, for the period between the Effective
Time of the Merger and the pay-off of Alexander's secured creditors
with the proceeds of the Bank One Agreement, the liens granted to
Alexander's secured creditors, subject only to liens for taxes or
charges of mechanics or materialmen not yet due and to encumbrances
under gas sales contracts, operating agreements, unitization and
pooling agreements and other
-8-
<PAGE> 13
similar agreements as are customarily found in connection with
comparable drilling and producing operations and to title defects and
other encumbrances that are, singularly and in the aggregate, not
material in amount and do not interfere with their use or enjoyment of
their oil and gas properties. The Company and its Subsidiaries have
complied in all material respects with the terms of the oil and gas
leases in which they purport to own an interest, and all of such
leases are in full force and effect (except where the failure so to
comply or to be in full force and effect will not have a Material
Adverse Effect upon the Company and its Subsidiaries, taken as a
whole).
(b) The Company and its Subsidiaries do not own any
material properties or other assets that are not described in the
Commission Documents. The Company and its Subsidiaries have good and
marketable title in fee simple to all properties and assets described
in the Commission Documents as owned by them, and valid, subsisting
and enforceable leases for the properties described in the Commission
Documents as leased by them, in each case free and clear of all liens,
charges, encumbrances or restrictions, except for (i) such as are
described in the Commission Documents, (ii) liens under the Bank One
Agreement or (iii) liens, charges, encumbrances or restrictions as do
not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
3.14 Registration Rights. Except as set forth on Schedule 3.14,
there are no contracts, agreements or understandings between the Company and
any person granting such person the right to require the Company to include
such securities in any SEC registration statement.
3.15 Offering. Subject to the accuracy of the Purchasers'
representations in Article 4 hereof, the offer, sale and issuance of the
Shares, the Warrants and the Registrable Securities as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act
and the securities laws of any state having jurisdiction with respect to the
transactions contemplated by this Agreement, and neither the Company nor anyone
acting on its behalf has or will take any action that would cause the loss of
such exemption.
3.16 No Defaults. Neither the Company nor any of its Subsidiaries
is (i) in violation of any provision of its charter or bylaws, (ii) in breach,
violation or default, in any material respect, of or under any material
contract, lease, commitment or instrument to which it is a party or by which it
is bound or to which any of its properties or assets are subject, and no event
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a material
breach, violation or default or (iii) in material violation of any Law.
3.17 Litigation. There is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries or any of their properties
or rights by or before any Governmental Authority that (i) relates to or
challenges the legality of this Agreement, the Merger Agreement, the High River
Stock Purchase Agreement, the Bank One Agreement, the Preferred Stock, the
Warrants or the Common Stock, (ii) would reasonably be expected to have a
Material Adverse Effect upon the Company and its Subsidiaries, taken as a whole
(except as disclosed in the Commission
-9-
<PAGE> 14
Documents) or (iii) would reasonably be expected to impair the ability of the
Company to perform fully on a timely basis any obligations that it has under
this Agreement, the Merger Agreement, the High River Stock Purchase Agreement,
the Bank One Agreement, the Warrants or any documents related hereto or
thereto.
3.18 Compliance with Laws. The Company is in compliance in all
material respects with all laws and regulations in all jurisdictions where the
failure to effect such compliance would reasonably be expected to have a
Material Adverse Effect upon the Company.
3.19 Taxes. Except as set forth on Schedule 3.19, all tax returns
required to be filed by the Company in any jurisdiction have been so filed, and
all taxes, assessments, fees and other charges shown thereon to be due and
payable have been paid, other than those being contested in good faith. The
Company does not know of any actual or proposed material additional tax
assessments for any fiscal period against it. None of the Company's tax
returns are under audit, and no waivers of the statute of limitations or
extensions of time with respect to any tax returns have been granted to the
Company, except such audits, waivers or extensions as would not reasonably be
expected to have a Material Adverse Effect upon the Company.
3.20 ERISA. Neither the execution and delivery of this Agreement
nor the sale of the Shares and Warrants to be purchased by the Purchasers is a
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) on the part of the Company that is not exempt by statute,
regulation or class exemption. The Company and its Subsidiaries are in
compliance in all material respects with all presently applicable provisions of
ERISA; no "reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company or its
Subsidiaries would have any material liability; the Company and its
Subsidiaries have not incurred and do not expect to incur liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 (whether or not waived) or 4971 of the
Code; and each "pension plan" for which the Company or its Subsidiaries would
have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, that would cause the loss of such
qualification.
3.21 Compliance with Environmental Laws. The business and
properties of the Company and its Subsidiaries have been operated in compliance
with all applicable federal, state or local laws, rules, regulations or orders
(collectively, "Environmental Laws") relating to pollution or protection of the
environment including, without limitation, any law, rule, regulation or order
relating to emissions, discharges, releases or threatened releases ("Releases")
of chemicals, pollutants, contaminants, wastes, petroleum or petroleum
products, toxic substances or hazardous substances ("Pollutants") for which
noncompliance would have a Material Adverse Effect upon the Company and its
Subsidiaries, taken as a whole. Neither the Company nor its Subsidiaries have
received any written communication, whether from a Governmental Authority,
citizens' group, landowner, or employee, nor, to the best knowledge of the
executive officers of the Company, has the Company or its Subsidiaries received
any oral communication from a Governmental Authority, alleging that (i) the
Company or its Subsidiaries is not in compliance with any Environmental Law
applicable to it and its business and properties, or (ii) any
-10-
<PAGE> 15
employee or third party has suffered bodily injury or property damage as a
result of one or more Releases of Pollutants arising out of or resulting from
the operations of the Company or its Subsidiaries, or prior owners and
operators of its business or property, which allegation, if true, would have a
Material Adverse Effect upon the Company. Except as disclosed in the
Commission Documents, neither the Company nor its Subsidiaries have no material
obligation to remediate, repair or replace any property, whether real or
personal, owned by the Company or its Subsidiaries or any third party, as a
result of one or more Releases of Pollutants arising out of or resulting from
the operations of the Company or its Subsidiaries or prior owners and operators
of their business or properties.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF PURCHASERS
Each Purchaser severally represents and warrants with respect to
itself to the Company as of the date hereof as follows:
4.1 Organization. Each Purchaser is a corporation or limited
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization.
4.2 Authority. Each Purchaser has all requisite power and
authority to enter this Agreement and the other documents and agreements
contemplated hereby, to purchase the Shares and the Warrants on the terms
described in this Agreement and to perform its other obligations contemplated
by this Agreement.
4.3 Authorization. The execution, delivery and performance of
this Agreement and the transactions contemplated hereunder have been duly and
validly authorized by all requisite corporate or partnership action on the part
of each Purchaser.
4.4 Binding Agreement. This Agreement has been duly executed and
delivered by each Purchaser and constitutes a legal, valid and binding
obligation of such Purchaser enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy and other similar laws of general
application with respect to creditors and subject to principles of equity and
public policy that affect enforceability of agreements generally.
4.5 No Conflicts. Neither the execution or delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in a breach or violation of, or constitute a default under, the
governing documents of the Purchasers, or any agreement, indenture or other
instrument to which the Purchasers are a party or by which any of them are
bound or to which any of their properties are subject, nor will the performance
by the Purchasers of their obligations hereunder violate any Law or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or assets of the Purchasers. No permit, consent, approval,
authorization or order of any Governmental Authority or other Person is
required in connection with the consummation by the Purchasers of the
transactions
-11-
<PAGE> 16
contemplated by this Agreement, except such as have been obtained and as
otherwise contemplated by this Agreement.
4.6 Absence of Bankruptcy Proceedings. There are no bankruptcy or
reorganization proceedings pending against, being contemplated by, or to any
Purchaser's knowledge, threatened against, any Purchaser.
4.7 No Brokers. No broker or finder has acted for or on behalf of
Purchasers in connection with this Agreement or the transactions contemplated
by this Agreement, and no broker or finder is entitled to any brokerage or
finder's fee or commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchasers.
4.8 Accredited Investor, Etc. Each Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act. Each
Purchaser is acquiring the Shares and the Warrants for its own account and not
for distribution or resale, with no present intention of distributing or
reselling said Shares or Warrants or any part thereof; provided that the
disposition of such Purchaser's property shall at all times remain within its
control. Each Purchaser agrees: (a) that such Purchaser will not sell, assign,
pledge, give, transfer or otherwise dispose of the Shares or the Warrants or
any interest therein, or make any offer or attempt to do any of the foregoing,
except pursuant to a registration of the Shares under the Securities Act and
all applicable state securities laws or in a transaction which, in the written
opinion of counsel for such Purchaser satisfactory to the Company (which
requirement may be waived by the Company upon advice of counsel), is exempt
from the registration provisions of the Securities Act and all applicable state
securities laws; (b) that the certificate(s) for the Shares and the Warrants
will bear a legend making reference to the foregoing restrictions for so long
as such legend may be required pursuant to applicable federal securities laws;
and (c) that the Company and any transfer agent for the Shares and Warrants
shall not be required to give effect to any purported transfer of any of the
Shares or the Warrants except upon compliance with the foregoing restrictions.
4.9 Information Available. Each Purchaser has been given the
opportunity to ask questions of and receive answers from the officers of the
Company or their designated representatives concerning the terms and conditions
of the offering of the Shares and the Warrants and the Company, and to obtain
any additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
information furnished in the Commission Documents.
ARTICLE 5 - AGREEMENTS PENDING CLOSING
5.1 Investigations; Operation of Business of the Company. Between
the date of this Agreement and the earlier of the Closing or termination of
this Agreement:
(a) (i) The Company shall give each Purchaser, its
agents and representatives, full access to all of the premises of the Company,
including well sites, and
-12-
<PAGE> 17
books and records, and to cause their respective officers to furnish each
Purchaser, its agents and representatives with such financial and operating
data and other information with respect to the respective businesses and
properties of the Company, as each Purchaser, its agents and representatives
shall from time to time reasonably request; provided, however, that any such
investigation shall not affect any of the representations and warranties of the
Company hereunder, and provided further, that any such investigation shall be
conducted in such manner as not to interfere unreasonably with the operation of
the respective businesses of the Company. In the event of termination of this
Agreement, except as prevented by law, each Purchaser will, and shall cause its
agents and representatives to, return to the Company all documents, work papers
and other materials obtained from the Company in connection with the
transactions contemplated hereby, and all copies, extracts or other
reproductions thereof in whole or in part (the "Company Confidential
Material"). The Company Confidential Material does not include information
which (i) is public information, (ii) was already known to such Purchaser,
(iii) is developed by such Purchaser independently from the information
supplied to Purchaser pursuant to this Agreement, or (iv) is furnished to
Purchaser such by a third party who is not an employee, agent, representative,
or advisor of the Company or any entity in which the Company has an interest
independently from such Purchaser's investigation pursuant to the transactions
contemplated by this Agreement. Each Purchaser agrees, and shall cause its
affiliates and their respective officers, directors, employees, financial
advisors and agents (collectively, "Purchaser Representatives") to keep
confidential any information obtained pursuant to this Agreement which is
stamped confidential or otherwise transmitted to Purchasers in a manner that
indicates such material is Company Confidential Material unless such
information is readily ascertainable from public or published information or
trade sources. If this Agreement is terminated, each Purchaser shall not use,
and shall cause each Purchaser Representative not to use, any of the Company
Confidential Information to such Purchaser's or any other person's or entity's
financial advantage or to the detriment of the Company. The confidentiality
provisions of this Section 5.1(a) shall survive the termination of this
Agreement.
(ii) Subject to Subsection 5.1(a)(iii) below or
except as required by law, the Company Confidential Material will be kept
confidential and will not, without the prior written consent of the Company, be
disclosed by any Purchaser or Purchaser Representatives, in whole or in part,
and will not be used by any Purchaser or Purchaser Representatives, directly or
indirectly, for any purpose other than in connection with this Agreement, the
other transactions contemplated by this Agreement or that is to the detriment
of the Company. In any event, each Purchaser will be responsible for any
actions by its Purchaser Representatives which are not in accordance with the
provisions hereof.
(iii) In the event that any Purchaser, the
Purchaser Representatives or anyone to whom such Purchaser or the Purchaser
Representatives supply the Company Confidential Material are requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand, any informal or formal
investigation by any Governmental Body or otherwise in connection with legal
processes) to disclose any of the Company Confidential Material, each Purchaser
agrees (i) to immediately notify the Company of the existence, terms and
circumstances of such a request, (ii) to consult with the Company on the
advisability of taking legally available steps to resist or narrow such request
and (iii) if
-13-
<PAGE> 18
disclosure of such information is required, to furnish only that portion of the
Company Confidential Material which, upon advice of such Purchaser's counsel,
such Purchaser is legally compelled to disclose and to cooperate with any
action by the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Company
Confidential Material (it being agreed that the Company shall reimburse such
Purchaser for all reasonable legal fees and expenses and other out-of-pocket
expenses incurred by such Purchaser in connection with such cooperation).
(b) The Company will, to the extent required for
continued operation of its business without impairment, use its reasonable
efforts to preserve substantially intact the books and records and the business
organization of the Company, to keep available the services of its present
officers and employees, and to preserve the present relationships of the
Company with persons having significant business relations therewith such as
suppliers, customers, brokers, agents or otherwise and to promptly notify
Purchasers of an emergency or other change which would have a Material Adverse
Effect on the Company, any governmental complaints, investigations, hearings
(or communications indicating that the same may be contemplated) or the breach
in any material respect of any representation, warranty, covenant or agreement
contained herein.
(c) The Company will conduct its business only in the
ordinary course and, by way of amplification and not limitation, the Company
will not, without the prior written consent of Purchasers, take any of the
actions prohibited of the Company pursuant to Section 4.02(c) of the Merger
Agreement.
(d) The Company shall furnish Purchasers a copy of any
report filed with the SEC under the Exchange Act.
5.2 Taking of Necessary Action. Subject to the terms and
conditions of this Agreement and to applicable law, each of the parties to this
Agreement shall use all reasonable efforts promptly to take or cause to be
taken all action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
ARTICLE 6 - CONDITIONS TO CLOSING
6.1 The Company's Conditions. The obligations of the Company to
close under this Agreement are subject, at the option of the Company, to the
satisfaction at or prior to the Closing of the following conditions:
(a) All representations of Purchasers contained in this
Agreement shall be true at and as of the delivery date as if such
representations were made at and as of date of delivery, and
Purchasers shall have performed and satisfied all agreements required
by this Agreement to be performed and satisfied by Purchasers at or
prior to the date of the Closing;
-14-
<PAGE> 19
(b) The Company shall have received a certificate dated
as of the delivery date, executed by a duly authorized officer of each
Purchaser or of the general partner of each Purchaser that is a
partnership, to the effect that to such officer's knowledge the
conditions set forth in Section 6.1(a) above are satisfied at and as
of the date of the Closing; and
(c) As of the Closing, no suit, action or other
proceeding (excluding any such matter initiated by the Company) shall
be pending or threatened before any Governmental Authority seeking to
restrain the Company or prohibit the transactions contemplated hereby
or seeking damages against the Company as a result of the consummation
of this Agreement.
6.2 Purchasers' Conditions. The obligations of Purchasers to
close under this Agreement are subject, at the option of Purchasers, to the
satisfaction at or prior to the date of the Closing of the following
conditions:
(a) All representations of the Company contained in this
Agreement shall be true at and as of the date of Closing as if such
representations were made at and as of the date of delivery, and the
Company shall have performed and satisfied all agreements and
conditions to Closing required by this Agreement to be performed and
satisfied by the Company at or prior to the date of Closing;
(b) The stockholders of the Company shall have approved
the Merger Agreement, the Merger and the amendments to the Certificate
of Incorporation of the Company contemplated by the Proxy Statement;
(c) The stockholders of Alexander shall have approved the
Merger Agreement and the Merger;
(d) The closing of the High River Stock Purchase
Agreement shall have occurred or will occur simultaneous with the
Closing hereunder substantially on the terms set forth therein;
(e) All conditions precedent to the closing of the Bank
One Agreement (other than the Closing) shall have occurred;
(f) The Amendment to the Company's Certificate of
Incorporation contemplated by the Proxy Statement shall have been duly
filed with the Secretary of State of the State of Delaware and the
Purchasers shall have received evidence satisfactory to the Purchasers
of the filing thereof with the Secretary of State of the State of
Delaware;
(g) Purchasers shall have received certificates dated as
of the date of the Closing, executed by duly authorized officers of
the Company, to the effect that to such
-15-
<PAGE> 20
officer's knowledge the conditions set forth in Section 6.2(a) above
are satisfied at and as of the date of the Closing;
(h) The Purchasers shall have received a certificate of
the Secretary or the Assistant Secretary of the Company, dated as of
the date of Closing, certifying, among other things, as to the due
authorization of the transactions contemplated hereby;
(i) The Purchasers shall have received certificates of
existence and good standing for each of the Company and NEG-OK in the
jurisdiction of its incorporation and each jurisdiction in which it is
qualified or licensed to do business and own material assets;
(j) The Purchasers shall have received a copy of any
required written consent and waiver to the transactions contemplated
hereby executed by the third party or appropriate Governmental
Authority;
(k) Purchasers shall have received a legal opinion dated
as of the date of Closing from Strasburger & Price, L.L.P. in
substantially the form of Exhibit C hereto;
(l) Purchasers shall have received evidence satisfactory
to them that the transactions contemplated hereby do not violate the
Bank One Agreement;
(m) No suit, action or other proceeding (excluding any
such matter initiated by Purchasers) shall be pending or threatened
before any Governmental Authority seeking to restrain Purchasers or
prohibit the transactions contemplated by this Agreement or seeking
damages against Purchasers as a result of the consummation of this
Agreement;
(n) The Certificate of Designation shall have been duly
filed by the Company with the Secretary of State of the State of
Delaware and the Purchasers shall have received evidence satisfactory
to the Purchasers of the filing of the Certificate of Designation with
the Secretary of State of the State of Delaware; and
(o) Except for the amendments to the certificate of
incorporation of the Company described in the Proxy Statement, the
certificate of designation with respect to the Series D Preferred
Stock, and the Certificate of Designation, no amendments to the
Certificate of Incorporation or Bylaws of the Company as in effect on
June 14, 1995 shall have been effected.
ARTICLE 7 - DELIVERIES AT THE CLOSING
7.1 Deliveries of the Company. At the Closing the Company shall
deliver the to the Purchasers certificates representing the Shares and the
Warrants, each such certificate executed by the Company's President and
Secretary or Assistant Secretary and appropriately registered in the name of
each Purchaser.
-16-
<PAGE> 21
7.2 Deliveries of Purchasers. At the Closing, Purchasers shall
deliver to the Company the Purchase Price in immediately available funds to the
Company.
ARTICLE 8 - POST-CLOSING AGREEMENTS
8.1 Survival of Representations and Warranties. All
representations, warranties, covenants and agreements of the Company contained
in this Agreement or made in writing by the Company in connection herewith, and
all representations and warranties of any Purchaser contained in this Agreement
or made in writing by Purchaser in connection herewith, shall survive the
Closing, regardless of any investigation made by such party or on such party's
behalf and without any other document being delivered at the date hereof.
8.2 Indemnification. After the Closing, the Company shall
indemnify and hold harmless each Purchaser, and each Purchaser severally and
not jointly shall indemnify and hold harmless the Company, from and against any
and all claims, losses, damages and liabilities (and actions in respect
thereof) and any and all costs and expenses (including reasonable attorneys'
fees and expenses) that such person may sustain or incur as a result of any
misrepresentation or breach of warranty or the nonperformance of any obligation
on the part of the other under this Agreement.
8.3 Brokers. Without limiting the parties' respective
representations in Sections 3.9 and 4.7, after the Closing each party agrees to
indemnify and hold the other harmless from and against any claim for a
brokerage or finder's fee or commission in connection with this Agreement or
the transactions contemplated by this Agreement to the extent such claim arises
from or is attributable to the actions of such indemnifying party.
ARTICLE 9 - REGISTRATION RIGHTS
9.1 Shelf Registration.
(a) At any time commencing nine months after the Closing,
the Company shall, upon demand by Purchasers and provided each
Purchaser represents to the Company that it has a present intention to
sell, prepare and file with the SEC a shelf registration statement
(the "Shelf Registration Statement") on an appropriate form pursuant
to Rule 415 (or any similar provision that may be adopted by the SEC)
under the Securities Act with respect to the Registrable Securities.
(b) The Company agrees to use its best efforts to have
the Shelf Registration Statement declared effective as soon as
practicable after the filing thereof, and to keep the Shelf
Registration Statement continuously effective, at the option of
Purchasers, until all of the Shares covered thereby have been sold or
such time as all of the Registrable Securities can be resold pursuant
to Rule 144(k) under the Securities Act (or any successor provision).
Further, the Company shall maintain the quotation of the Common Stock
on the Nasdaq National Market or a listing with a national securities
exchange.
-17-
<PAGE> 22
(c) Notwithstanding any other provisions of this
Agreement to the contrary, the Company shall cause the Shelf
Registration Statement and the related prospectus and any amendment or
supplement thereto, as of the effective date of the Shelf Registration
Statement, amendment or supplement, as the case may be (i) to comply
in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the SEC and (ii) not
to contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading other than statements or omissions
made in reliance upon and in conformity with information furnished to
the Company in writing by the holders of Registrable Securities
expressly for use in such Shelf Registration Statement and the related
prospectus or any amendment or supplement thereto.
9.2 Piggy-Back Registration.
(a) If at any time after the Closing the Company proposes
to file a registration statement under the Securities Act with respect
to a firm commitment underwritten offering by the Company whether or
not for sale for its own account (other than a registration statement
on Form S-4 or S-8 (or any substitute form for comparable purposes
that may be adopted by the SEC) or a registration statement filed in
connection with an exchange offer or an offering of securities solely
to the Company's existing security holders), then the Company shall in
each such case give written notice of such proposed filing to the
holders of Registrable Securities as soon as practicable (but in no
event less than 10 days before the anticipated filing date), and such
notice shall offer such holders of Registrable Securities (provided
such holders represent to the Company that they have a present
intention to sell) the opportunity to register such Registrable
Securities and such number of shares of Registrable Securities as each
such holder may request.
(b) The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included
in the registration statement for such offering to be included on the
same terms and conditions as any similar securities of the Company or
of any selling stockholder included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such
offering deliver a written notice to the holders of such Registrable
Securities that either because of (i) the kind of securities which
such holders, the Company and any other persons or entities intend to
include in such offering or (ii) the size of the offering which the
holders of Registrable Securities, the Company and such other persons
intend to make, the success of the offering would be materially and
adversely affected by inclusion of the Registrable Securities
requested to be included, then (a) in the event that the size of the
offering is the basis of such managing underwriter's opinion, the
amount of securities to be offered for the accounts of holders of
Registrable Securities shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in
such offering to the amount recommended by such managing underwriter
or underwriters; provided that if securities are being offered for the
account of other persons or entities as well as the Company, the
proportion by
-18-
<PAGE> 23
which the amount of such class of securities intended to be offered by
holders of Registrable Securities is reduced shall not exceed the
proportion by which the amount of such class of securities intended to
be offered by such other persons or entities is reduced; and (b) in
the event that the combination of securities to be offered is the
basis of such managing underwriter's opinion, (x) the Registrable
Securities to be included in such offering shall be reduced as
described in clause (a) above (subject to the proviso in clause (a))
or, (y) if the actions described in clause (x) would, in the judgment
of the managing underwriter, be insufficient to substantially
eliminate the adverse effect that inclusion of the Registrable
Securities requested to be included would have on such offering, such
Registrable Securities will be excluded from such offering.
9.3 Registration Procedures. In connection with any registration
pursuant to Section 9.1 or Section 9.2 hereof, the following provisions shall
apply:
(a) The Company shall (i) prior to filing the Shelf
Registration Statement or any other registration statement registering
Registrable Securities (a "Registration Statement") or prospectus or
any amendments or supplements thereto, furnish to one counsel selected
by the holders of a majority in aggregate principal amount or number
of shares, as the case may be, of the Registrable Securities covered
by such Registration Statement copies of all such documents proposed
to be filed, which documents will be subject to the reasonable review
of such counsel and (ii) as soon as reasonably possible, furnish to
each Selling Holder, prior to filing a Registration Statement, copies
of such Registration Statement as proposed to be filed, and thereafter
furnish to such Selling Holder such number of copies of such
Registration Statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and
such other documents as such Selling Holder may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such Selling Holder;
(b) The Company shall notify the holders of Registrable
Securities in writing:
(i) when the Registration Statement and any
amendment thereto has been filed with the SEC
and when the Registration Statement or any
post-effective amendment thereto has become
effective;
(ii) of any request by the SEC for amendments or
supplements to the Registration Statement or
the prospectus included therein or for
additional information relating to such
registration;
(iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the
Registration Statement or the initiation of
any proceedings for that purpose; and
(iv) of the receipt by the Company of any
notification with respect to the suspension
of the qualification of the Registrable
Securities for
-19-
<PAGE> 24
sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(c) The Company shall use its best efforts to register or
qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions as any Selling Holder reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Selling Holder to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Selling Holder; provided that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (c), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
such jurisdiction.
(d) The Company shall use reasonable efforts to prevent
the issuance or obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible
time.
(e) The Company shall notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly file with the SEC and
make available to each Selling Holder any such supplement or
amendment.
(f) At any time commencing nine months after the Closing,
if requested in writing by the holders beneficially owning at least
25% collectively, of the Registrable Securities (including holders of
Preferred Stock), the Company shall enter into customary agreements
(including an underwriting agreement in customary form with customary
terms with underwriters reasonably approved by the Company) and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities; provided
that the Company shall not be required to participate in more than
[two] underwritten offerings under the Shelf Registration Statement.
(g) The Company shall make available for inspection by
any Selling Holder of such Registrable Securities, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other professional retained
by any such Selling Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its Subsidiaries
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's and its Subsidiaries' officers, directors and employees
to supply all information reasonably requested by any such Inspector
in connection with such Registration Statement. Each Selling Holder
of such Registrable Securities agrees that information obtained by it
as a
-20-
<PAGE> 25
result of such inspections which is deemed confidential shall not be
used by it as the basis for any market transactions in securities of
the Company unless and until such is made generally available to the
public. Each Selling Holder of such Registrable Securities further
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential.
(h) The Company will use its best efforts to comply with
all the rules and regulations of the SEC to the extent and so long as
they are applicable to the Registration Statement and will make
generally available to its security holders after the effective date
of the applicable Registration Statement an annual earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
The Company may require each Selling Holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
and such other information as may be legally required in connection with such
registration.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
9.3(e) hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 9.3(e) hereof, and,
if so directed by the Company, such Selling Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
such Selling Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
9.4 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 9, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by
the Company are then listed, and fees and disbursements of counsel for the
Company and its independent certified public accountants, the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, fees and expenses of other persons retained by the Company,
and reasonable fees and expenses (limited to $15,000 per registration) of one
counsel (who shall be reasonably acceptable to the Company) for the holders of
Registrable Securities incurred in connection with each registration hereunder
(but not including any
-21-
<PAGE> 26
underwriting discounts or commissions attributable to the sale of Registrable
Securities) will be borne by the Company (all such expenses being herein called
"Registration Expenses").
9.5 Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each Selling Holder of Registrable
Securities, its officers, directors, partners and agents and each
person, if any, who controls such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages (whether in
contract, tort or otherwise), liabilities and expenses (including
reasonable costs of investigation) whatsoever (as incurred or
suffered) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities or in
any amendment or supplement thereto or in any preliminary prospectus,
or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise
out of, or are based upon, any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the
Company by such Selling Holder or on such Selling Holder's behalf
expressly for use therein. The Company also agrees to indemnify any
underwriters of the Registrable Securities, their officers, partners
and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the
Selling Holders provided in this Section 9.5(a) or such other
indemnification customarily obtained by underwriters at the time of
offering.
(b) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall
be brought or asserted against any Selling Holder (or its officers,
directors, partners or agents) or any person controlling any such
Selling Holder in respect of which indemnity may be sought from the
Company, the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Selling Holder,
and shall assume the payment of all expenses. Such Selling Holder or
any controlling person of such Selling Holder shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Selling Holder or such controlling person unless
(i) the Company has agreed to pay such fees and expenses or (ii) the
named parties to any such action or proceeding (including any
impleaded parties) include both such Selling Holder or such
controlling person and the Company, and such Selling Holder or such
controlling person shall have been advised by counsel that there may
be one or more legal defenses available to such Selling Holder or such
controlling person which differ from those available to the Company
(in which case, if such Selling Holder or such controlling person
notifies the Company in writing that it elects to employ separate
counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of
such Selling Holder or such controlling person; it being understood,
however, that the
-22-
<PAGE> 27
Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such Selling Holder and such
controlling persons, which firm shall be designated in writing by such
Selling Holder). The Company shall not be liable for any settlement
of any such action or proceeding effected without the Company's
written consent, but if settled with its written consent, or if there
be a final judgment for the plaintiff in any such action or
proceeding, the Company agrees to indemnify and hold harmless such
Selling Holder and such controlling person from and against any loss
or liability (to the extent stated above) by reason of such settlement
or judgment.
(c) Indemnification by Selling Holders. Each Selling
Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its directors, officers and agents and each
person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, as
amended, to the same extent as the indemnity contained in Section
9.5(a) from the Company to such Selling Holder, but only with respect
to information furnished in writing by such Selling Holder or on such
Selling Holder's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities, or any
amendment or supplement thereto, or any preliminary prospectus. In
case any action or proceeding shall be brought against the Company or
its directors, officers or agents, or any such controlling person, in
respect of which indemnity may be sought against such Selling Holder,
such Selling Holder shall have the rights and duties given to the
Company, and the Company or its directors, officers or agents or such
controlling person shall have the rights and duties given to such
Selling Holder by the preceding Section 9.5(b). Each Selling Holder
also agrees to indemnify and hold harmless underwriters of the
Registrable Securities, their officers and directors and each person
who controls such underwriters on substantially the same basis as that
of the indemnification of the Company provided in this Section 9.5(c).
(d) Contribution. If the indemnification provided for in
this Section 9.5 is unavailable to the Company, the Selling Holders or
the underwriters in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each such
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) as between the Company and the Selling Holders on the
one hand and the underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company
and the Selling Holders on the one hand and the underwriters on the
other from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Selling Holders on the one hand
and of the underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations
-23-
<PAGE> 28
and (ii) as between the Company, on the one hand, and each Selling
Holder on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of each Selling Holder in
connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by
the Company and the Selling Holders on the one hand and the
underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (net of underwriting discounts
and commissions but before deducting expenses) received by the Company
and the Selling Holders bear to the total underwriting discounts and
commissions received by the underwriters, in each case as set forth in
the table on the cover page of the prospectus. The relative fault of
the Company and the Selling Holders on the one hand and of the
underwriters on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company and the Selling
Holders or by the underwriters. The relative fault of the Company on
the one hand and of each Selling Holder on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 9.5 were determined
by pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9.5(d), no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission, and
no Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
9.6 Participation in Underwritten Registrations. No person may
participate in any underwritten registration hereunder unless such person (a)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and execute all questionnaires,
-24-
<PAGE> 29
powers of attorneys, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and this
Agreement.
9.7 Rule 144. The Company covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act, and
that it will take such further action as any holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
holders of Registrable Securities to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to whether it has complied
with such requirements.
9.8 Grant of Registration Rights to Others. When negotiating the
grant of registration rights to other parties with respect to its Common Stock,
the Company will not agree to any provision that prohibits Purchasers from
exercising their piggyback rights on any registration statement that may be
filed if such other party exercises such registration rights.
ARTICLE 10 - MISCELLANEOUS
10.1 Public Announcements. Except as set forth in the following
sentence, the parties to this Agreement agree that prior to making any public
announcement or statement with respect to the transactions contemplated by this
Agreement, the party desiring to make such public announcement or statement
shall consult with the other party and exercise reasonable efforts to (i) agree
upon the text of a joint public announcement or statement to be made by both of
such parties or (ii) obtain approval of the other party to the text of a public
announcement or statement to be made solely by the Company or Purchasers, as
the case may be. Nothing contained in this Section 10.1 shall be construed to
require either party to obtain approval of the other party to disclose
information with respect to any disclosure (i) required by applicable law or by
any applicable rules, regulations or orders of any Governmental Authority
having jurisdiction or (ii) necessary to comply with disclosure requirements of
any applicable stock exchange.
10.2 Notices. Except as otherwise expressly provided in this
Agreement, all communications required or permitted under this Agreement shall
be in writing and any such communication or delivery shall be deemed to have
been duly given and received when actually delivered to the address set forth
below of the party to be notified personally (by a recognized commercial
courier or delivery service that provides a receipt) or by telecopier
(confirmed in writing by a personal delivery as set forth above), addressed as
follows:
-25-
<PAGE> 30
If to the Company:
National Energy Group, Inc.
4925 Greenville Ave., Suite 1400
Dallas, Texas 75206
Attention: Mr. Miles Bender
Telecopy No.: (214) 692-9310
If to Arbco Associates L.P., Offense Group Associates, L.P.,
Kayne, Anderson Nontraditional Investments L.P. and Kayne,
Anderson Offshore Limited:
c/o KAIM Nontraditional L.P.
1800 Avenue of the Stars, Suite 2000
Los Angeles, California 90067
Attention: Mr. Robert V. Sinnott
Telecopy No.: (310) 284-6490
If to Foremost Insurance Company:
Foremost Insurance Company
5230 33rd Street S.E.
Grand Rapids, Michigan 49512
Attention: Mr. Donald D. Welsh
If to Topa Insurance Company:
Topa Insurance Company
1800 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
With a copy to (if to any Purchaser):
Baker & Botts, L.L.P.
3000 One Shell Plaza
Houston, Texas 77002
Attention: Ms. Kelly B. Rose
Telecopy No.: (713) 229-1522
Any party may, by written notice so delivered to the other, change the address
to which delivery shall thereafter be made.
10.3 Expenses. The Company shall promptly pay after receipt of an
invoice all accrued fees and expenses of Purchasers, including fees and
expenses of Baker & Botts, counsel to Purchasers, in connection with the
negotiation, preparation, execution and delivery of the
-26-
<PAGE> 31
Agreement and related documents and the consummation of the transactions
contemplated hereby up to the aggregate amount of $45,000.
10.4 Entire Agreement. This Agreement embodies the entire
agreement between the parties with respect to the subject matter of this
Agreement (superseding all prior agreements, arrangements, understandings and
solicitations of interest or offers related to the subject matter of this
Agreement including the related Term Sheet executed by the parties hereto dated
July 25, 1996), and this Agreement may be supplemented, altered, amended,
modified or revoked by writing only, signed by all of the parties to this
Agreement. The headings in this Agreement are for convenience only and shall
have no significance in the interpretation of any term or provision of this
Agreement.
10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO RULES CONCERNING CONFLICTS OF LAWS.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one agreement.
10.7 Waiver. Any of the terms, provisions, covenants,
representations, warranties or conditions contained in this Agreement may be
waived only by a written instrument executed by the party waiving compliance.
No waiver by any party of any condition, or of the breach of any term,
provision, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.
10.8 Binding Effect; Assignment. All the terms, provisions,
covenants, representations, warranties and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
to this Agreement and their respective successors and assigns; but this
Agreement and the rights and obligations hereunder shall not be assignable or
delegable by any party without the express written consent of the non assigning
or non delegating parties.
10.9 Construction. Each party hereby acknowledges and agrees that
such party has consulted legal counsel in connection with the negotiation of
this Agreement and that such party has bargaining power equal to that of the
other party in connection with the negotiation and execution of this Agreement.
Accordingly, the parties agree that the rule of contract construction that an
agreement shall be construed against the draftsman shall have no application in
the construction or interpretation of this Agreement.
-27-
<PAGE> 32
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-----------------------------------
Name: MILES D. BENDER
Title: PRESIDENT & CEO
FOREMOST INSURANCE COMPANY
By: /s/ Donald D. Welsh
-----------------------------------
Name: DONALD D. WELSH
Title: VICE PRESIDENT-INVESTMENTS
ARBCO ASSOCIATES L.P.
By: KAYNE, ANDERSON INVESTMENT
MANAGEMENT, INC., General Partner
By: /s/ Alvin J. Portnoy
-----------------------------------
Name: Alvin J. Portnoy
---------------------------------
Title: Executive Vice President
--------------------------------
OFFENSE GROUP ASSOCIATES, L.P.
By: KAYNE, ANDERSON INVESTMENT
MANAGEMENT, INC., General Partner
By: /s/ Alvin J. Portnoy
-----------------------------------
Name: Alvin J. Portnoy
---------------------------------
Title: Executive Vice President
--------------------------------
-28-
<PAGE> 33
KAYNE, ANDERSON NONTRADITIONAL
INVESTMENTS L.P.
By: KAYNE, ANDERSON INVESTMENT
MANAGEMENT, INC., General Partner
By: /s/ Alvin J. Portnoy
-----------------------------------
Name: Alvin J. Portnoy
---------------------------------
Title: Executive Vice President
--------------------------------
TOPA INSURANCE COMPANY
By: /s/ Dirk D. Heim
-----------------------------------
Name: Dirk D. Heim
---------------------------------
Title: Vice President
--------------------------------
KAYNE, ANDERSON OFFSHORE LIMITED
By: KAYNE, ANDERSON INVESTMENT
MANAGEMENT, INC., General Partner
By: /s/ Alvin J. Portnoy
-----------------------------------
Name: Alvin J. Portnoy
---------------------------------
Title: Executive Vice President
--------------------------------
-29-
<PAGE> 1
EXHIBIT 10.37
NEITHER THIS WARRANT NOR THE SECURITIES RECEIVED UPON EXERCISE OF THIS
WARRANT HAS BEEN REGISTERED OR QUALIFIED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, THIS WARRANT
AND THE SECURITIES RECEIVED UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED OR QUALIFIED UNDER SAID ACT AND ALL APPLICABLE STATE SECURITIES LAWS
OR, AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE AND SUCH
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS
OF THE ACT OR APPLICABLE LAWS.
NATIONAL ENERGY GROUP, INC.
Warrant to Purchase
_______ Shares of
National Energy Group, Inc.
Common Stock
This Warrant (the "Warrant") certifies that, for value received
_____________ ___________ or its registered assigns ("Holder") is entitled to
purchase _______ shares of Common Stock, $0.01 par value (the "Common Stock")
of the Company at a price of $2.50 per share (the "Exercise Price"). Holder
agrees by acceptance of this Warrant that this Warrant is subject to the terms
and conditions of this Warrant and that certain Stock Purchase Agreement dated
August 26, 1996 among National Energy Group, Inc. (the "Company"), Holder and
the other Purchasers named therein.
This Warrant may be exercised by Holder, in whole or in part, at any
time and from time to time until 12:00 midnight on August 29, 2001 (the
"Expiration Date"). This Warrant shall be void and all rights of Holder under
this Warrant shall cease if this Warrant shall not have been duly exercised on
or prior to the Expiration Date.
This Warrant shall not entitle Holder to any rights other than as set
forth herein, and Holder will not have any of the rights, privileges or
liabilities of a stockholder of the Company prior to the exercise of this
Warrant.
The number of shares of Common Stock as to which this Warrant may be
exercised and the Exercise Price from time to time in effect shall be adjusted
from time to time as follows:
(A) In case the Company shall (i) subdivide its shares of
outstanding Common Stock into a larger number of shares of Common Stock, (ii)
combine shares of its outstanding Common Stock into a smaller number of shares
of Common Stock or (iii) issue stock as a dividend on its Common Stock; then
Holder, after the close of business on the effective date of such
<PAGE> 2
subdivision, combination or stock dividend, as the case may be (the close of
business times being hereinafter in this subparagraph (A) referred to as "such
record date"), shall be entitled to receive, upon actual exercise of this
Warrant, the aggregate number and kind of shares of capital stock of the
Company which, if this Warrant had been exercised immediately prior to such
record date at the Exercise Price then in effect, it would have been entitled
to receive by virtue of such subdivision, combination or stock dividend; and
the Exercise Price shall be deemed to have been adjusted after such record date
to apply to such aggregate number and kind of shares. Such adjustment shall be
made whenever any of the events listed above shall occur.
(B) No notification to Holder of any adjustment in the exercise
price otherwise required by this Warrant to be made must be made, if such
adjustment (plus any other adjustments not heretofore made) would not require
any increase or decrease of 5% or more in the Exercise Price; provided,
however, that upon exercise of this Warrant, all adjustments shall be made in
calculating the exercise rights of Holder. Whenever the Exercise Price is
adjusted by 5% or more, as herein provided, the Company shall promptly mail to
Holder a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(C) In the event that at any time, as a result of an adjustment,
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in
subparagraphs (A) and (B), above, and the other provisions of this Warrant with
respect to the shares of Common Stock shall apply on like terms to any such
other shares.
(D) In case of any reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), any consolidation of the Company with, or merger of the
Company into, any other person, any merger of any person into the Company
(other than a merger that does not result in any reclassification of, or change
in the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Company (other than a sale-lease back,
collateral assignment, mortgage or other similar financing transaction), or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other properties, then Holder shall have the right
thereafter, during the period this Warrant shall be exercisable, to exercise
this Warrant for the kind and amount of securities, cash or other property
receivable upon such reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
this Warrant might have been exercised immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
(E) In case the Company at any time while this Warrant is
outstanding shall issue shares of Common Stock, warrants or rights to acquire
Common Stock or securities convertible
-2-
<PAGE> 3
into Common Stock (excluding options or shares of Common Stock or other common
stock issued to officers, employees or directors so long as the number issued
to officers, employees and directors in any one year does not exceed five
percent of the number of shares of Common Stock outstanding on January 1st of
such year) at a price per share of Common Stock purchased, purchasable, or
issuable upon conversion that is less than the Exercise Price, then the
Exercise Price at which each share of Common Stock at which this Warrant shall
thereafter be exercisable shall be reduced by multiplying the Exercise Price in
effect on the date of issuance of such shares, warrants, rights or convertible
securities by a fraction, of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such shares, warrants, rights or convertible securities
plus the number of additional shares of Common Stock issued, offered for
subscription or purchase or issuable upon conversion, and of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such shares, warrants,
rights or convertible securities plus the number of shares of Common Stock that
the aggregate offering price of the total number of shares so offered, issued,
or issuable, or, with respect to convertible securities, the aggregate
consideration received by the Company for the convertible securities, would
purchase at the prior Exercise Price. Such adjustment shall be made whenever
shares, warrants, rights or convertible securities are issued, and shall become
effective immediately after such issuance date. However, upon the expiration
of any warrant, right or conversion right to purchase Common Stock, the
issuance of which resulted in an adjustment in the Exercise Price of this
Warrant pursuant to this Warrant, if any such warrant, right or convertible
rights shall expire and shall not have been exercised, the Exercise Price per
share of Common Stock at which this Warrant shall thereafter be exercisable
shall immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Exercise Price made pursuant to the
provisions of this Warrant after the issuance of such warrants, rights or
convertible securities) had the adjustment of the Exercise Price made upon the
issuance of such warrants, rights or convertible securities been made on the
basis of offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of the warrants or rights
actually exercised or the conversion of the convertible securities actually
converted. For purposes of this Warrant, the term Common Stock shall include
(i) any common equity security into which the Common Stock is reclassified or
for which it is exchanged, or (ii) any common equity security of the Company
that has equal or superior voting rights with the Common Stock.
(F) In case the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or cash distributions paid out
of earned surplus) or rights to subscribe (excluding those referred to in
subparagraph (E) above) then in each such case the Exercise Price per share of
Common Stock at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination for stockholders entitled to receive such distribution
by a fraction, of which the denominator shall
-3-
<PAGE> 4
be the Closing Price of a share of Common Stock determined as of the record
date mentioned above, and of which the numerator shall be such Closing Price of
a share of Common Stock, less the then fair market value per share (as
determined by the Board of Directors of the Company in good faith, whose
determination shall be conclusive if made in good faith and shall be described
in a statement provided to Holder) of the portion of assets or evidences of
indebtedness so distributed or of such subscription rights. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(G) Upon each adjustment of the Exercise Price as provided for
herein, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the adjusted Exercise Price on the date
purchase rights under this Warrant are exercised, the number of shares of
Common Stock determined by (a) multiplying the number of shares purchasable
hereunder immediately prior to the adjustment of the Exercise Price by the
Exercise Price in effect immediately prior to such adjustment, and (b) dividing
the product so obtained by the adjusted Exercise Price in effect on the date of
such exercise.
(H) In case:
1. the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise
than in cash out of its earned surplus; or
2. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
3. the Company shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any other rights; or
4. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to
which the Company is party or any sale or transfer of
all or substantially all of the assets of the
Company; or
5. of the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the
Company;
then the Company shall, at least 10 days prior to the applicable record date
hereinafter specified, contact by telephone and cause to be mailed to Holder at
its last address as it shall appear upon
-4-
<PAGE> 5
the stock books of the Company, a notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, redemption, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.
(I) In case at any time conditions shall arise by reason of action
taken by the Company, which, in the opinion of the Board of Directors of the
Company, are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of Holder, or in case at any
time any such conditions are expected to arise by reason of any action
contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company), who shall give their opinion as to the adjustment,
if any (not inconsistent with the standards herein), of the Exercise Price
(including, if necessary, any adjustment as to the securities to be received
thereafter upon exercise of this Warrant) which is or would be required to
preserve without dilution the rights of Holder. The Board of Directors of the
Company may, in its judgment, make the adjustment recommended upon the receipt
of such opinion; provided, however, that no adjustment pursuant to this
subparagraph (I) of the Exercise Price shall be made which in the opinion of
the accountant or firm of accountants giving the aforesaid opinion would result
in an increase of the Exercise Price to more than the Exercise Price then in
effect.
As used above, the term "Closing Price" on any day shall mean the
higher of (i) the reported closing sales price per share of Common Stock on the
principal national securities exchange or the Nasdaq National Market on which
the shares of Common Stock are at the time listed or traded on such day or (ii)
the average of the closing sales prices for the twenty Trading Days prior to
such day. In case no such sale takes place on a day, the Closing Price shall
be the average of the reported closing bid and asked prices, or, if the shares
of Common Stock shall not be so listed, the average of the high bid and low ask
prices in the over-the-counter market as reported by the National Association
of Securities Dealers' Automated Quotation System, or, if not so reported, as
reported by the National Quotation Bureau, Incorporated, or any successor
thereof, or, if not so reported, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or the Nasdaq National Market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to, trading on any
national securities exchange or the Nasdaq National Market, a Monday, Tuesday,
Wednesday, Thursday,
-5-
<PAGE> 6
or Friday on which banking institutions in the City of Dallas, State of Texas,
are not authorized or obligated by law or executive order to close.
The Company shall at all times after August 29, 1996, reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock solely for the purpose of issuance upon the exercise of
this Warrant the full number of shares of Common Stock then deliverable upon
the exercise of this Warrant. The Company covenants and agrees that all shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges of any nature whatsoever.
This Warrant may be exercised by filling out and signing the Warrant
Exercise Notice and mailing or delivering the Warrant Exercise Notice to the
Company in time to reach the Company by the Expiration Date, accompanied by
payment of the full applicable Exercise Price. Payment of the Exercise Price
must be made in United States funds (by certified check) payable to the order
of the Company. Certificates for shares of Common Stock purchased upon
exercise of this Warrant will be delivered by the Company to the person
designated in the Warrant Exercise Notice within five business days after the
date the Warrant Exercise Notice and the full applicable Exercise Price is
received by the Company. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and will, within such five-day period, deliver such new Warrant to the person
designated for delivery in the Warrant Exercise Notice. If the Warrant
Exercise Notice is mailed by first class mail, registered or certified, postage
prepaid, and properly addressed to National Energy Group, Inc., 4925 Greenville
Ave., Ste. 1400, Dallas, TX 75206, or, to such other address as the Company may
have specified in a notice duly given to Holder, then the Warrant Exercise
Notice will be presumed to be received by the Company three business days after
the date so mailed.
The Common Stock issuable upon the exercise of this Warrant will be
deemed to have been issued to the person designated in the Warrant Exercise
Notice on the date the Warrant Exercise Notice and the full applicable Exercise
Price is received by the Company, and the person designated in the Warrant
Exercise Notice will be deemed for all purposes to have become the record
holder of such Common Stock at such date.
The issuance of certificates for shares of Common Stock upon exercise
of the this Warrant will be made without charge to the Holder for any issuance
tax in respect thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Common Stock. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of certificates
representing Warrants or Common Stock issuable upon exercise of this Warrant in
-6-
<PAGE> 7
the name other than that of the Holder at the time of surrender for exercise,
and until the payment of such tax, shall not be required to issue such Common
Stock.
Subject to the provisions of the legend on the first page of this
Warrant, this Warrant is transferable by Holder, in whole or in part (provided
that any partial transfer shall be for a whole number of shares of Common
Stock), and upon delivery of this Warrant to the Company with evidence of such
transfer by Holder reasonably satisfactory to the Company, the Company shall
issue a replacement Warrant in a form similar to this Warrant, in the name of
such transferee (and in the case of such partial transfer, the Company shall
issue a new Warrant to Holder to purchase the balance of the shares of Common
Stock that is not the subject of transfer). Holder shall indemnify the Company
against any loss, claim or damages arising from or related to such transfer and
shall sign a written instrument of indemnity in a form acceptable to the
Company.
The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with any sale of the Common
Stock or sale of the Company, the exercise of any portion of this Warrant may,
at the election of the holder thereof, be conditioned upon the consummation of
the sale of the Common Stock or sale of the Company, in which case such
exercise shall not be deemed to be effective until the consummation of such
transaction.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and shall for all purposes be governed by and construed in
accordance with the laws of such State.
Dated: August 29, 1996
NATIONAL ENERGY GROUP, INC.
By:
-------------------------------------
Miles D. Bender, President and
Chief Executive Officer
-7-
<PAGE> 8
EXHIBIT 1
WARRANT EXERCISE NOTICE
INSTRUCTIONS
IN ORDER FOR WARRANTS TO BE EXERCISED THIS NOTICE MUST BE
RECEIVED BY THE COMPANY ON OR PRIOR TO THE
EXPIRATION DATE SPECIFIED IN THE WARRANT.
This Warrant Exercise Notice, dated ____________________________ (the
"Notice"), relates to this Warrant, dated August 29, 1996 (the "Warrant"),
issued by National Energy Group, Inc., a Delaware corporation whose address is
4925 Greenville Ave., Ste. 1400, Dallas, TX 75206 (the "Company"), to the
undersigned. This Warrant initially represented the right to purchase the
aggregate number of shares as indicated in this Warrant, which number will be
reduced by this Warrant Exercise Notice and by any prior or future Warrant
Exercise Notices.
The undersigned hereby exercises the portion of this Warrant to
purchase, and hereby purchases, ________ shares of the Company's Common Stock,
at a price of $2.50 per share, which is the price indicated in this Warrant.
The full amount of $__________ in United States funds, by certified check
payable to the order of the Company is attached hereto.
-8-
<PAGE> 9
The undersigned acknowledges that a certificate for the shares of
Common Stock purchased by the undersigned through the exercise of this Warrant
pursuant to this Notice will be delivered to the undersigned, at the address
indicated below (unless the Company has received written notice of a different
address) within five business days after receipt of this notice and the full
payment of the applicable purchase price.
Dated:
-----------------------------
Holder:
---------------------------------
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Social Security or
Taxpayer Identification Number:
----------------------------------------
Business Phone Number:
----------------------------------------
Home Phone Number:
----------------------------------------
-9-
<PAGE> 1
EXHIBIT 10.38
AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of the 29th day of August,
1996, is by and between National Energy Group, Inc., a Delaware corporation
(the "Company"), and Prudential Securities Incorporated ("Prudential").
WHEREAS, on November 16, 1994, Alexander Energy Corporation and
Prudential entered into agreements (the "Alexander Agreement") pursuant to
which, among other matters, Alexander retained Prudential as financial adviser,
and agreed to compensate Prudential and to reimburse Prudential in connection
with its services as financial adviser to Alexander;
WHEREAS, pursuant to the Merger Agreement Alexander will be merged
with and into NEG-OK, Inc., a wholly-owned subsidiary of the Company and
Prudential is entitled to compensation in connection with the Merger;
WHEREAS, Prudential and the Company desire to terminate the Alexander
Agreement in exchange for NEG agreeing to issue to Prudential shares of Common
Stock of the Company, $1.00 par (the "Common Stock") and warrants to purchase
Common Stock, and to pay certain out of pocket expenses of Prudential; and
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth in this Agreement, the parties to this
Agreement hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Certain Defined Terms. The following terms, as used in this
Agreement, shall have the following meanings:
"Alexander" shall mean Alexander Energy Corporation, an
Oklahoma corporation.
"Closing" means the closing under the Merger Agreement.
"Merger" means the merger between Alexander and NEG-OK, Inc.,
a wholly-owned subsidiary of the Company, pursuant to the Merger
Agreement.
"Merger Agreement" means that certain Agreement and Plan of
Merger among the Company, Alexander, NEG- OK, Inc., dated June 6,
1996, as amended.
"Person" shall mean an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a
limited liability company, a government or any department or agency of
a government.
1
<PAGE> 2
"Proxy Statement" shall mean the Joint Proxy and Prospectus of
the Company filed with the SEC with respect to the Merger and other
related transactions.
"Registrable Securities" means (i) any Common Stock issued
pursuant to this Agreement, (ii) any Common Stock issued as, or
issuable upon the conversion or exercise of any warrant, option, right
or other security that is issued or issuable as, a dividend or other
distribution with respect to, or in exchange for, or in replacement
of, the Common Stock issued pursuant to this Agreement, and (iii) any
Common Stock issued or issuable upon the exercise of the Warrants.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor agency.
"Securities Act" shall mean the Securities Act of 1933, or any
successor statute, as at the time in effect. Reference to a
particular section of such Act shall include a reference to the
comparable section, if any, of such successor statute.
ARTICLE 2 - AGREEMENTS
2.1 Alexander Agreement Terminated in Part. Effective as of the
Closing, Prudential agrees to terminate the Alexander Agreement, except with
respect to (i) the fairness opinion issued pursuant to the Alexander Agreement
and (ii) paragraphs 7 and 8 of the Alexander Agreement (which paragraphs shall
remain in full force and effect notwithstanding any contrary provision of this
Agreement), and agrees to release and discharge Alexander, NEG-OK, Inc. and
the Company, as well as their successors and assigns, and their directors,
officers, employees, shareholders, agents or representatives, from any and all
claims, causes of action, demands, damages, costs or expenses arising out of or
in any way related to the Alexander Agreement. In exchange, the Company agrees
at the Closing to:
(a) to pay or cause Alexander to pay to Prudential by
wire transfer the amount of $500,000 to Morgan Guaranty Trust of New
York for Prudential Securities Incorporated, Account Number
722-00-011, ABA 021- 000-238, Reference General Ledger Account
#9NAAEOK0.
(b) to issue to Prudential the number of shares of Common
Stock of the Company (the "Shares") equal to $500,000 divided by the
NEG Average Price. The NEG Average Price shall be the average closing
price of the NEG Common Stock for the ten trading days immediately
prior to the date of the Closing of the Merger.
(c) to issue to Prudential 100,000 warrants to purchase
shares of Common Stock at an exercise price equal to the NEG Average
Price, which warrants shall be in the form attached hereto as Exhibit
A.
2
<PAGE> 3
(d) to reimburse Prudential for its out of pocket and
incidental expenses, incurred in connection with its engagement under
the Alexander Agreement, including the fees and expenses of its legal
counsel and of those of any advisor retained by Prudential Securities
not previously reimbursed by Alexander.
(e) to release and discharge Prudential, its successors
and assigns, and its directors, officers, employees, shareholders,
agents and representatives from any and all claims, causes of action,
demands, damages, costs or expenses arising out of or in any way
related to the Alexander Agreement.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Prudential as of the date of
Closing as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2 Authority. The Company has all requisite corporate power and
authority to carry on its business as presently conducted and to enter into
this Agreement and to perform its obligations contemplated by this Agreement.
3.3 Authorization. The execution, delivery and performance of
this Agreement and the transactions contemplated by this Agreement have been
duly and validly authorized by all requisite corporate action on the part of
the Company.
3.4 Valid Issuance. The issuance and delivery of the Shares and
the Warrants in accordance with this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, and the Shares and the
Warrants when so issued, sold and delivered against payment therefor in
accordance with this Agreement will be duly and validly issued, fully paid and
nonassessable. The issuance and delivery of the shares of Common Stock
issuable upon exercise of the Warrants have been duly authorized by all
necessary corporate action on the part of the Company, and such shares of
Common Stock have been duly reserved for issuance and, when issued upon such
conversion or exercise, will be duly and validly issued, fully paid and
nonassessable.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF PRUDENTIAL
Prudential represents and warrants to the Company as of the date of
Closing as follows:
4.1 Organization. Prudential is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization.
3
<PAGE> 4
4.2 Authority. Prudential has all requisite power and authority
to enter this Agreement and the other documents and agreements contemplated
hereby and to perform its obligations contemplated by this Agreement.
4.3 Authorization. The execution, delivery and performance of
this Agreement and the transactions contemplated hereunder have been duly and
validly authorized by all requisite corporate action on the part of Prudential.
4.4 Accredited Investor, Etc. Prudential is an "accredited
investor" within the meaning of Rule 501 under the Securities Act. Prudential
is acquiring the Shares and the Warrants for its own account and not for
distribution or resale, with no present intention of distributing or reselling
the Shares or Warrants or any part thereof. Prudential agrees: (a) that
Prudential will not sell, assign, pledge, give, transfer or otherwise dispose
of the Shares or the Warrants or any interest therein, or make any offer or
attempt to do any of the foregoing, except pursuant to a registration of the
Shares under the Securities Act and all applicable state securities laws or in
a transaction which, in the written opinion of counsel for Prudential
satisfactory to the Company (which requirement may be waived by the Company
upon advice of counsel), is exempt from the registration provisions of the
Securities Act and all applicable state securities laws; (b) that the
certificate(s) for the Shares and the Warrants will bear a legend making
reference to the foregoing restrictions for so long as such legend may be
required pursuant to applicable federal securities laws; and (c) that the
Company and any transfer agent for the Shares and Warrants shall not be
required to give effect to any purported transfer of any of the Shares or the
Warrants except upon compliance with the foregoing restrictions.
ARTICLE 5 - REGISTRATION RIGHTS
5.1 Registration Rights.
(a) Immediately after the Closing the Company shall
prepare and file with the SEC a shelf registration statement (the
"Shelf Registration Statement") on an appropriate form pursuant to
Rule 415 (or any similar provision that may be adopted by the SEC)
under the Securities Act with respect to the Registrable Securities.
(b) The Company agrees to use its best efforts to have
the Shelf Registration Statement declared effective, and to keep the
Shelf Registration Statement continuously effective, at the option of
Prudential, until all of the Shares covered thereby have been sold or
such time as all of the Registrable Securities can be resold pursuant
to Rule 144(k) under the Securities Act (or any successor provision).
Further, the Company shall use its best efforts to maintain the
quotation of the Common Stock on the Nasdaq National Market or a
listing with a national securities exchange.
(c) Notwithstanding any other provisions of this
Agreement to the contrary, the Company shall cause the Shelf
Registration Statement and the related prospectus and any amendment or
supplement thereto, as of the effective date of the Shelf Registration
Statement, amendment or supplement, as the case may be (i) to comply
in all material
4
<PAGE> 5
respects with the applicable requirements of the Securities Act and
the rules and regulations of the SEC and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading other than statements or omissions made in
reliance upon and in conformity with information furnished to the
Company in writing by the holders of Registrable Securities expressly
for use in such Shelf Registration Statement and the related
prospectus or any amendment or supplement thereto.
5.2 Registration Procedures. In connection with any registration
pursuant to Section 5.1 the following provisions shall apply:
(a) The Company shall (i) prior to filing the Shelf
Registration Statement or any other registration statement registering
Registrable Securities (a "Registration Statement") or prospectus or
any amendments or supplements thereto, furnish to counsel selected by
Prudential copies of all such documents proposed to be filed, which
documents will be subject to the reasonable review of such counsel and
(ii) as soon as reasonably possible, furnish to Prudential, prior to
filing a Registration Statement, copies of such Registration Statement
as proposed to be filed, and thereafter furnish to Prudential such
number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as Prudential may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Prudential;
(b) The Company shall notify Prudential in writing:
(i) when the Registration Statement and any
amendment thereto has been filed with the SEC
and when the Registration Statement or any
post-effective amendment thereto has become
effective;
(ii) of any request by the SEC for amendments or
supplements to the Registration Statement or
the prospectus included therein or for
additional information relating to such
registration;
(iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the
Registration Statement or the initiation of
any proceedings for that purpose; and
(iv) of the receipt by the Company of any
notification with respect to the suspension
of the qualification of the Registrable
Securities for sale in any jurisdiction or
the initiation or threatening of any
proceeding for such purpose.
5
<PAGE> 6
(c) The Company shall use its best efforts to register or
qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions as Prudential reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable Prudential to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by Prudential; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this paragraph (c), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction.
(d) The Company shall use reasonable efforts to prevent
the issuance or obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible
time.
(e) The Company shall notify Prudential, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of the Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
promptly file with the SEC and make available to Prudential any such
supplement or amendment.
(f) The Company shall make available for inspection by
Prudential and any attorney, accountant or other professional retained
by Prudential (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the
Company (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspectors in connection
with such Registration Statement. Prudential agrees that information
obtained by it as a result of such inspections which is deemed
confidential shall not be used by it as the basis for any market
transactions in securities of the Company unless and until such is
made generally available to the public. Prudential further agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(g) The Company will use its best efforts to comply with
all the rules and regulations of the SEC to the extent and so long as
they are applicable to the Registration Statement and will make
generally available to its security holders after the effective date
of the applicable Registration Statement an annual earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
6
<PAGE> 7
The Company may require Prudential to furnish to the Company
such information regarding the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing and such other
information as may be legally required in connection with such registration.
Prudential agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5.2(e)
hereof, Prudential will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until Prudential's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5.2(e) hereof, and, if so directed
by the Company, Prudential will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in Prudential's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
5.3 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 5, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by
the Company are then listed, and fees and disbursements of counsel for the
Company and its independent certified public accountants, the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration and fees and expenses of other persons retained by the
Company will be borne by the Company (all such expenses being herein called
"Registration Expenses").
5.4 Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless Prudential, its officers, directors,
partners and agents and each person, if any, who controls Prudential
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims,
damages (whether in contract, tort or otherwise), liabilities and
expenses (including reasonable costs of investigation) whatsoever (as
incurred or suffered) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable
Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by Prudential or on
the Prudential's behalf expressly for use therein.
7
<PAGE> 8
(b) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall
be brought or asserted against Prudential (or its officers, directors,
partners or agents) or any person controlling Prudential in respect of
which indemnity may be sought from the Company relating to the
Registrable Securities, the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to
Prudential, and shall assume the payment of all expenses. Prudential
or any controlling person of Prudential shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of Prudential or such controlling person unless (i) the
Company has agreed to pay such fees and expenses or (ii) the named
parties to any such action or proceeding (including any impleaded
parties) include both Prudential or such controlling person and the
Company, and Prudential or such controlling person shall have been
advised by counsel that there may be one or more legal defenses
available to Prudential or such controlling person which differ from
those available to the Company (in which case, if Prudential or such
controlling person notifies the Company in writing that it elects to
employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or
proceeding on behalf of Prudential or such controlling person; it
being understood, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for
Prudential and such controlling persons, which firm shall be
designated in writing by Prudential). The Company shall not be liable
for any settlement of any such action or proceeding effected without
the Company's written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold
harmless Prudential and such controlling person from and against any
loss or liability (to the extent stated above) by reason of such
settlement or judgment.
(c) Indemnification by Prudential. Prudential agrees to
indemnify and hold harmless the Company, its directors, officers and
agents and each person, if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, as amended, to the same extent as the indemnity
contained in Section 5.4(a) from the Company to Prudential, but only
with respect to information furnished in writing by Prudential or on
Prudential's behalf expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. In case any action
or proceeding shall be brought against the Company or its directors,
officers or agents, or any such controlling person, in respect of
which indemnity may be sought against Prudential, Prudential shall
have the rights and duties given to the Company, and the Company or
its directors, officers or agents or such controlling person shall
have the rights and duties given to Prudential by the preceding
Section 5.4(b).
8
<PAGE> 9
(d) Contribution. If the indemnification provided for in
this Section 5.4 is unavailable to the Company or Prudential in
respect of any losses, claims, damages, liabilities or judgments
referred to herein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments as between the Company, on
the one hand, and Prudential on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of
Prudential in connection with such statements or omissions, as well as
any other relevant equitable considerations. The relative fault of
the Company on the one hand and of Prudential on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and Prudential agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.4(d),
Prudential shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of
Prudential were offered to the public exceeds the amount of any damages which
Prudential has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
5.5 Rule 144. The Company covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act, and
that it will take such further action as Prudential may reasonably request, all
to the extent required from time to time to enable Prudential to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of Prudential, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
ARTICLE 6 - MISCELLANEOUS
6.1 Notices. Except as otherwise expressly provided in this
Agreement, all communications required or permitted under this Agreement shall
be in writing and any such communication or delivery shall be deemed to have
been duly given and received when actually
9
<PAGE> 10
delivered to the address set forth below of the party to be notified personally
(by a recognized commercial courier or delivery service that provides a
receipt) or by telecopier (confirmed in writing by a personal delivery as set
forth above), addressed as follows:
If to the Company:
National Energy Group, Inc.
4925 Greenville Ave., Suite 1400
Dallas, Texas 75206
Attention: Mr. Miles Bender
Telecopy No.: (214) 692-9310
If to Prudential:
Prudential Securities Incorporated
One New York Plaza, 17th Floor
New York, New York 10292
Attention: Mr. John McKenna
Telecopy No.: (212) 778-4196
Any party may, by written notice so delivered to the other, change the address
to which delivery shall thereafter be made.
6.2 Entire Agreement. This Agreement embodies the entire
agreement between the parties with respect to the subject matter of this
Agreement (superseding all prior agreements, arrangements, understandings and
solicitations of interest or offers related to the subject matter of this
Agreement including the Alexander Agreement) and this Agreement may be
supplemented, altered, amended, modified or revoked by writing only, signed by
all of the parties to this Agreement. The headings in this Agreement are for
convenience only and shall have no significance in the interpretation of any
term or provision of this Agreement.
6.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO RULES CONCERNING CONFLICTS OF LAWS.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one agreement.
6.5 Binding Effect; Assignment. All the terms, provisions,
covenants, representations, warranties and conditions of this Agreement shall
be binding upon and inure to the benefit of
10
<PAGE> 11
and be enforceable by the parties to this Agreement and their respective
successors and assigns; but this Agreement and the rights and obligations
hereunder shall not be assignable or delegable by any party without the express
written consent of the non assigning or non delegating parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
NATIONAL ENERGY GROUP, INC.
By: /s/ Miles D. Bender
-------------------------------------
Name: MILES D. BENDER
Title: PRESIDENT & CEO
By: PRUDENTIAL SECURITIES
INCORPORATED
By: /s/ R. F. Vaughn
-------------------------------------
Name:R. F. Vaughn
-----------------------------------
Title:Managing Director
----------------------------------
11
<PAGE> 1
CERTIFICATE OF MERGER
MERGING EXHIBIT 10.39
ALEXANDER ENERGY CORPORATION
INTO
NEG-OK, INC.
NEG-OK, Inc., a Delaware corporation, pursuant to Section 82
of the Oklahoma General Corporation Act and Section 252 of the Delaware General
Corporation Law,
DOES HEREBY CERTIFY:
FIRST. That the name and state of incorporation of each of
the constituent corporations is Alexander Energy Corporation (Oklahoma) and
NEG-OK, Inc. (Delaware);
SECOND. That an Agreement of Merger has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the provisions of Section 82(c) of the Oklahoma
General Corporation Act and in accordance with the provisions of Section 252(c)
of the Delaware General Corporation Law;
THIRD. That the name of the surviving corporation is NEG-OK,
Inc.;
FOURTH. That the certificate of incorporation of NEG-OK, Inc.
shall be the certificate of incorporation of the surviving corporation;
FIFTH. That the executed Agreement of Merger is on file at
the principal place of business of the surviving corporation, which is located
at 1400 One Energy Square, 4925 Greenville Avenue, Dallas, TX 75206;
SIXTH. That a copy of the Agreement of Merger will be
furnished by the surviving corporation, on request and without cost, to any
shareholder of any constituent corporation.
SEVENTH. The authorized capital stock of Alexander Energy
Corporation is as follows:
Common Stock, $.03 par value, 50,000,000 shares
Preferred Stock, $.01 par value, 2,000,000 shares
EIGHTH. This merger shall be effective at 3 o'clock p.m. on
August 29, 1996.
NINTH. NEG-OK, Inc. hereby agrees that it may be served with
process in Oklahoma in any proceeding for enforcement of any obligation of any
constituent corporation organized in Oklahoma, as well as for enforcement of
any obligation of NEG-OK, Inc. arising from the merger, including any suit or
other proceeding to enforce the right of any shareholders
<PAGE> 2
as determined in appraisal proceedings pursuant to the provisions of Section
1091 of the Oklahoma General Corporation Act, and hereby irrevocably appoints
the Secretary of State of the State of Oklahoma, its agent to accept service of
process in any such suit or other proceeding. The address to which a copy of
such process shall be mailed by the Secretary of State of the State of Oklahoma
is 1400 One Energy Square, 4925 Greenville Avenue, Dallas, TX 75206.
IN WITNESS WHEREOF, NEG-OK, Inc. has caused this certificate
to be signed by its President and attested by its Secretary this 29th day of
August, 1996.
NEG-OK, INC.
/s/ Miles D. Bender
----------------------------------------
Name: Miles D. Bender
Title: President
ATTEST:
/s/ Grace Bricker
- -------------------------------------
Grace Bricker, Secretary
<PAGE> 1
EXHIBIT 10.40
RESTATED LOAN AGREEMENT
AMONG
NATIONAL ENERGY GROUP, INC.
AS BORROWER
AND
NEG-OK, INC. AND
BOOMER MARKETING CORPORATION
AS GUARANTORS
AND
BANK ONE, TEXAS, N.A.
AND
CREDIT LYONNAIS NEW YORK BRANCH
AS BANKS
AND
BANK ONE, TEXAS, N.A.,
AS ADMINISTRATIVE AGENT
AND
CREDIT LYONNAIS NEW YORK BRANCH
AS SYNDICATION AGENT
$100,000,000 REDUCING REVOLVING CREDIT FACILITY
$5,000,000 TERM LOAN FACILITY
AUGUST 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Commitments of the Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Terms of Revolving Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Voluntary Reduction of Revolving Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Monthly Commitment Reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Several Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Notes Evidencing Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Form of Revolving Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Form of Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Issuance of Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(e) Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(f) Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Payments to Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . 14
(j) Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Conversion Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Recoupment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Special Provisions Relating to Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Unavailability of Funds or Inadequacy of Pricing . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Reserve Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Change in Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Option to Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Payments Not at End of Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Other Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. Collateral Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Initial Borrowing Base and Monthly Commitment Reduction . . . . . . . . . . . . . . . . . . . . 20
(b) Subsequent Determinations of Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
8. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Unused Portion Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Mandatory Prepayment For Borrowing Base Deficiency . . . . . . . . . . . . . . . . . . . . . . . 22
10. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Creation and Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) Titles, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(k) Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(m) Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(n) Location of Business and Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(o) Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(p) No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(q) Not A Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(r) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(s) Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(u) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(v) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(w) Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(x) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11. Conditions of Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Financial Statements and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Certificates of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Accountants' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
(i) Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(l) ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Environmental Reports and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) Operation of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(p) Compliance with Leases and Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(q) Certain Additional Assurances Regarding
Maintenance and Operations of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(r) Sale of Certain Assets/Prepayment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 36
(s) Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(t) Title Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(u) Curative Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) Debts, Guaranties and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(h) Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(i) Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(j) Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(k) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(l) Hedging Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(m) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(n) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(o) Amendment to Articles of Incorporation or Bylaws . . . . . . . . . . . . . . . . . . . . . . . . 41
14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15. Exercise of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
18. The Administrative Agent and the Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Note Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) Consultation with Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
(f) Responsibility of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Independent Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(h) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(i) Benefit of Section 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(j) Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) Assumption as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(l) Other Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(m) Interests of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(n) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
20. Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
21. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
22. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
23. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
24. Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
25. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
26. Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
27. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
28. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
29. Choice of Forum: Consent to Service of Process and Jurisdiction . . . . . . . . . . . . . . . . . . . . 54
30. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
Exhibits
- --------
Exhibit "A" - Revolving Note
Exhibit "B" - Term Note
Exhibit "C" - Notice of Borrowing
Exhibit "D" - Unlimited Guaranty
Exhibit "E" - Certificate of Compliance
Schedules
- ---------
Schedule 1 - Permitted Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Environmental Matters
Schedule 6 - Title Matters
Schedule 7 - Curative Matters
Schedule 8 - Debts, Guaranties and Other Obligations
Schedule 9 - Loans and Advances
</TABLE>
v
<PAGE> 7
RESTATED LOAN AGREEMENT
THIS RESTATED LOAN AGREEMENT (hereinafter referred to as the
"Agreement") executed as of the 29th day of August, 1996, by and among the
NATIONAL ENERGY GROUP, INC., a Delaware corporation ("Borrower"), NEG-OK, INC.,
a Delaware corporation ("OK"), BOOMER MARKETING CORPORATION, an Oklahoma
corporation ("Boomer") (OK and Boomer are hereinafter collectively referred to
as "Guarantors") and BANK ONE, TEXAS, N.A., a national banking association
("Bank One") and CREDIT LYONNAIS NEW YORK BRANCH ("Credit Lyonnais") and each
of the financial institutions which may from time to time become a party hereto
or any successor or assignee thereof (hereinafter collectively referred to as
"Banks", and individually as "Bank") and Bank One, as "Administrative Agent"
and Credit Lyonnais as "Syndication Agent."
W I T N E S S E T H:
WHEREAS, Borrower and Bank One entered into a Loan Agreement dated as
of June 30, 1995 (the "Loan Agreement") pursuant to which Bank One made
available to Borrower an advance line of credit and a reducing revolving line
of credit; and
WHEREAS, the Loan Agreement was amended by a First Amendment to Loan
Agreement, Second Amendment to Loan Agreement, a Third Amendment to Loan
Agreement and a Fourth Amendment to Loan Agreement; and
WHEREAS, Borrower and Bank One have agreed to restate the Loan
Agreement to increase the amount of the reducing revolver, extend the maturity
of the reducing revolver, add a new term loan, add Credit Lyonnais as a Bank
and as the Syndication Agent and add OK and Boomer as Guarantors, and the
parties hereto are willing to make such amendments on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. DEFINITIONS. When used herein the terms "Administrative
Agent", "Agreement", "Bank", "Banks", "Bank One", "Boomer", "Borrower", "Credit
Lyonnais", "Guarantor," "OK," "Syndication Agent" shall have the meanings
indicated above. When used herein the following terms shall have the following
meanings:
"Advance or Advances" shall mean a loan or loans hereunder.
"Affiliate" shall mean any person which, directly or
indirectly, controls, is controlled by or is under common control with
the relevant Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall
mean a member of the board of directors, a partner or an officer of
such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, through the ownership (of
record, as trustee or by proxy) of voting shares, partnership interests
or voting rights, through a management contract or otherwise. Any
Person owning or controlling directly or indirectly ten percent or more
of the voting shares, partnership interests or voting rights, or other
equity interest of another Person shall be deemed to be an Affiliate of
such Person.
"Alexander" shall mean Alexander Energy Corporation.
<PAGE> 8
"Base Rate" shall mean, as of any date, the fluctuating rate
of interest per annum established from time to time by Administrative
Agent as its Base Rate (which rate of interest may not be the lowest,
best or most favorable rate of interest which Administrative Agent may
charge on loans to its customers). Each change in the Base Rate shall
become effective without prior notice to Borrower automatically as of
the opening of business on the date of such change in the Base Rate.
"Base Rate Interest Period" shall mean, with respect to any
Base Rate Loan, the period ending on the last day of each month;
provided, however, that (i) if any Base Rate Interest Period would end
on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, and (ii) if any Base Rate
Interest Period would otherwise end after the Maturity Date, such
Interest Period shall end on the Maturity Date.
"Base Rate Loans" shall mean any loan during any period, which
bears interest based upon the Base Rate or which would bear interest
based upon the Base Rate if the Maximum Rate ceiling were not in effect
at that particular time.
"Base Rate Margin" shall have the following meaning:
(a) For Revolving Loans:
(i) Before the Term Loan is repaid, zero
(0);
(ii) after the Term Loan is repaid;
(A) zero (0) whenever the Total
Outstandings are less than seventy- five
percent of the Borrowing Base in effect at
the time in question.
(B) one-quarter of one percent
(.25%) per annum whenever the Total
Outstanding are equal to or greater than
seventy-five percent of the Borrowing Base in
effect at the time in question.
(b) For the Term Loan, two percent (2%) per
annum.
"Borrowing Base" shall mean the value assigned by the Banks
from time to time to the Oil and Gas Properties pursuant to Section
7(b) hereof. Until the next determination of the Borrowing Base
pursuant to Section 7(b) hereof, the Borrowing Base for the Revolving
Commitment shall be $60,000,000.00 as adjusted from time to time
pursuant to Sections 2(d), 2(e) and 7(b) of this Agreement.
"Borrowing Date" shall mean the date elected by Borrower
pursuant to Section 2(c) hereof for an Advance on the Revolving Loan.
"Business Day" shall mean the normal banking hours during any
day, other than Saturdays or Sundays, that banks are legally open for
business in Dallas, Texas.
-2-
<PAGE> 9
"Cash Flow" shall mean Borrower's Net Income (loss) plus
non-cash items such as depletion, depreciation and amortization
(excluding gains or losses arising from the sale of capital assets for
the most recent fiscal quarter), all as calculated in accordance with
GAAP.
"Change of Management" shall occur if Miles D. Bender ceases
to act as President and Chief Executive Officer of Borrower.
"CIBC" shall mean Canadian Imperial Bank of Commerce.
"Collateral" is used herein as defined in Section 6 hereof.
"Commitments" shall mean the Revolving Commitment and the Term
Loan Commitment.
"Current Assets" shall mean the total of Borrower's
consolidated current assets, determined in accordance with GAAP.
"Current Liabilities" shall mean the total of Borrower's
consolidated current liabilities, as determined in accordance with
GAAP, less current maturities of Commitments.
"Current Ratio" shall mean the ratio of Current Assets to
Current Liabilities.
"Debt Service Coverage Ratio" shall mean the ratio of Cash
Flow to the sum of (i) the Monthly Commitment Reduction plus (ii) any
preferred stock dividends paid in cash during the period being
measured.
"Default" shall mean all of the events specified in Section
14, regardless of whether there shall have occurred any passage of time
or giving of notice or both that would be necessary in order to
constitute such event or Event of Default.
"Default Rate" shall mean the Base Rate plus 2%.
"Defaulting Bank" is used herein as defined in Section 3(g)
hereof.
"Determination Date" is used herein as defined in Section 7(b)
hereof.
"Effective Date" shall mean the date of this Agreement.
"Engineered Value" is used herein as defined in Section 6
hereof.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Super Fund Amendments and Reauthorization Act of 1986,
42 U.S.C.A. Section 9601, et seq., the Resource Conservation and
Recovery Act, as amended by the Hazardous Solid Waste Amendment of
1984, 42 U.S.C.A. Section 6901, et seq., the Clean Air Act, 42 U.S.C.A.
Section 1251, et seq., the Toxic Substances Control Act, 15 U.S.C.A.
Section 2601, et seq., The Oil Pollution Act of 1990, 33 U.S.G. Section
2701, et seq., and all other laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions,
-3-
<PAGE> 10
rules, regulations, orders and restrictions of any federal, state,
county, municipal and other governmental departments, commissions,
boards, agencies, courts, authorities, officials and officers, domestic
or foreign, relating to air pollution, water pollution, noise control
and/or the handling, discharge, disposal or recovery of on-site or
off-site asbestos or "hazardous substances" as defined by 42 U.S.C.
Section 9601, et seq., as amended, as each of the foregoing may be
amended from time to time.
"Environmental Liability" shall mean any claim, demand,
obligation, cause of action, order, violation, damage, injury,
judgment, penalty or fine, cost of enforcement, cost of remedial action
or any other cost or expense whatsoever, including reasonable
attorneys' fees and disbursements, resulting from the violation or
alleged violation of any Environmental Law or the imposition of any
Environmental Lien (as hereinafter defined) which could be expected to
individually or in the aggregate to have a Material Adverse Effect.
"Environmental Lien" shall mean a Lien in favor of any court,
governmental agency or instrumentality or any other Person (i) for any
Environmental Liability or (ii) for damages arising from, or cost
incurred by, such court or governmental agency or instrumentality or
other Person in response to a release or threatened release of asbestos
or "hazardous substance" into the environment, the imposition of which
Lien could be expected to have a Material Adverse Effect.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Eurodollar Business Day" shall mean a Business Day on which
dealings in U.S. Dollar deposits are carried on in the London Interbank
market.
"Eurodollar Interest Period" shall mean, with respect to any
Eurodollar Loan (i) initially, the period commencing on the date such
Eurodollar Loan is made and ending one (1), two (2), or three (3)
months thereafter as selected by the Borrower pursuant to Section
4(a)(ii) and (ii) thereafter, each period commencing on the day
following the last day of the next preceding Interest Period applicable
to such Eurodollar Loan and ending one (1), two (2) or three (3) months
thereafter, as selected by the Borrower pursuant to Section 4(a)(ii);
provided, however, that (x) if any Eurodollar Interest Period would
otherwise expire on a day which is not a Eurodollar Business Day, such
Interest Period shall expire on the next succeeding Eurodollar Business
Day, unless the result of such extension would be to extend such
Interest Period into the next calendar month, in which case such
Interest Period shall end on the immediately preceding Eurodollar
Business Day, (y) if any Eurodollar Interest Period begins on the last
Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period), such Interest Period shall end on the
last Eurodollar Business Day of a calendar month, and (z) any
Eurodollar Interest Period that would otherwise expire after the
Maturity Date shall end on such Maturity Date.
"Eurodollar Loan" shall mean any loan during any period which
bears interest at the Eurodollar Rate, or which would bear interest at
such rate if the Maximum Rate ceiling were not in effect at a
particular time.
"Eurodollar Margin" shall have the following meaning:
-4-
<PAGE> 11
(i) two and one quarter percent (2.25%) per annum
whenever the Total Outstandings are greater than 75% of the
Borrowing Base in effect at the time in question;
(ii) two percent (2%) per annum whenever the Total
Outstandings are greater than 50%, but less than or equal to
75%, of the Borrowing Base in effect at the time in question;
or
(iii) one and three-quarters percent (1.75%),
whenever the Total Outstandings are 50% or less of the
Borrowing Base in effect at the time in question.
"Eurodollar Rate" shall mean, with respect to each Eurodollar
Interest Period, the rate of interest per annum at which deposits in
immediately available and freely transferable funds in U.S. Dollars
are offered to the Administrative Agent (at approximately 10:00 a.m.,
Dallas, Texas time three Eurodollar Business Days prior to the first
day of each Eurodollar Interest Period) in the London Interbank market
for delivery on the first day of such Eurodollar Interest Period in an
amount equal to or comparable to the principal amount of the Eurodollar
Loan to which such Eurodollar Interest Period relates. Each
determination of the Eurodollar Rate by the Administrative Agent shall,
in the absence of error, be conclusive and binding.
"Event of Default" is used herein as defined in Section 14
hereof.
"Financial Statements" shall mean balance sheets, income
statements, statements of cash flow and appropriate footnotes and
schedules, prepared in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Guaranty" shall mean the guaranty agreements evidencing the
unconditional and unlimited guarantees of Guarantor of the obligations
of Borrower hereunder.
"Indemnified Taxes" is used herein as defined in Section
12(s)(i) hereof.
"Interest Payment Date" shall mean the earlier of (i) the last
day of each Interest Period or (ii) the last day of each month.
"Interest Period" shall mean any Base Rate Interest Period or
Eurodollar Interest Period.
"IRS" is used herein as defined in Section 12(s)(v) hereof.
"John Hancock" shall mean John Hancock Mutual Life Insurance
Company.
"Lien" shall mean any mortgage, deed of trust, pledge,
security interest, assignment, encumbrance or lien (statutory or
otherwise) of any kind or character.
"Loans" shall mean the Term Loan and the Revolving Loan.
-5-
<PAGE> 12
"Loan Documents" shall mean this Agreement, the Notes, the
Guaranty, the Security Instruments and all other documents executed in
connection with the transaction described in this Agreement.
"Majority Banks" shall mean Banks holding 66 2/3% or more of
the Commitment.
"Material Adverse Effect" shall mean any material adverse
effect or the occurrence of any circumstance or event which (i) could
have a material adverse effect on the assets, properties, liabilities,
financial condition, business, operations, affairs or circumstances of
Borrower, Guarantor or any of their Subsidiaries from the facts
represented or warranted in this Agreement or in any Security
Instrument or (ii) could materially impair the ability of the Borrower
or Guarantor or any of their Subsidiaries to carry out their respective
businesses as conducted as of the date of this Agreement or as proposed
at the date of this Agreement to be conducted or to meet their
respective obligations under the Notes, this Agreement or the other
Loan Documents on a timely basis, or (iii) is material and adverse to
the financial condition or business operations of Borrower or Guarantor
or any of their Subsidiaries, or (iv) could have a material adverse
effect on the validity, enforceability, perfection or priority of any
of the Loan Documents, or (v) may result in or cause a Default or Event
of Default.
"Maturity Date" shall mean the Term Maturity Date or the
Revolving Maturity Date, as the case may be.
"Maximum Rate" shall mean at any particular time in question,
the maximum, non-usurious rate of interest which, under applicable law,
may then be charged on the Notes. If such Maximum Rate changes after
the date hereof, the Maximum Rate shall be automatically increased or
decreased, as the case may be, without notice to Borrower, from time to
time, as of the effective date of each change in such Maximum Rate.
"Monthly Commitment Reduction" is used herein as defined in
Section 2(e) hereof.
"Negative Pledge" is used herein to describe the agreement of
the Borrower and the Guarantor contained in Section 13(a) of this
Agreement.
"Net Income" shall mean the Borrower's consolidated net income
(before preferred dividends paid in cash), determined in accordance
with GAAP.
"Notes" shall mean the Revolving Notes and Term Notes,
substantially in the form of Exhibits "A" and "B" hereto, issued or to
be issued hereunder to each Bank, respectively, to evidence
indebtedness to such Bank arising by reason of Advances on the
Revolving Loan and the Term Loan, together with all modifications,
renewals and extensions thereof or any part thereof.
"Notice of Borrowing" is used herein as defined in Section
2(c) hereof.
"Oil and Gas Properties" shall mean all oil, gas and mineral
properties, interests, oil and gas gathering systems, gas processing
and plant operations, and related personal properties in which Borrower
-6-
<PAGE> 13
or OK have granted or will grant to the Banks either a first and prior
Lien pursuant to Section 6 hereof or a Negative Pledge.
"Other Financings" is used herein as defined in Section 18(m)
hereof.
"Payor" is used herein as defined in Section 3(i) hereof.
"Permitted Liens" shall mean (i) royalties, overriding
royalties, reversionary interests, production payments and similar
burdens; (ii) sales contracts or other arrangements for the sale of
production of oil, gas or associated liquid or gaseous hydrocarbons
that would not (when considered cumulatively with the matters discussed
in clause (i) above) deprive Borrower or either Guarantor or any of
their Subsidiaries of any material right in respect of any of
Borrower's, Guarantors' or Subsidiary's assets or properties (except
for rights customarily granted with respect to such contracts and
arrangements); (iii) statutory Liens for taxes or other assessments
that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings, levy and execution
thereon having been stayed and continue to be stayed and for which such
Borrower, either Guarantor or any of their Subsidiaries has established
on its books adequate reserves in accordance with GAAP); (iv)
easements, rights of way, servitudes, permits, surface leases and other
rights in respect to surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like, conditions, covenants and
other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements
and rights of way on, over or in respect of such Borrower's,
Guarantor's or any of their Subsidiaries' assets or properties and that
do not individually or in the aggregate, cause a Material Adverse
Effect; (v) materialmen's, mechanic's, repairman's, employee's,
warehousemen's, carrier's, pipeline's, contractor's, sub-contractor's,
operator's, non-operator's (arising under operating or joint operating
agreements) and other Liens (including any financing statements filed
in respect thereof) incidental to obligations incurred by Borrower,
either Guarantor or any of their Subsidiaries in connection with the
construction, maintenance, development, transportation, storage or
operation of such Borrower's, Guarantor's or any of their Subsidiaries'
assets or properties to the extent not delinquent (or which, if
delinquent, are being contested in good faith by appropriate
proceedings, levy and execution therein having been stayed and continue
to be stayed and for which such Borrower, either Guarantor or any of
their Subsidiaries has established on its books adequate reserves in
accordance with GAAP); (vi) all contracts, agreements and instruments,
and all defects and irregularities and other matters affecting such
Borrower's, Guarantor's or any of their Subsidiaries' assets and
properties which were in existence at the time Borrower's, Guarantor's
or Subsidiary's assets and properties were originally acquired by such
Borrower, such Guarantor or any of their Subsidiaries and all routine
operational agreements entered into in the ordinary course of business,
which contracts, agreements, instruments, defects, irregularities and
other matters and routine operational agreements are not such as to,
individually or in the aggregate, interfere materially with the
operation, value or use of such Borrower's, Guarantor's or Subsidiary's
assets and properties, considered in the aggregate; (vii) Liens in
connection with workmen's compensation, unemployment insurance or other
social security, old age pension or public liability obligations;
(viii) legal or equitable encumbrances deemed to exist by reason of the
existence of any litigation or other legal proceeding or arising out of
a judgment or award with respect to which an appeal is being prosecuted
in good faith and levy and execution thereon have been stayed and
continue to be stayed; (ix) rights reserved to or vested in any
municipality, governmental, statutory or other public authority to
control or regulate any Borrower's, Guarantor's or Subsidiary's assets
and properties in any manner, and all applicable laws, rules and orders
from any
-7-
<PAGE> 14
authority; (x) landlord's Liens; (xi) Liens existing at the date of
this Agreement which have been disclosed to Banks in Borrower's, either
Guarantor's or any of their Subsidiaries' Financial Statements or
identified in Schedule "1" hereto; (xii) Liens previously granted by
Alexander to CIBC and John Hancock which are being released
contemporaneously with the execution of this Agreement; (xiii) Liens
created pursuant to the Security Instruments; and (xiv) any and all
renewals and extensions of all or any of the foregoing; provided,
however, that the definition of the term "Permitted Liens" does not
include Liens of any kind or character which are prior by perfection to
the Liens on the Oil and Gas Properties held by the Banks, or which
may, by operation of law, become prior to such Liens held by the Banks.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by Borrower, Guarantor or any of their Subsidiaries or any
such plan to which Borrower, Guarantor or any of their Subsidiaries is
required to contribute on behalf of its employees.
"Pro Rata Part" shall mean for each Bank the proportion which
the portion of the outstanding Loans owed to such Bank bears the
aggregate outstanding Loans owed to all Banks at the time in question
(calculated separately for each Bank for the Revolving Loan and the
Term Loan).
"Required Payment" is used herein as defined in Section 3(i)
hereof.
"Revolving Commitment" shall mean for all Banks, the lesser of
(i) $100,000,000 or (ii) the Borrowing Base, as adjusted from time to
time pursuant to Sections 2(d), 2(e) and 7(b) hereof, and as to any
Bank, its obligation to make Advances hereunder on the Revolving Loan
in amounts not exceeding in the aggregate its Revolving Commitment
Percentage of the Revolving Commitment.
"Revolving Commitment Percentage" shall mean for each Bank the
percentage derived by dividing its Revolving Commitment at the time of
determination by the Revolving Commitments of all Banks at the time of
determination. At the Effective Date, each Bank's Revolving Commitment
Percentage is:
BANK ONE 50%
CREDIT LYONNAIS 50%
"Revolving Loan" shall mean loans made under the Revolving
Commitment pursuant to Section 2 hereof.
"Revolving Maturity Date" shall mean August 29, 2000.
"Revolving Notes" shall mean the Revolving Notes described in
Section 3(a) hereof, together with all modifications, renewals and
replacements thereof.
"Security Instruments" shall mean this Agreement, all Deeds of
Trust, Mortgages, Security Agreements, Assignment of Production and
Financing Statements, and other collateral documents, covering
-8-
<PAGE> 15
certain of Borrower's and OK's Oil and Gas Properties, related personal
property and proceeds thereof, and all amendments and supplements
thereof, all such documents to be in form and substance satisfactory to
Administrative Agent.
"Subsidiary" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at any time directly or indirectly
owned by Borrower, either Guarantor or another subsidiary of Borrower
or either Guarantor.
"Tangible Net Worth" shall mean an amount equal to
stockholders' equity, determined in accordance with GAAP.
"Term Commitment" shall mean the commitment contained in
Section 2(b) hereof.
"Term Loan" shall mean loan or loans made under the Term
Commitment pursuant to Section 2(b) hereof.
"Term Loan Commitment" shall mean, as to all Banks,
$5,000,000.00 and, as to any Bank, its obligation to make an Advance
hereunder on the Term Loan in the amount equal to its Term Loan
Commitment Percentage.
"Term Loan Commitment Percentage" shall mean for each Bank the
percentage derived by dividing its Term Loan Commitment at the time of
determination by the Term Loan Commitment of Banks at the time of
determination. At the Effective Date, each Bank's Term Loan Commitment
Percentage is:
BANK ONE 50%
CREDIT LYONNAIS 50%
"Term Maturity Date" shall mean February 28, 1997.
"Term Notes" shall mean the Term Notes described Section 3(b)
hereof.
"Total Outstandings" shall mean, as of any date, the total
principal balance outstanding on the Revolving Notes.
"Tranche" shall mean a Eurodollar Loan or a Base Rate Loan.
"Unscheduled Redeterminations" shall mean a redetermination of
the Borrowing Base made at any time other than on the dates set for the
regular semi-annual redetermination of the Borrowing Base pursuant to
Section 7, which are made (i) at the reasonable request of Borrower, or
(ii) at any time it appears to Majority Banks, in the exercise of their
reasonable discretion, that either (A) there has been a material
decrease in the value of the Oil and Gas Properties, or (B) an event
has occurred which is reasonably expected to have a Material Adverse
Effect.
-9-
<PAGE> 16
"Unused Commitment Fee" is used herein as defined in Section
8(a) hereof.
2. COMMITMENTS OF THE BANKS.
(a) Terms of Revolving Commitment. On the terms and
conditions hereinafter set forth, each Bank agrees severally to make
Advances to the Borrower from time to time during the period beginning
on the Effective Date and ending on the Revolving Maturity Date in such
amounts as the Borrower may request up to an amount of Total
Outstandings not to exceed, in the aggregate outstanding at any time,
the Revolving Commitment. The obligation of each Bank to make Advances
under the Revolving Commitment shall be limited to such Bank's
Revolving Commitment Percentage of such Advance. The obligation of the
Borrower hereunder shall be evidenced by this Agreement and the Notes
issued in connection herewith, the Notes to be as described in Section
3 hereof. Notwithstanding any other provision of this Agreement, no
Advance shall be required to be made hereunder if any Default or Event
of Default has occurred and is continuing. Each Advance under the
Revolving Commitment shall be an aggregate amount of at least
$1,000,000 or a whole number multiple thereof. Irrespective of the
face amount or amounts of any Note or Notes outstanding at any time,
the Banks shall never have the obligation to Advance any amount or
amounts in excess of the Borrowing Base or to increase the Revolving
Commitment. Until the Term Loan is repaid in full, principal and
interest, all Revolving Loans shall be Base Rate Loans. The total
number of Tranches which may be outstanding at any time hereunder shall
never exceed five (5), whether such Tranches are Base Rate Loans,
Eurodollar Loans, or a combination thereof.
(b) Term Loan. On the terms and conditions hereinafter
set forth, each Bank agrees severally to make an Advance to Borrower on
the Effective Date equal to such Bank's Term Loan Commitment. No
portion of the Term Loan, once repaid, may be reborrowed by Borrower.
(c) Procedure for Borrowing. Whenever the Borrower
desires an Advance on the Revolving Loan, it shall give Administrative
Agent telegraphic, telex, facsimile or telephonic notice ("Notice of
Borrowing") of such requested Advance, which in the case of telephonic
notice, shall be promptly confirmed in writing. Each Notice of
Borrowing shall be in the form of Exhibit "C" attached hereto and shall
be received by Administrative Agent not later than 11:00 a.m., Dallas,
Texas time, (i) one Business Day prior to the Borrowing Date in the
case of the Base Rate Loan or (ii) three Eurodollar Business Days prior
to any proposed Borrowing Date in the case of Eurodollar Loans. Upon
receipt of such notice, Administrative Agent shall advise each Bank
thereof; provided, that if the Banks have received at least one (1)
day's notice of such Advance prior to funding of a Base Rate Loan, or
at least three (3) days notice of such Advance prior to funding in the
case of a Eurodollar Loan, each Bank shall provide Administrative Agent
at its office at 1717 Main Street, Dallas, Texas 75201, not later than
1:00 p.m., Dallas, Texas time, on the Borrowing Date, in immediately
available funds, its pro rata share of the requested Advance, but the
aggregate of all such fundings by each Bank shall never exceed such
Bank's Revolving Commitment. Not later than 2:00 p.m., Dallas, Texas
time, on the Borrowing Date, Administrative Agent shall make available
to the Borrower at the same office, in like funds, the aggregate amount
of such requested Advance. Neither Administrative Agent nor any Bank
shall incur any liability to the Borrower in acting upon any notice
referred to above which Administrative Agent or such Bank believes in
good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of Borrower or for otherwise
acting in good faith
-10-
<PAGE> 17
under this Section 2(c). Upon funding of Advances by Banks in
accordance with this Agreement pursuant to any such notice, the
Borrower shall have effected Advances hereunder.
(d) Voluntary Reduction of Revolving Commitment. The
Borrower may at any time, or from time to time, upon not less than
three (3) Business Days prior written notice to Administrative Agent,
reduce or terminate the Revolving Commitment; provided, however, that
(i) each reduction in the Revolving Commitment must be in the amount of
$1,000,000 or more, in increments of $1,000,000 and (ii) each reduction
must be accompanied by a prepayment of the Notes in the amount by which
the Total Outstandings exceed the Revolving Commitment as reduced
pursuant to this Section 2.
(e) Monthly Commitment Reduction. The Revolving
Commitment shall be reduced as of the first day of each month beginning
October 1, 1996, by an amount determined by the Banks pursuant to
Section 7(b) hereof (the "Monthly Commitment Reduction"). From the
Effective Date until redetermined pursuant to Section 7(b) hereof, the
Monthly Commitment Reduction shall be $1,000,000 per month. If, as a
result of any Monthly Commitment Reduction required pursuant to this
Section 2(e), the Total Outstandings ever exceed the Revolving
Commitment, Borrower shall immediately prepay, without premium or
penalty, the principal amount of the Revolving Notes in an amount at
least equal to such excess plus interest thereon to the date of such
prepayment.
(f) Several Obligations. The obligations of the Banks
under the Revolving Commitment and the Term Loan are several and not
joint. The failure of any Bank to make an Advance required to be made
by it shall not relieve any other Bank of its obligation to make its
Advance, and no Bank shall be responsible for the failure of any other
Bank to make the Advance to be made by such other Bank. No Bank shall
ever be required to lend hereunder any amount in excess of its legal
lending limit applicable to this transaction.
3. NOTES EVIDENCING LOANS. The loans described above in Section
2 shall be evidenced by promissory notes of Borrower as follows:
(a) Form of Revolving Notes - The Revolving Loan shall be
evidenced by Revolving Notes in an aggregate amount of $100,000,000,
and shall be in the form of Exhibit "A" hereto with appropriate
insertions. Notwithstanding the aggregate face amount of the Revolving
Notes outstanding at any time, the actual principal amount due from the
Borrower to Banks on account of the Revolving Notes, as of any date of
computation, shall be the sum of Advances then and theretofore made on
account thereof, less all principal payments actually received by Banks
in collected funds with respect thereto. Although the Revolving Notes
may be dated as of the Effective Date, interest in respect thereof
shall be payable only for the period during which the loans evidenced
thereby are outstanding and, although the stated amount of the
Revolving Notes may be higher, the Revolving Notes shall be
enforceable, with respect to Borrower's obligation to pay the principal
amount thereof, only to the extent of the unpaid principal amount of
the loans.
(b) Form of Term Notes. The Term Loan shall be evidenced
by Term Notes in an aggregate amount of $5,000,000, and shall be in the
form of Exhibit "B" attached hereto with appropriate insertions.
-11-
<PAGE> 18
(c) Issuance of Additional Notes. At the Effective Date
there shall be outstanding (i) two (2) separate Revolving Notes, in the
total aggregate face amount of $100,000,000, and (ii) two (2) Term
Notes, in the total aggregate amount of $5,000,000. The $30,000,000
revolving note and the $3,000,000 special advance note previously held
by Bank One shall be exchanged by Bank One for a new Revolving Note and
the Administrative Agent shall return such notes to the Borrower. From
time to time new Notes may be issued to other Banks as such Banks
become parties to this Agreement. Upon request from Administrative
Agent, the Borrower shall execute and deliver to Administrative Agent
any such new or additional Notes. From time to time as new Notes are
issued the Administrative Agent shall require that each Bank exchange
their Notes for newly issued Notes to better reflect the extent of each
Bank's Commitments hereunder.
(d) Interest Rate - The unpaid principal balance of the
Notes shall bear interest from time to time as set forth in Section 4
hereof; provided, however, that until the Term Loan is repaid in full,
principal and interest, all Advances made as Revolving Loans shall be
Base Rate Loans.
(e) Payment of Interest - Interest on the Revolving Notes
shall be payable to the Administrative Agent as specified in Section 4
hereof.
(f) Payment of Principal -
(i) Revolving Notes. Principal of the Revolving
Notes shall be due and payable to the Administrative Agent for
the ratable benefit of the Banks on the Revolving Maturity
Date, unless earlier due in whole or in part as a result of a
payment required pursuant to Section 2(d) or (e) hereof, an
acceleration of the amount due or a mandatory prepayment
pursuant to the provisions of Section 9(b) hereof;
(ii) Term Notes. Principal of the Term Notes
shall be payable to the Administrative Agent on the Term
Maturity Date, unless earlier due in whole or in part as a
result of an acceleration of the amount due.
(g) Payments to Banks - Each Bank's Pro Rata Part of
payment or prepayment of the Revolving Loans or the Term Loan shall be
directed by wire transfer to such Bank by the Administrative Agent at
the address provided to the Administrative Agent for such Bank for
payments no later than 2:00 p.m., Dallas, Texas, time on the Business
Day such payments or prepayments are deemed hereunder to have been
received by Administrative Agent; provided, however, in the event that
any Bank shall have failed to make an Advance as contemplated under
Section 2 hereof (a "Defaulting Bank") and the Administrative Agent or
another Bank or Banks shall have made such Advance, payment received by
Administrative Agent for the account of such Defaulting Bank or Banks
shall not be distributed to such Defaulting Bank or Banks until such
Advance or Advances shall have been repaid in full to the Bank or Banks
who funded such Advance or Advances. Any payment or prepayment
received by Administrative Agent at any time after 12:00 noon, Dallas,
Texas, time on a Business Day shall be deemed to have been received on
the next Business Day. Interest shall cease to accrue on any principal
as of the end of the day preceding the Business Day on which any such
payment or prepayment is deemed hereunder to have been received by
Administrative Agent. If Administrative Agent fails to transfer any
principal amount to any Bank as provided above, then Administrative
Agent shall promptly direct such principal amount by wire transfer to
such Bank.
-12-
<PAGE> 19
(h) Sharing of Payments, Etc. - If any Bank shall obtain
any payment (whether voluntary, involuntary, or otherwise) on account
of the Revolving Loan or the Term Loan, (including, without limitation,
any set-off) which is in excess of its Pro Rata share of payments on
the Revolving Loan or the Term Loan as the case may be, obtained by all
Banks, such Bank shall purchase from the other Banks such participation
as shall be necessary to cause such purchasing Bank to share the excess
payment Pro Rata with each of them; provided that, if all or any
portion of such excess payment is thereafter recovered from such
purchasing Bank, the purchase shall be rescinded and the purchase price
restored to the extent of the recovery. The Borrower agrees that any
Bank so purchasing a participation from another Bank pursuant to this
section may, to the fullest extent permitted by law, exercise all of
its rights of payment (including the right of offset) with respect to
such participation as fully as if such Bank were the direct creditor of
the Borrower in the amount of such participation.
(i) Non-Receipt of Funds by the Administrative Agent -
Unless the Administrative Agent shall have been notified by a Bank or
the Borrower (the "Payor") prior to the date on which such Bank is to
make payment to the Administrative Agent of the proceeds of a Loan to
be made by it hereunder or the Borrower is to make a payment to the
Administrative Agent for the account of one or more of the Banks, as
the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor
does not intend to make the Required Payment to the Administrative
Agent, the Administrative Agent may assume that the Required Payment
has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient of such
payment shall, on demand, pay to the Administrative Agent the amount
made available to it together with interest thereon in respect of the
period commencing on the date such amount was made available by the
Administrative Agent until the date the Administrative Agent recovers
such amount at the rate applicable to such portion of the applicable
Revolving Loan or the applicable Term Loan.
(j) Capital Adequacy - If either (i) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation or (ii) the introduction
or implementation of or the compliance with any mandatory request,
directive or guideline from any central bank or other governmental
authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by
any Bank or any corporation controlling any Bank as a result of
maintaining the Loans, then within fifteen (15) days after demand by
such Bank, the Borrower will pay to such Bank, from time to time as
specified by such Bank, such additional amount or amounts which such
Bank shall reasonably determine to be appropriate to compensate such
Bank or any corporation controlling such Bank in light of such
circumstances, to the extent that such Bank reasonably determines that
the amount of any such capital would be increased, or the rate of
return on any such capital would be reduced in whole or in part, based
on the existence of the amount of the Loans or such Bank's Commitment
under this Agreement.
-13-
<PAGE> 20
4. INTEREST RATES.
(a) Options.
(i) Base Rate Loans. Borrower agrees to pay
interest on the Notes calculated on the basis of the actual
days elapsed in a year consisting of 365 or, if appropriate,
366 days with respect to the unpaid principal amount of each
Base Rate Loan from the date the proceeds thereof are made
available to Borrower until maturity (whether by acceleration
or otherwise), at a varying rate per annum equal to the lesser
of (i) the Maximum Rate or (ii) the sum of the Base Rate plus
the Base Rate Margin. Subject to the provisions of this
Agreement as to prepayment, the principal of the Notes
representing Base Rate Loans shall be payable as specified in
Section 3(f) hereof and the interest in respect of each Base
Rate Loan shall be payable on each Interest Payment Date.
Past due principal and, to the extent permitted by law, past
due interest in respect to each Base Rate Loan, shall bear
interest, payable on demand, at a rate per annum equal to the
Default Rate until acceleration pursuant to Section 14 hereof,
and thereafter, at the Maximum Rate. Until the Term Loan is
paid in full, principal and interest, all Revolving Loans made
hereunder shall be Base Rate Loans.
(ii) Eurodollar Loans. Borrower agrees to pay
interest calculated on the basis of a year consisting of 360
days with respect to the unpaid principal amount of each
Eurodollar Loan from the date the proceeds thereof are made
available to Borrower until maturity (whether by acceleration
or otherwise), at a rate per annum equal to the lesser of (i)
the Maximum Rate or (ii) the Eurodollar Rate plus the
Eurodollar Margin. Subject to the provisions of this
Agreement with respect to prepayment, the principal of the
Notes shall be payable as specified in Section 3(f) hereof and
the interest with respect to each Eurodollar Loan shall be
payable on each Interest Payment Date. Past due principal
and, to the extent permitted by law, past due interest shall
bear interest, payable on demand, at a rate per annum equal to
the Default Rate until acceleration pursuant to Section 14
hereof, and thereafter, at the Maximum Rate. Upon three (3)
Eurodollar Business Days' written notice prior to the making
by the Banks of any Eurodollar Loan (in the case of the
initial Interest Period therefor) or the expiration date of
each succeeding Interest Period (in the case of subsequent
Interest Periods therefor), Borrower shall have the option,
subject to compliance by Borrower with all of the provisions
of this Agreement, as long as no Event of Default exists, to
specify whether the Interest Period commencing on any such
date shall be a one (1), two (2) or three (3) month period.
If Administrative Agent shall not have received timely notice
of a designation of such Interest Period as herein provided,
Borrower shall be deemed to have elected to convert all
maturing Eurodollar Loans to Base Rate Loans.
(b) Interest Rate Determination. The Administrative Agent
shall determine each interest rate applicable to the Loans hereunder.
The Administrative Agent shall give prompt notice to the Borrower and
the Banks of each rate of interest so determined and its determination
thereof shall be conclusive absent error.
-14-
<PAGE> 21
(c) Conversion Option. Borrower may elect from time to
time (i) to convert all or any part of its Eurodollar Loans to Base
Rate Loans by giving Administrative Agent irrevocable notice of such
election in writing prior to 10:00 a.m., Dallas, Texas time on the
conversion date and such conversion shall be made on the requested
conversion date, provided that any such conversion of Eurodollar Loan
shall only be made on the last day of the Eurodollar Interest Period
with respect thereof, or (ii) to convert all or any part of its Base
Rate Loans to Eurodollar Loans by giving the Administrative Agent
irrevocable written notice of such election three (3) Eurodollar
Business Days prior to the proposed conversion and such conversion
shall be made on the requested conversion date or, if such requested
conversion date is not a Eurodollar Business Day or a Business Day, as
the case may be, on the next succeeding Eurodollar Business Day or
Business Day, as the case may be. Any such conversion shall not be
deemed to be a prepayment of any of the Loans for purposes of this
Agreement or any of the Notes. Notwithstanding any of the foregoing,
Borrower may not convert any portion of any Loan to Eurodollar Loans
until the Term Loan is repaid in full.
(d) Recoupment. If at any time the applicable rate of
interest selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall
exceed the Maximum Rate, thereby causing the interest on the Notes to
be limited to the Maximum Rate, then any subsequent reduction in the
interest rate so selected or subsequently selected shall not reduce the
rate of interest on the Notes below the Maximum Rate until the total
amount of interest accrued on the Notes equals the amount of interest
which would have accrued on the Notes if the rate or rates selected
pursuant to Sections 4(a)(i) or (ii), as the case may be, had at all
times been in effect.
5. SPECIAL PROVISIONS RELATING TO EURODOLLAR LOANS.
(a) Unavailability of Funds or Inadequacy of Pricing. In
the event that, in connection with any proposed Eurodollar Loan, any
Bank (i) shall have determined that U.S. Dollar deposits of the
relevant amount and for the relevant Eurodollar Interest Period for
Eurodollar Loans are not available to such Bank in the London Interbank
market or (ii) determines that the Eurodollar Interest Rate will not
adequately reflect the cost to the Banks of maintaining or funding the
Eurodollar Loans for such Interest Period, the obligations of the Banks
to make the Eurodollar Loans shall be suspended until such time such
Bank in its sole discretion reasonably exercised, determines that the
event resulting in such suspension has ceased to exist. If any Bank
shall make such determination it shall promptly notify Administrative
Agent in writing, and Administrative Agent shall promptly notify
Borrower in writing, and Borrower shall either repay the outstanding
Eurodollar Loans owed to Banks, without penalty, on the last day of the
current Interest Period or convert the same to Base Rate Loans on the
last day of the then current Interest Period for such Eurodollar Loan.
(b) Reserve Requirements. In the event of any change in
any applicable law, treaty or regulation or in the interpretation or
administration thereof, or in the event any central bank or other
fiscal monetary or other authority having jurisdiction over the Banks
or the loans contemplated by this Agreement shall impose, modify or
deem applicable any reserve requirement of the Board of Governors of
the Federal Reserve System on any Eurodollar Loan, or any other
reserve, special deposit or similar requirements against assets to,
deposits with or for the account of, or credit extended by, the Banks
or shall impose on the Banks or the London interbank market, as the
case may be, any other condition affecting this Agreement or the
Eurodollar Loans and the result of any of the foregoing is to increase
the cost to the Banks in making
-15-
<PAGE> 22
or maintaining its Eurodollar Loans or to reduce any amount (or the
effective return on any amount) received by the Banks hereunder, then
Borrower shall pay to the Banks upon demand of the Banks as additional
interest on the Notes evidencing the Eurodollar Loans such additional
amount or amounts as will reimburse the Banks for such additional cost
or such reduction. The Banks shall give notice to Borrower within a
reasonable time of becoming aware of any such change or imposition
which may result in any such increase or reduction. A certificate of
any Bank setting forth the basis for the determination of such amount
necessary to compensate Banks as aforesaid shall be delivered to
Borrower and shall be conclusive as to such determination and such
amount, absent error.
(c) Taxes. Both principal and interest on the Notes
evidencing the Eurodollar Loans are payable without withholding or
deduction for or on account of any taxes. If any taxes are levied or
imposed on or with respect to the Notes evidencing the Eurodollar Loans
or on any payment on the Notes evidencing the Eurodollar Loans made to
the Banks, then, and in any such event, Borrower shall pay to the Banks
upon demand by the Banks such additional amounts as may be necessary so
that every net payment of principal and interest on the Notes
evidencing the Eurodollar Loans, after withholding or deduction for or
on account of any such taxes, will not be less than any amount provided
for herein. In addition, if at any time when the Eurodollar Loans are
outstanding, any laws enacted or promulgated, or any court of law or
governmental agency interprets or administers any law, which, in any
such case, materially changes the basis of taxation of payments to the
Banks of principal of or interest on the Notes evidencing the
Eurodollar Loans by reason of subjecting such payments to double
taxation or otherwise (except through an increase in the rate of tax on
the overall net income of Banks) then Borrower will pay the amount of
loss to the extent that such loss is caused by such a change. The
Banks shall give notice to Borrower upon becoming aware of the amount
of any loss incurred by the Banks through enactment or promulgation of
any such law which materially changes the basis of taxation of payments
to the Banks. The Banks shall also give notice within a reasonable
time of becoming aware of any such enactment or promulgation which may
result in such payments becoming subject to double taxation or
otherwise. A certificate of any Bank setting forth the basis for the
determination of such loss and the computation of such amounts shall be
delivered to Borrower and shall be conclusive of such determination and
such amount, absent error.
(d) Change in Laws. If at any time any new law or any
change in existing laws or in the interpretation of any new or existing
laws shall make it unlawful for the Banks to maintain or fund its
Eurodollar Loans hereunder, then the Banks shall promptly notify
Borrower in writing and Borrower shall either repay the outstanding
Eurodollar Loans owed to the Banks, without penalty, on the last day of
the current Interest Periods (or, if the Banks may not lawfully
continue to maintain and fund such Eurodollar Loans, immediately) or
Borrower may convert such Eurodollar Loans at such appropriate time to
Base Rate Loans.
(e) Option to Fund. The Banks shall have the option, if
the Borrower elects a Eurodollar Loan, to purchase one or more deposits
in order to fund or maintain their funding of the principal balance of
the Notes to which such Eurodollar Loan is applicable during the
Interest Period in question; it being understood that the provisions of
this Agreement relating to such funding are included only for the
purpose of determining the rate of interest to be paid under such
Eurodollar Loan and any amounts owing hereunder and under the Notes.
Each Bank shall be entitled to fund and maintain its funding of all or
any part of that portion of the principal balance of the Notes in any
manner it sees fit, but all such determinations hereunder
-16-
<PAGE> 23
shall be made as if the Banks have actually funded and maintained that
portion of the principal balance of the Notes to which a Eurodollar
Loan is applicable during the applicable Interest Period through the
purchase of deposits in an amount equal to the principal balance of the
Notes to which such Eurodollar Loan is applicable and having a maturity
corresponding to such Interest Period. The Banks may fund the
outstanding principal balance of the Notes which is to be subject to
any Eurodollar Loan from any branch or office of the Banks as the Banks
may designate from time to time.
(f) Payments Not at End of Interest Period. If the
Borrower makes any payment of principal with respect to any Eurodollar
Loan on any day other than the last day of the Interest Period
applicable to such Eurodollar Loan, then Borrower shall reimburse the
Banks on demand for any loss, cost or expense incurred by the Banks as
a result of the timing of such payment or in redepositing such
principal amount, including the sum of (i) the cost of funds to the
Banks in respect of such principal amount so paid, for the remainder of
the Interest Period applicable to such sum, reduced, if the Banks are
able to redeposit such principal amount so paid for the balance of the
Interest Period, by the interest earned by Banks as a result of so
redepositing such principal amount, plus (ii) any expense or penalty
incurred by the Banks in redepositing such principal amount. A
certificate of any Bank setting forth the basis for the determination
of the amount owed by Borrower pursuant to this Section 5(f) shall be
delivered to the Borrower and shall be conclusive in the absence of
manifest error.
(g) Indemnity. Borrower shall indemnify and hold harmless
the Banks against all reasonable and necessary out-of-pocket costs and
expenses which the Banks may sustain as a consequence of making any
Advance hereunder as a Eurodollar Loan.
(h) Other Lending Offices. Each Bank agrees to designate
a different lending office if possible to avoid or reduce any of the
adverse consequences described above.
6. COLLATERAL SECURITY. To secure the performance by Borrower of
its obligations hereunder, and under the Notes and Security Instruments,
whether now or hereafter incurred, matured or unmatured, direct or contingent,
joint or several, or joint and several, including extensions, modifications,
renewals and increases thereof, and substitutions therefore, Borrower has
heretofore granted and assigned to Bank One a first and prior Lien on certain
of its Oil and Gas Properties and certain related equipment, oil and gas
inventory and proceeds of the foregoing (the "Prior Lien"). To secure its
Guaranty of the Borrower's obligations hereunder and under the Note, OK shall
contemporaneously with or prior to the execution of this Agreement, grant and
assign to the Administrative Agent, for the ratable benefit of the Banks, a
first and prior Lien on at least 90% of the Engineered Value (as hereinafter
defined) of its Oil and Gas Properties, and on certain related equipment, oil
and gas inventory and proceeds of the foregoing. The documentation evidencing
the Prior Lien shall be amended to indicate that the Liens granted thereby are
granted to secure the Loans made hereunder pursuant to the Revolving Loan
Commitment and the Term Loan Commitment. In addition, the Liens previously
granted to CIBC by Alexander shall be released by CIBC and John Hancock. All
Oil and Gas Properties, stock and other collateral in which the Borrower and
Guarantor have heretofore or herewith granted or hereafter grant to the
Administrative Agent, for the ratable benefit of the Banks, a Lien (to the
satisfaction of the Administrative Agent) in accordance with this Section 6, as
such properties and interests are from time to time constituted, are
hereinafter collectively called the "Collateral".
-17-
<PAGE> 24
The granting and assigning of such security interests and Liens by
Borrower and Guarantor shall be pursuant to Security Instruments in form and
substance satisfactory to the Administrative Agent. Concurrently with the
delivery of each of the Security Instruments covering Oil and Gas Properties,
Borrower and Guarantor shall furnish to the Administrative Agent mortgage and
title opinions and other documents satisfactory to the Administrative Agent
with respect to the title and Lien status of Borrower's and Guarantor's
interests in not less than 90% of the Engineered Value of the Oil and Gas
Properties mortgaged to the Banks pursuant to the Security Instruments.
"Engineered Value" for this purpose shall mean future net revenues discounted
at the discount rate being used by the Administrative Agent as of the date of
any such determination using the pricing parameters used in the engineering
report furnished to the Banks pursuant to Sections 7 and 12 hereof. Borrower
and Guarantor will cause to be executed and delivered to the Administrative
Agent, for the ratable benefit of the Banks, in the future, additional Security
Instruments if the Administrative Agent deems such are necessary to insure
perfection or maintenance of the Liens in the Oil and Gas Properties, or any
part thereof.
7. BORROWING BASE.
(a) Initial Borrowing Base and Monthly Commitment
Reduction. During the period from the date hereof to the first
Determination Date (as hereinafter defined), the Borrowing Base for the
Revolving Loan shall be $60,000,000 and the Monthly Commitment
Reduction shall be $1,000,000 per month beginning October 1, 1996.
(b) Subsequent Determinations of Borrowing Base.
Subsequent determinations of the Borrowing Base shall be made by the
Banks at least semi-annually on the dates set forth hereinbelow or as
Unscheduled Redeterminations. In connection with, and as of, each such
determination of the Borrowing Base, Banks shall also redetermine the
Monthly Commitment Reduction. The Borrower shall furnish to the Banks
as soon as possible, but in any event no later than May 1 of each year,
beginning May 1, 1997, with an engineering report in form and substance
satisfactory to Banks, in their discretion, prepared by an independent
petroleum engineer acceptable to the Administrative Agent covering the
Oil and Gas Properties, utilizing economic and pricing parameters used
by the Administrative Agent as established from time to time, together
with such other information concerning the value of the Oil and Gas
Properties as the Administrative Agent may deem necessary to determine
the value of such Oil and Gas Properties. By November 1 of each year
beginning November 1, 1997, or within thirty (30) days after either (i)
receipt of notice from the Administrative Agent that Majority Banks
require an Unscheduled Redetermination or (ii) the Borrower gives
notice to the Administrative Agent of their desire to have an
Unscheduled Redetermination performed, the Borrower shall furnish to
Banks an engineering report in form and substance satisfactory to the
Administrative Agent valuing the Oil and Gas Properties using the same
methodology utilized by the independent petroleum engineer that
prepared the most recent independent engineering report, together with
such other information, report and data concerning the value of the Oil
and Gas Properties as the Administrative Agent shall deem reasonably
necessary to determine the value of such Oil and Gas Properties. The
Administrative Agent shall by notice to the Borrower no later than June
1 and December 1 of each year beginning December 1, 1996, or within a
reasonable time thereafter (herein called the "Determination Date"),
designate a new Borrowing Base and Monthly Commitment Reduction during
the period beginning on such Determination Date and continuing until,
but not including, the next Determination Date. If an Unscheduled
Redetermination is made by the Banks, the Administrative Agent shall
notify the Borrower within a reasonable time after receipt of all
requested information of the new Borrowing Base and Monthly
-18-
<PAGE> 25
Commitment Reduction, if any, and such new Borrowing Base shall
continue until the next Determination Date. If the Borrower does not
furnish all such information, reports and data by the date specified in
this Section 7(b), the Banks may nonetheless designate the Borrowing
Base and Monthly Commitment Reduction at any amounts which the Banks
determine in their discretion and may redesignate the Borrowing Base
and Monthly Commitment Reduction from time to time thereafter until the
Banks receive all such information, reports and data, whereupon the
Banks shall designate a new Borrowing Base and Monthly Commitment
Reduction as described above. Each Bank shall determine the amount of
the Borrowing Base based upon the loan collateral value which each Bank
in its discretion (using such methodology, assumptions and discounts
rates as each Bank customarily uses in assigning collateral value to
Oil and Gas Properties, oil and gas gathering systems, gas processing
and plant operations) assigns to such Oil and Gas Properties of the
Borrower and the Guarantor at the time in question and based upon such
other credit factors consistently applied (including, without
limitation, the assets, liabilities, cash flow, business, properties,
prospects, management and ownership of the Borrower and the Guarantor
and their Subsidiaries) as each Bank customarily considers in
evaluating similar oil and gas credits, but each Bank, in its
discretion, shall not be required to give any additional positive value
to any Oil and Gas Property over the current economic and pricing
parameters used by each Bank for such Determination Date which
additional value is derived directly from a hedging, forward sale or
swap agreement covering such Oil and Gas Property as of the date of
such determination. If the Banks cannot otherwise agree on the
Borrowing Base or the Monthly Commitment Reduction, each Bank shall
submit in writing to the Administrative Agent its proposed Borrowing
Base and Monthly Commitment Reduction and the Borrowing Base and
Monthly Commitment Reduction shall be set on the basis of the lowest
Borrowing Base and the highest Monthly Commitment Reduction proposed by
any Bank. If at any time any of the Oil and Gas Properties are sold,
the Borrowing Base then in effect shall automatically be reduced by a
sum equal to the amount of any prepayment required pursuant to Section
12(r) hereof. The Borrowing Base shall be additionally reduced from
time to time pursuant to the provisions of Sections 2(d) and 2(e)
hereof. It is expressly understood that the Banks have no obligation
to designate the Borrowing Base at any particular amount, except in the
exercise of each Bank's discretion, whether in relation to the
Revolving Commitment or otherwise; provided, however, that no Bank
shall ever have the obligation to designate a Borrowing Base in an
amount such that such Bank's Pro Rata Part thereof is in excess of its
legal or internal lending limits applicable to the Loans.
8. FEES.
(a) Unused Portion Fee. The Borrower shall pay to the
Administrative Agent for the ratable benefit of the Banks an unused
portion fee (the "Unused Portion Fee") equivalent to three-eighths of
one percent (3/8%) per annum on the daily average of the unadvanced
amount of the Revolving Commitment. The Unused Portion Fee shall be
payable in arrears on the last Business Day of each calendar quarter
beginning September 30, 1996 with the final Unused Portion Fee payment
due on the Revolving Maturity Date for any period then ending for which
the Unused Portion Fee shall not have been theretofore paid. In the
event the Revolving Commitment terminates on any date prior to the end
of any such quarterly period, the Borrower shall pay to the
Administrative Agent for the ratable benefit of the Banks, on the date
of such termination, the pro rata portion of the Unused Portion Fee due
for the period in which such termination occurs.
-19-
<PAGE> 26
(b) Facility Fee. The Borrower shall pay to the
Administrative Agent for the ratable benefit of the Banks a Facility
Fee (hereinafter referred to as "Facility Fees", or separately as a
"Facility Fee"):
(i) on the Revolving Commitment, a Facility Fee
of $450,000; and
(ii) on the Term Loan Commitment, a Facility Fee
of $100,000.
The Borrower paid $100,000 of the aforesaid Facility Fees upon the
execution of a commitment letter, said payment is non-refundable and is
to be pro rated between the two Facility Fees. The remaining balances
of the Facility Fees are payable on the Effective Date.
(c) Agency Fees. The Borrower shall pay to Administrative
and the Syndication Agents' certain fees in amounts to be negotiated
between Borrower and such Agents.
9. PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower may at any time
and from time to time, without penalty or premium, prepay the Notes, in
whole or in part. Each such prepayment shall be made on at least one
(1) Business Day's notice to the Administrative Agent and shall be in a
minimum amount of $1,000,000 or any larger multiple thereof or the
unpaid balance on the Note or Notes, whichever is less, plus accrued
interest thereon to the date of prepayment.
(b) Mandatory Prepayment For Borrowing Base Deficiency.
In the event the Total Outstandings ever exceed the Borrowing Base as
determined by Banks pursuant to Section 7(b) hereof, the Borrower
shall, within thirty (30) days after notification from the
Administrative Agent, either (A) by instruments reasonably satisfactory
in form and substance to the Administrative Agent, provide
Administrative Agent with collateral with value and quality in amounts
satisfactory to the Majority Banks in their discretion in order to
increase the Borrowing Base by an amount at least equal to such excess,
or (B) prepay, without premium or penalty, the principal amount of the
Revolving Notes in an amount at least equal to such excess plus accrued
interest thereon to the date of prepayment.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks
to enter into this Agreement, the Borrower and Guarantor hereby, jointly and
severally, represent and warrant to the Banks (which representations and
warranties will survive the delivery of the Notes) that:
(a) Creation and Existence. Borrower and each Guarantor
and each of their Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which they are incorporated and are duly qualified as a foreign
corporation in all jurisdictions wherein failure to qualify may result
in a Material Adverse Effect. Borrower, each Guarantor and each of
their Subsidiaries have all power and authority to own their respective
properties and assets and to transact the business in which each is
engaged.
(b) Power and Authority. The Borrower is duly authorized
and empowered to create and issue the Notes; and Borrower and each
Guarantor are each duly authorized and empowered to execute, deliver
-20-
<PAGE> 27
and perform the Loan Documents, including this Agreement; and all
corporate and other action on Borrower's part requisite for the due
creation and issuance of the Notes on the part of Borrower and each
Guarantor and for the due execution, delivery and performance of the
Loan Documents, including this Agreement, has been duly and effectively
taken.
(c) Binding Obligations. This Agreement does, and the
Notes and other Loan Documents, upon their creation, issuance,
execution and delivery, will constitute valid and binding obligations
of Borrower and each Guarantor, enforceable in accordance with their
respective terms (except that enforcement may be subject to any
applicable bankruptcy, insolvency or similar debtor relief laws, now or
hereafter in effect and relating to or affecting the enforcement of
creditor's rights generally).
(d) No Legal Bar or Resultant Lien. The execution,
delivery and performance of the Notes and the Loan Documents, including
this Agreement, do not and will not, to the best of Borrower's and each
Guarantor's knowledge violate any provisions of any contract,
agreement, law, regulation, order, injunction, judgment, decree or writ
to which the Borrower, each Guarantor or any of their Subsidiaries is
subject, or result in the creation or imposition of any lien or other
encumbrance upon any assets or properties of Borrower, each Guarantor
or any of their Subsidiaries, other than those contemplated by this
Agreement.
(e) No Consent. The execution, delivery and performance
by the Borrower and each Guarantor of the Notes and the Loan Documents,
including this Agreement, do not require the consent or approval of any
other Person or entity, including, without limitation, any regulatory
authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state
thereof except for consents required for federal, state and, in some
instances, private leases, right of ways and other conveyances or
encumbrances of oil and gas leases (all of which consents have been or
will be obtained by the Borrower to the extent usually obtained in
accordance with industry customs and standards).
(f) Financial Condition. The Financial Statements of
Borrower dated March 31, 1996, and the Financial Statement of Alexander
dated March 31, 1996, which have been delivered to Banks, are complete
and correct in all material respects, and fully and accurately reflect
in all material respects the financial condition and results of the
operations of Borrower and Alexander as of the date or dates and for
the period or periods stated. No change has since occurred in the
condition, financial or otherwise, of the Borrower or Alexander which
is reasonably expected to have a Material Adverse Effect, except as
disclosed to the Banks in Schedule "2" attached hereto.
(g) Liabilities. Neither Borrower nor either Guarantor
nor any Subsidiary of Borrower or either Guarantor has any material
(individually or in the aggregate) liability, direct or contingent,
except as disclosed to the Banks in the Financial Statements or on
Schedule "3" attached hereto. No unusual or unduly burdensome
restrictions, restraints or hazards exist by contract, law or
governmental regulation or otherwise relative to the business, assets
or properties of Borrower, either Guarantor or any Subsidiary of
Borrower or Guarantor which is reasonably expected to have a Material
Adverse Effect.
(h) Litigation. Except as described in the Financial
Statements, or as otherwise disclosed to the Banks in Schedule "4"
attached hereto, there is no litigation, legal or administrative
proceeding, investigation or other action of any nature pending or, to
the knowledge of the officers of Borrower or either
-21-
<PAGE> 28
Guarantor, threatened against or affecting Borrower, either Guarantor
or any of their Subsidiaries which involves the possibility of any
judgment or liability not fully covered by insurance, and which is
reasonably expected to have a Material Adverse Effect.
(i) Taxes; Governmental Charges. The Borrower, each
Guarantor and each of their Subsidiaries have filed all tax returns and
reports required to be filed and have paid all taxes, assessments, fees
and other governmental charges levied upon them or their assets,
properties or income which are due and payable, including interest and
penalties, the failure of which to pay could reasonably be expected to
have a Material Adverse Effect, except such as are being contested in
good faith by appropriate proceedings and for which adequate reserves
for the payment thereof as required by GAAP has been provided and levy
and execution thereon have been stayed and continue to be stayed.
(j) Titles, Etc. The Borrower and OK have good and
defensible title to all of the Collateral, free and clear of all Liens
or other encumbrances except Permitted Liens. The Borrower, each
Guarantor and each of their Subsidiaries have good and defensible title
to all of their other assets except for defects which are not
reasonably expected to have a Material Adverse Effect, free and clear
of all liens except Permitted Liens.
(k) Defaults. Neither Borrower, either Guarantor nor any
of their Subsidiaries is in default and no event or circumstance has
occurred which, but for the passage of time or the giving of notice, or
both, would constitute a default under any loan or credit agreement,
indenture, mortgage, deed of trust, security agreement or other
agreement or instrument to which Borrower, either Guarantor or any of
their Subsidiaries is a party in any respect that would be reasonably
expected to have a Material Adverse Effect. No Event of Default
hereunder has occurred and is continuing.
(l) Casualties; Taking of Properties. Since the dates of
the latest Financial Statements of the Borrower and Alexander delivered
to Banks, neither the business nor the assets or properties of Borrower
or Alexander has been affected (to the extent it is reasonably likely
to cause a Material Adverse Effect), as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any domestic or
foreign government or any agency thereof, riot, activities of armed
forces or acts of God or of any public enemy.
(m) Use of Proceeds; Margin Stock. The proceeds of the
Loans hereunder will be used by the Borrower for the purposes of (i)
refinancing existing indebtedness and (ii) general corporate purposes.
Neither Borrower, Guarantors nor any of their Subsidiaries is engaged
principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any "margin
stock" as defined in Regulation U of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 221), or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
said Regulation U.
Neither Borrower, Guarantors nor any of their Subsidiaries nor
any Person or entity acting on behalf of them has taken or will take
any action which might cause the Loans hereunder or any of the Loan
-22-
<PAGE> 29
Documents, including this Agreement, to violate Regulation U or any
other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
(n) Location of Business and Offices. The principal place
of business and chief executive offices of the Borrower and the
Guarantors are located at the address stated in Section 16 hereof.
(o) Compliance with the Law. To the best of the
Borrower's and Guarantors' knowledge neither Borrower, Guarantors nor
any of their Subsidiaries:
(i) is violation of any law, judgment, decree,
order, ordinance, or governmental rule or regulation to which
Borrower, Guarantors or any of their Subsidiaries or any of
their assets or properties is subject; or
(ii) has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the
ownership of any of its assets or properties or the conduct of
Borrower's, Guarantors' or any of their Subsidiary's business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) No Material Misstatements. No information, exhibit or
report furnished by Borrower or Guarantors to the Banks in connection
with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially
misleading.
(q) Not A Utility. Neither Borrower nor either Guarantor
is an entity engaged in the State of Texas in the (i) generation,
transmission or distribution and sale of electric power; (ii)
transportation, distribution and sale through a local distribution
system of natural or other gas for domestic, commercial, industrial, or
other use; (iii) provision of telephone or telegraph service to others;
(iv) production, transmission or distribution and sale of steam or
water; (v) operation of a railroad or (vi) provision of sewer service
to others.
(r) ERISA. The Borrower, each Guarantor and each of their
Subsidiaries are in compliance in all material respects with the
applicable provisions of ERISA, and no "reportable event", as such term
is defined in Section 403 of ERISA, has occurred with respect to any
Plan of Borrower or Guarantors.
(s) Public Utility Holding Company Act. Neither Borrower,
either Guarantor nor any of their Subsidiaries is a "holding company",
or "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(t) Subsidiaries. As of the Effective Date, OK will be
the only subsidiary of Borrower. As of such date, OK has the one
Subsidiary, Boomer.
-23-
<PAGE> 30
(u) Environmental Matters. Except as disclosed on
Schedule "5", neither Borrower, either Guarantor nor any of their
Subsidiaries (i) has received notice or otherwise learned of any
Environmental Liability which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect arising
in connection with (A) any non-compliance with or violation of the
requirements of any Environmental Law or (B) the release or threatened
release of any toxic or hazardous waste into the environment (ii) has
notice of any threatened or actual liability in connection with the
release or notice of any threatened release of any toxic or hazardous
waste into the environment which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect or
(iii) has received notice or otherwise learned of any federal or state
investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or hazardous
waste into the environment for which Borrower, either Guarantor any or
any of their Subsidiaries is or may be liable which may reasonably be
expected to result in a Material Adverse Effect.
(v) Liens. Except for Permitted Liens, the assets and
properties, including the Collateral, of the Borrower and each
Guarantor are free and clear of all Liens and encumbrances.
(w) Negative Pledge. All of the Borrower's and OK's
assets, including but not limited to, the Oil and Gas Properties, will
be either mortgaged or negatively pledged to the Administrative Agent
or the Banks on the Effective Date.
(x) Solvency. As of the Effective Date, no obligation
shall have been incurred by Borrower or either of the Guarantors
pursuant to any Loan Document, or any document executed in connection
therewith with the intent to hinder, delay, disturb or defraud
creditors of Borrower or either of the Guarantors and neither Borrower
nor either of the Guarantors (i) shall be insolvent (within the meaning
of Section 101(29) of the United States Bankruptcy Code, as amended, or
Section 2 of the Uniform Fraudulent Transfers Act) or will become
insolvent (after giving effect to the transactions contemplated in any
Loan Documents) as a result of the incurrence of such obligation; (ii)
shall be engaged in any business or transaction with unreasonably small
capital (after giving effect to the transactions contemplated in any
Loan Document); or (iii) shall be unable to perform its obligations and
commitments (contingent and otherwise) as they mature in the normal
course of business.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement and the obligation
of the Banks to make the initial Advance under the Revolving Commitment
and the Term Loan shall be subject to the following conditions
precedent:
(i) Execution and Delivery. (A) The
Borrower shall have executed and delivered to Administrative
Agent the Notes, the Security Instruments, and other required
Loan Documents, all in form and substance satisfactory to
Administrative Agent, and (B) each Guarantor shall have
executed and delivered to the Administrative Agent its Loan
Documents, and other required Loan Documents (including,
without limitation, its Guaranty in the form of Exhibit "D"
hereto), all in form and substance satisfactory to the
Administrative Agent;
-24-
<PAGE> 31
(ii) Legal Opinion. Administrative Agent shall
have received from Borrower's and Guarantor's legal counsel a
favorable legal opinion in form and substance satisfactory to
it (i) as to the matters set forth in Subsections (a), (b),
(c), (d), (e) and (h) of Section 10 hereof and (ii) as to such
other matters as Administrative Agent or its counsel may
reasonably request;
(iii) Corporate Resolutions. Administrative Agent
shall have received appropriate certified corporate
resolutions of Borrower and each Guarantor;
(iv) Good Standing. Administrative Agent shall
have received evidence of existence and good standing for
Borrower and each Guarantor;
(v) Incumbency. Administrative Agent shall have
received a signed certificate of the Secretaries of Borrower
and each Guarantor, certifying the names of each of the
officers of Borrower and Guarantor authorized to sign Loan
Documents on behalf of Borrower and each Guarantor, together
with the true signatures of each such officer. Administrative
Agent may conclusively rely on such certificate until
Administrative Agent receives a further certificate of the
Secretary of Borrower or either Guarantor canceling or
amending the prior certificate and submitting signatures of
the officers named in such further certificate;
(vi) Articles of Incorporation and Bylaws.
Administrative Agent shall have received copies of the
Articles of Incorporation of Borrower and each Guarantor and
all amendments thereto, certified by the Secretaries of State
of the state of Borrower's and each Guarantor's incorporation,
and a copy of the bylaws of Borrower and each Guarantor and
all amendments thereto, certified by the Secretaries of
Borrower and each Guarantor as being true, correct and
complete;
(vii) Closing of Alexander Transaction.
Administrative Agent shall have received a copy of the
Certificate of Merger issued by the Secretary of State of the
State of Delaware indicating the completion and closing of the
transaction described in that certain Agreement and Plan of
Merger dated as of June 6, 1996, as amended as of June 20,
1996, by and between Borrower and Alexander, said closing to
be consummated in substantially the manner described in such
Plan and Agreement of Merger on or before August 31, 1996;
(viii) Equity. Administrative Agent shall have
received satisfactory evidence of cash equity contributions
into Borrower of at least $12,500,000.
(ix) Payment of Other Indebtedness.
Administrative Agent shall have received satisfactory evidence
that all amounts due from Alexander to (i) John Hancock
pursuant to a Note Agreement dated as of June 6, 1988 as
amended, and (ii) to CIBC pursuant to a Credit Agreement dated
as of November 14, 1994, as amended, have been paid in full by
Borrower;
(x) Fees. Administrative Agent and Syndication
Agent shall have received payment of all fees due at Closing;
-25-
<PAGE> 32
(xi) Environmental Report. The Administrative
Agent shall have received one or more environmental reports
covering the Oil and Gas Properties, such reports to be in
form and substance satisfactory to Administrative Agent;
(xii) Payment of Certain Expenses. The
Administrative Agent shall have received satisfactory evidence
that all invoices for outside land consultants hired in
connection with the review of title to the Oil and Gas
Properties have been paid in full;
(xiii) SEC Filings. The Administrative Agent shall
have received copies of all filings made by Borrower with the
Securities and Exchange Commission prior to the Effective
Date;
(xiv) Representation and Warranties. The
representations and warranties of Borrower and Guarantors
under this Agreement are true and correct in all material
respects as of the Effective Date, as if then made (except to
the extent that such representations and warranties related
solely to an earlier date);
(xv) No Event of Default. No Event of Default
shall have occurred and be continuing nor shall any event have
occurred or failed to occur which, with the passage of time or
service of notice, or both, would constitute an Event of
Default;
(xvi) Other Documents. Administrative Agent shall
have received such other instruments and documents incidental
and appropriate to the transaction provided for herein as
Administrative Agent or its counsel may reasonably request,
and all such documents shall be in form and substance
reasonably satisfactory to Administrative Agent; and
(xvii) Legal Matters Satisfactory. All legal
matters incident to the consummation of the transactions
contemplated hereby shall be reasonably satisfactory to
counsel for Administrative Agent retained at the expense of
the Borrower.
(b) The obligation of the Banks to make any Advance
(including the initial Advance) on the Revolving Commitment and the
Term Loan shall be subject to the following additional conditions
precedent that, at the date of making each such Advance and after
giving effect thereto:
(i) Execution and Delivery. The Borrower shall
have executed and delivered to Administrative Agent any
additional Notes from which Advances are sought and other
required documents, all in form and substance satisfactory to
Administrative Agent;
(ii) Representation and Warranties. The
representations and warranties of Borrower and Guarantors
under this Agreement are true and correct in all material
respects as of such date, as if then made (except to the
extent that such representations and warranties related solely
to an earlier date);
-26-
<PAGE> 33
(iii) No Event of Default. No Event of Default
shall have occurred and be continuing nor shall any event have
occurred or failed to occur which, with the passage of time or
service of notice, or both, would constitute an Event of
Default;
(iv) Other Documents. Administrative Agent shall
have received such other instruments and documents incidental
and appropriate to the transaction provided for herein as
Administrative Agent or its counsel may reasonably request,
and all such documents shall be in form and substance
reasonably satisfactory to Administrative Agent; and
(v) Legal Matters Satisfactory. All legal
matters incident to the consummation of the transactions
contemplated hereby shall be reasonably satisfactory to
counsel for Administrative Agent retained at the expense of
the Borrower.
12. AFFIRMATIVE COVENANTS. A deviation from the provisions of
this Section 12 shall not constitute an Event of Default under this Agreement
if such deviation is consented to in writing by Majority Banks. Without the
prior written consent of Majority Banks, the Borrower, the Guarantors and each
of the Subsidiaries of Borrower and Guarantors will at all times comply with
the covenants contained in this Section 12 from the date hereof and for so long
as the Revolving Commitment is in existence or any part of the Revolving Loan
or the Term Loan is outstanding or any other amounts owed by the Borrower or
the Guarantors under the Loan Documents remain unpaid.
(a) Financial Statements and Reports. Borrower shall
promptly furnish to Administrative Agent from time to time upon request
such information regarding the business and affairs and financial
condition of Borrower, Guarantors and their Subsidiaries, as
Administrative Agent may reasonably request, and will furnish to
Administrative Agent:
(i) Annual Audited Financial Statements. As soon
as available, and in any event within ninety (90) days after
the close of each fiscal year, the annual audited consolidated
Financial Statements of Borrower, prepared in accordance with
GAAP, accompanied by an unqualified opinion rendered by an
independent accounting firm reasonably acceptable to
Administrative Agent;
(ii) Quarterly Financial Statements. As soon as
available, and in any event within forty-five (45) days after
the end of each calendar quarter of each year (except the last
calendar quarter of any fiscal year), the quarterly unaudited
consolidated Financial Statements of Borrower, prepared in
accordance with GAAP;
(iii) Report on Properties. As soon as available
and in any event on or before November 1 and May 1 of each
calendar year, and at such other times as any Bank, in
accordance with Section 7 hereof, may request, the engineering
reports required to be furnished to the Banks under such
Section 7 on the Oil and Gas Properties;
(iv) Budget. Contemporaneously with the delivery
of the semi-annual engineering reports required above in
Subsection 12(a)(iv), provide a budget for Borrower and each
Guarantor setting forth all anticipated material sources and
uses of funds for the succeeding twelve (12) months; and
-27-
<PAGE> 34
(v) SEC Reports. As soon as available, and in
any event within five (5) days after filing, furnish the
Administrative Agent with copies of all filings made by
Borrower with the Securities and Exchange Commission;
(vi) Quarterly Hedging Reports. Borrower shall
furnish to the Administrative Agent within forty-five (45)
days of the end of each quarter, a report of forward sales of
crude oil and natural gas by Borrower and Guarantors, said
information to be provided for both the subject period and on
an appropriate basis for all such forward sales;
(vii) Additional Information. Promptly upon
request of Administrative Agent from time to time any
additional financial information or other information that
Administrative Agent may reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as
Administrative Agent may reasonably request and shall be prepared in a
manner consistent with the Financial Statements.
(b) Certificates of Compliance. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to
Subsection 12(a)(i) hereof and the quarterly unaudited Financial
Statements pursuant to Subsection 12(a)(ii) hereof, Borrower will
furnish or cause to be furnished to Administrative Agent a certificate
in the form of Exhibit "E" attached hereto, signed by the President of
Borrower (i) stating that Borrower and each Guarantor have fulfilled in
all material respects their obligations under the Notes and the Loan
Documents, including this Agreement, and that all representations and
warranties made herein and therein continue (except to the extent they
relate solely to an earlier date) to be true and correct in all
material respects (or specifying the nature of any change), or if an
Event of Default has occurred, specifying the Event of Default and the
nature and status thereof; (ii) to the extent requested from time to
time by Administrative Agent, specifically stating compliance of
Borrower and each Guarantor in all material respects with any of their
representations (except to the extent they relate solely to an earlier
date) or obligations under said instruments; (iii) setting forth the
computation, in reasonable detail as of the end of each period covered
by such certificate, of compliance with (on a consolidation basis)
Sections 13(b), 13(c), and 13(d) and (iv) containing or accompanied by
such financial or other details, information and material as
Administrative Agent may reasonably request to evidence such
compliance.
(c) Accountants' Certificate. Concurrently with the
furnishing of the annual audited Financial Statement pursuant to
Section 12(a)(i) hereof, the Borrower will furnish a statement from the
firm of independent public accountants which prepared such Financial
Statement to the effect that nothing has come to their attention to
cause them to believe that there existed on the date of such statements
any Event of Default and specifically calculating Borrower's compliance
with Sections 13(b), 13(c) and 13(d) of this Agreement.
(d) Taxes and Other Liens. The Borrower and each
Guarantor shall, and shall cause each of their Subsidiaries to, pay and
discharge promptly all taxes, assessments and governmental charges or
levies imposed upon such entities or upon the income or any assets or
property of such parties as well as all claims of any kind (including
claims for labor, materials, supplies and rent) which, if unpaid, might
become
-28-
<PAGE> 35
a Lien or other encumbrance upon any or all of the assets or property
of such parties and which could reasonably be expected to result in a
Material Adverse Effect; provided, however, that neither Borrower,
either Guarantor nor any of their Subsidiaries shall be required to pay
any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings diligently conducted, levy and
execution thereon have been stayed and continue to be stayed, and such
Borrower, Guarantor or Subsidiary, as the case may be, shall have
established adequate reserves therefor, if required, under GAAP.
(e) Compliance with Laws. The Borrower, each Guarantor
and each of their Subsidiaries will observe and comply, in all material
respects, with all applicable laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, orders and
restrictions relating to environmental standards or controls or to
energy regulations of the federal and all state, county, municipal and
other governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(f) Further Assurances. The Borrower and each Guarantor
will promptly cure any defects in the creation and issuance of the
Notes and the execution and delivery of the Notes and the Loan
Documents, including this Agreement. The Borrower and each Guarantor
at their sole expense will promptly execute and deliver to
Administrative Agent, upon its reasonable request all such other and
further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements in this Agreement, or
required to correct any omissions in the Notes or more fully to state
the obligations set out herein.
(g) Performance of Obligations. The Borrower will pay the
Notes and other obligations incurred by it hereunder according to the
reading, tenor and effect thereof and hereof and the Borrower and each
Guarantor will do and perform every act and discharge all of the
obligations provided to be performed and discharged by the Borrower or
the Guarantor under the Loan Documents, including this Agreement, at
the time or times and in the manner specified.
(h) Insurance. The Borrower and each Guarantor now
maintain and will continue to maintain insurance with financially sound
and reputable insurers with respect to its assets against such
liabilities, fires, casualties, risks and contingencies and in such
types and amounts as is customary in the case of Persons engaged in the
same or similar businesses and similarly situated. Upon request of
Administrative Agent, the Borrower and each Guarantor will furnish or
cause to be furnished to Administrative Agent from time to time a
summary of the respective insurance coverage of the Borrower and each
Guarantor in form and substance satisfactory to Administrative Agent,
and, if requested, will furnish Administrative Agent copies of the
applicable policies. Upon demand by Administrative Agent, any such
insurance policies covering any such property shall be endorsed (i) to
name Administrative Agent as loss payee thereunder, (ii) to provide
that such policies may not be canceled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to
Administrative Agent (iii) to provide for insurance against fire,
casualty and other hazards normally insured against, in the amount of
the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated business and
properties) of the property insured and (iv) to provide for such other
matters as Administrative Agent may reasonably require. The Borrower
and each Guarantor shall at all times maintain adequate insurance with
respect to all of their assets, including but not limited to, the Oil
and Gas Properties or any collateral against their liability for injury
to persons or
-29-
<PAGE> 36
property, which insurance shall be by financially sound and reputable
insurers and shall without limitation provide the following coverages:
comprehensive general liability (including coverage for damage to
underground resources and equipment, damage caused by blowouts or
cratering, damage caused by explosion, damage to underground minerals
or resources caused by saline substances, broad form property damage
coverage, broad form coverage for contractually assumed liabilities and
broad form coverage for acts of independent contractors), worker's
compensation and automobile liability. The Borrower and OK shall at
all times maintain cost of control of well insurance with respect to
the Oil and Gas Properties which shall insure the Borrower and OK
against liability for seepage and pollution expense if deemed
economical in the reasonable discretion of the Borrower or OK, as the
case may be, redrilling expense, and cost of control of well, fires,
blowouts, etc. Additionally, the Borrower and each Guarantor shall at
all times maintain adequate insurance with respect to all of its other
assets and wells in accordance with prudent business practices.
(i) Accounts and Records. The Borrower and each Guarantor
will keep books, records and accounts in which full, true and correct
entries will be made of all dealings or transactions in relation to its
business and activities, prepared in a manner consistent with prior
years, subject to changes suggested by either Borrower's or one of the
Guarantor's auditors.
(j) Right of Inspection. The Borrower and each Guarantor
will permit any officer, employee or agent of the Banks upon three (3)
days prior notice to examine the Borrower's or each Guarantor's books,
records and accounts, and take copies and extracts therefrom, all at
such reasonable times during normal business hours and as often as the
Banks may reasonably request. The Banks will keep all such information
confidential and will not without the Borrower's or Guarantors' (as the
case may be) prior written consent disclose or reveal the information
or any part thereof to any person other than the Banks' officers,
employees, legal counsel, regulatory authorities or advisors to whom it
is necessary to reveal such information for the purpose of effectuating
the agreements and undertakings specified herein or as otherwise
required by law or in connection with the enforcement of Banks' and
Administrative Agent's rights and remedies under the Notes, the
Security Instruments, including this Agreement and the other Loan
Documents.
(k) Notice of Certain Events. The Borrower shall promptly
notify the Administrative Agent if Borrower or either Guarantor learn
of the occurrence of (i) any event which constitutes an Event of
Default together with a detailed statement by Borrower or such
Guarantor of the steps being taken to cure the Event of Default; (ii)
any legal, judicial or regulatory proceedings affecting Borrower or
either Guarantor, or any of the assets or properties of Borrower or
either Guarantor which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect; (iii) any dispute between
Borrower or either Guarantor and any governmental or regulatory body or
any other Person or entity which, if adversely determined, might
reasonably be expected to cause a Material Adverse Effect or (iv) any
other matter which in Borrower's reasonable opinion could have a
Material Adverse Effect.
(l) ERISA Information and Compliance. The Borrower will
promptly furnish to Administrative Agent immediately upon becoming
aware of the occurrence of any "reportable event", as such term is
defined in Section 4043 of ERISA, or of any "prohibited transaction",
as such term is defined in Section 4975 of the Internal Revenue Code of
1954, as amended, in connection with any Plan or any trust created
thereunder, a written notice signed by the Trustee or the chief
financial officer of Borrower, either Guarantor or the appropriate
Subsidiary specifying the nature thereof, the action Borrower, such
Guarantor or the
-30-
<PAGE> 37
appropriate Subsidiary is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto.
(m) Environmental Reports and Notices. The Borrower will
deliver to the Administrative Agent (i) promptly upon its becoming
available, one copy of each report sent by Borrower or either Guarantor
or any Subsidiary to any court, governmental agency or instrumentality
pursuant to any Environmental Law (ii) notice, in writing, promptly
upon Borrower's or either Guarantor's or any Subsidiary's receipt of
notice or otherwise learning of any claim, demand, action, event,
condition, report or investigation indicating any potential or actual
liability arising in connection with (x) the non-compliance with or
violation of the requirements of any Environmental Law which reasonably
could be expected to have a Material Adverse Effect or (y) the release
or threatened release of any toxic or hazardous waste into the
environment which reasonably could be expected to have a Material
Adverse Effect or which release the Borrower or either Guarantor or any
Subsidiary would have a duty to report to any court or government
agency or instrumentality or (iii) notice of the existence of any
Environmental Lien on any properties or assets of Borrower or either
Guarantor or any Subsidiary and Borrower shall immediately deliver a
copy of any such notice to Administrative Agent.
(n) Compliance and Maintenance. The Borrower and each
Guarantor will, and will cause each of their Subsidiaries to, (i)
observe and comply in all material respects with all Environmental
Laws; (ii) except as provided in Subsections 12(p) and 12(q) below,
maintain the Oil and Gas Properties and other assets and properties in
good and workable condition at all times and make all repairs,
replacements, additions, betterments and improvements to the Oil and
Gas Properties and other assets and properties as are needed and proper
so that the business carried on in connection therewith may be
conducted properly and efficiently at all times in the opinion of the
Borrower or the appropriate Guarantor exercised in good faith; (iii)
take or cause to be taken whatever actions are necessary or desirable
to prevent a default by either Borrower or either Guarantor under the
provisions of any gas purchase or sales contract or any other contract,
agreement or lease comprising a part of the Oil and Gas Properties or
other collateral security hereunder which default could reasonably be
expected to result in a Material Adverse Effect and (iv) furnish
Administrative Agent upon request evidence satisfactory to
Administrative Agent that there are no Liens, claims or encumbrances on
the Oil and Gas Properties, except Permitted Liens.
(o) Operation of Properties. Except as provided in
Subsection 12(p) and (q) below, the Borrower and each Guarantor will
operate, or use reasonable efforts to cause to be operated, all Oil and
Gas Properties in a careful and efficient manner in accordance with the
practice of the industry and in compliance in all material respects
with all applicable laws, rules, and regulations and in compliance in
all material respects with all applicable proration and conservation
laws of the jurisdiction in which the properties are situated, and all
applicable laws, rules and regulations, of every other agency and
authority from time to time constituted to regulate the development and
operation of the properties and the production and sale of hydrocarbons
and other minerals therefrom; provided, however, that the Borrower or
either Guarantor, as the case may be, shall have the right to contest
in good faith by appropriate proceedings, the applicability or
lawfulness of any such law, rule or regulation and pending such contest
may defer compliance therewith, as long as such deferment shall not
subject the properties or any part thereof to foreclosure or loss.
-31-
<PAGE> 38
(p) Compliance with Leases and Other Instruments. The
Borrower and each Guarantor will pay or cause to be paid and discharge
all rentals, delay rentals, royalties, production payment and
indebtedness required to be paid by the Borrower or such Guarantor, as
the case may be (or required to keep unimpaired in all material
respects the rights of the Borrower or the Guarantor in Oil and Gas
Properties), accruing thereunder and perform or cause to be performed
in all material respects each and every act, matter or thing required
of the Borrower or either Guarantor by each and all of the assignments,
deeds, leases, subleases, contracts and agreements in any way relating
to the Borrower or either Guarantor or any of the Oil and Gas
Properties and do all other things necessary of the Borrower or the
appropriate Guarantor to keep unimpaired in all material respects the
rights of the Borrower or the appropriate Guarantor thereunder and to
prevent the forfeiture thereof or default thereunder; provided,
however, that nothing in this Agreement shall be deemed to require the
Borrower or any Guarantor to perpetuate or renew any oil and gas lease
or other lease by payment of rental or delay rental or by commencement
or continuation of operations nor to prevent the Borrower or either
Guarantor from abandoning or releasing any oil and gas lease or other
lease or well thereon when, in any of such events, in the opinion of
the Borrower or such Guarantor exercised in good faith, it is not in
the best interest of the Borrower or such Guarantor to perpetuate the
same.
(q) Certain Additional Assurances Regarding Maintenance
and Operations of Properties. With respect to those Oil and Gas
Properties which are being operated by operators other than the
Borrower or either Guarantor, the Borrower or such Guarantor, as the
case may be, shall not be obligated to perform any undertakings
contemplated by the covenants and agreement contained in Subsections
12(n) or 12(o) hereof which are performable only by such operators and
are beyond the control of the Borrower or such Guarantor; provided,
however that the Borrower and the Guarantor agree to promptly take all
reasonable actions available under any operating agreements or
otherwise to bring about the performance of any such material
undertakings required to be performed thereunder.
(r) Sale of Certain Assets/Prepayment of Proceeds. The
Borrower will immediately pay over to Administrative Agent for the
ratable benefit of the Banks as a prepayment 100% of the proceeds (net
of income taxes attributable thereto and direct costs of sale) in
excess of $250,000 in the aggregate for any calendar year received by
the Borrower or either Guarantor from the sale of the Oil and Gas
Properties. Any such prepayment shall be applied first to the
principal of the Revolving Note in an amount of up to the Borrowing
Base value assigned to such Oil and Gas Properties at the most recent
Borrowing Base redetermination, then to the principal of the Advance
Note.
(s) Yield Protection.
(i) All amounts payable by the Borrower or any
Guarantor under the Loan Documents (whether principal,
interest, fees, expenses or otherwise) to, or for the account
of, each Bank not created or organized under the laws of the
United States of America or a political subdivision thereof
shall be paid in full, free of any deductions or withholdings
for or on account of any Indemnified Taxes; as used herein,
the term "Indemnified Taxes" means all taxes, assessments,
fees, levies, imposts, duties, deductions, withholdings, stamp
taxes, equalization taxes, capital transaction taxes, foreign
exchange taxes or charges, or other charges of any nature
whatsoever from time to time imposed by current or future law,
statute, ordinance, regulation, order, writ injunction or
decree (as the same may be amended from time to time) of the
United States of
-32-
<PAGE> 39
America or a political subdivision thereof other than taxes on
the overall net income of, or franchise taxes related to, any
Bank by the jurisdiction either of such Bank's incorporation
or in which its relevant lending office is located. If the
Borrower or either Guarantor is prohibited by law from paying
any such deductions and withholdings, then (at the same time
and in the same manner that such original amount is otherwise
due under the Loan Documents) the Borrower or such Guarantor
shall pay to such Bank such additional amount as may be
necessary in order that the actual amount received by such
Bank after deduction or withholding (and after payment of any
additional Indemnified Taxes due as a consequence of the
payment of such additional amount) will equal that which such
Bank would have received if such deduction or withholding were
not made; provided, however, that the Borrower or such
Guarantor shall not be required to pay such additional amount
to any such Bank to the extent such amount relates to any
withholding, deduction or Indemnified Taxes required by law
but not covered by the latest IRS form, if any, of such Bank
delivered under Section 12(s)(v).
(ii) The Borrower or each Guarantor shall pay
directly to the appropriate taxing authority or tribunal any
and all Indemnified Taxes, filing and other fees, and charges
imposed by virtue of any change of any law or the promulgation
of any new law (or the interpretation or administration
thereof by any court, agency or tribunal, whether or not
having the force of law) on or with respect to any aspect of
the transactions contemplated by the Loan Documents, the
execution and delivery of the Loan Documents, or with respect
to any Bank. The Borrower and each Guarantor shall hold each
Bank and Administrative Agent free and harmless from any loss,
costs, claim, liability or expense relating to any delay or
failure by the Borrower or either Guarantor to make any such
payment, and shall reimburse each Bank and Administrative
Agent upon demand for any Indemnified Taxes, filing or other
fees, or charges paid by them in connection herewith.
(iii) Each Bank shall notify the Borrower through
Administrative Agent within a reasonable time of becoming
aware that conditions exist (through change in applicable
laws, the promulgation of any new law, the interpretation or
application thereof or otherwise) which may result in the
Borrower and any Guarantor becoming obligated under this
Section 12(s) to pay additional amounts to such Bank
hereunder; provided that the failure of any Bank to so notify
the Borrower and Administrative Agent shall not impair or
diminish any of Borrower's or either Guarantor's obligations
hereunder.
(iv) If the Borrower or any Guarantor, as the case
may be, shall make any deductions or withholdings from amounts
payable under the Loan Documents or shall pay any Indemnified
Taxes under this Section 12(s), then the Borrower or such
Guarantor, as the case may be, shall, within thirty (30) days
after taking such action, furnish to Administrative Agent
official receipts or other evidence acceptable to
Administrative Agent evidencing such deduction, withholding or
payment.
(v) Each Bank not created or organized under the
laws of the United States of America or a political
subdivision thereof may deliver to Administrative Agent two
(2) executed copies of Form 1001 of the Internal Revenue
Service of the United States of America (hereinafter referred
to as the "IRS") or two (2) copies of IRS Form 4224 evidencing
that such Bank is entitled
-33-
<PAGE> 40
to receive payments of interest hereunder either without
deduction or withholding of United States federal income tax
or, as the case may be, subject to such deduction or
withholding at the rate specified by such Bank. Each such
Bank hereby undertakes to deliver to Administrative Agent and
the Borrower revised or substitute IRS forms before or
promptly upon the occurrence of any event requiring a change
in the most recent forms previously delivered by it to
Administrative Agent and the Borrower. Non-delivery of any
such form (or any subsequent form in respect of any changed
conditions, as the case may be) by any such Bank as aforesaid
shall entitle the Borrower, or Administrative Agent on the
Borrower's behalf, to withhold and deduct from payments of
interest payable to such Bank hereunder United States federal
income tax thereon at the full rate (or at the limited rate
most recently described hereunder by such Bank) applicable
under the Internal Revenue Code of 1986 of the United States
of America, as amended. In the event any such Bank claims an
exemption under this Section 11(s) (and the Borrower or
Administrative Agent shall be entitled to withhold or deduct,
if at all, to the extent and on the basis of such claimed
exemption) to which the appropriate taxing authority or
tribunal subsequently determines that such Bank was not
entitled, such Bank shall reimburse the Borrower or
Administrative Agent any amounts the Borrower or
Administrative Agent is required to pay to such authority or
tribunal as a result thereof.
(vi) To the extent applicable, the parties intend
for the provisions of this Section 12(s) to apply and protect
each Bank from the consequences of its own negligence, whether
or not that negligence is the sole, contributing or concurring
cause of any covered loss, cost, claims, liability or expense
indemnified hereunder.
(t) Title Matters. Within ninety (90) days after the date
of this Agreement, Borrower and/or OK shall provide additional title
opinions and title information on the Oil and Gas Properties listed on
Schedule "6" hereto. As to any Oil and Gas Properties hereafter
mortgaged to Administrative Agent for the ratable benefit of the Banks,
Borrower or OK, as the case may be, will promptly (but in no event more
than sixty (60) days following such mortgaging), furnish Banks with
title opinions and/or title information reasonably satisfactory to
Administrative Agent showing good and defensible title to such Oil and
Gas Properties subject only to Permitted Liens.
(u) Curative Matters. Within one hundred twenty (120)
days after the date hereof with respect to matters listed on Schedule
"7" and, thereafter, within ninety (90) days after receipt by Borrower
from Administrative Agent or its counsel of written notice of title
defects the Administrative Agent reasonable requires to be cured,
Borrower and/or OK shall either (i) provide such curative information,
in form and substance satisfactory to Administrative Agent or (ii)
substitute Oil and Gas Properties of value and quality satisfactory to
Administrative Agent for all of Oil and Gas Properties for which such
title curative was requested but upon which Borrower or OK, as the case
may be, elected not to provide such title curative information, and,
within ninety (90) days of such substitution, provide title opinions or
title information satisfactory to Administrative Agent covering the Oil
and Gas Properties so substituted.
13. NEGATIVE COVENANTS. A deviation from the provisions of this
Section 13 shall not constitute an Event of Default under this Agreement if
such deviation is consented to in writing by Majority Banks. Without the prior
written consent of Majority Banks, the Borrower, the Guarantors and each of the
Subsidiaries of the Borrower and the Guarantors will at all times comply with
the covenants contained in this Section 13 from the date hereof
-34-
<PAGE> 41
and for so long as the Revolving Commitment is in existence or any part of the
Revolving Loan or the Term Loan is outstanding or any other amounts owed by the
Borrower or either of the Guarantors under the Loan Documents remain unpaid.
(a) Negative Pledge. Neither Borrower, either Guarantor
nor any Subsidiaries of Borrower or either Guarantor shall without the
prior written consent of the Banks:
(i) create, incur, assume or permit to exist any
Lien, security interest or other encumbrance on any of its
assets or properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose
of, in any fiscal year, any of its assets, except for sales,
leases, transfers or other disposition made in the ordinary
course of the Borrower's and Guarantors' oil and gas
businesses which do not exceed $250,000 in the aggregate in
any fiscal year.
(b) Current Ratio. The Borrower will not allow its
Current Ratio to be less than 1.0 to 1.0 as of the end of any fiscal
quarter.
(c) Minimum Tangible Net Worth. The Borrower's
consolidated Tangible Net Worth shall not, as of the end of any fiscal
quarter, ever be less than $55,000,000; provided, however, that such
amount shall be reduced dollar for dollar for any non-cash write down
of the Oil and Gas Properties required by GAAP.
(d) Debt Service Coverage Ratio. The Borrower will not
allow its consolidated Debt Service Coverage Ratio to be less than 1.10
to 1.0 as of the end of any fiscal quarter.
(e) Consolidations and Mergers. Neither Borrower nor
either Guarantor shall, nor shall they permit any of their Subsidiaries
to, consolidate or merge with or into any other Person, except that
Borrower, either Guarantor and any of their Subsidiaries may merge with
another Person if the Borrower, either Guarantor or any such Subsidiary
is the corporation surviving such merger and if, after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing.
(f) Debts, Guaranties and Other Obligations. Neither the
Borrower nor either Guarantor shall, nor shall they permit any of their
Subsidiaries to, incur, create, assume or in any manner become or be
liable in respect of any indebtedness, nor shall the Borrower or either
Guarantor (nor shall they permit any of their Subsidiaries to)
guarantee or otherwise in any manner become or be liable in respect of
any indebtedness, liabilities or other obligations of any other person
or entity, whether by agreement to purchase the indebtedness of any
other person or entity or agreement for the furnishing of funds to any
other person or entity through the purchase or lease of goods, supplies
or services (or by way of stock purchase, capital contribution, advance
or loan) for the purpose of paying or discharging the indebtedness of
any other person or entity, or otherwise, except that the foregoing
restrictions shall not apply to:
(i) the Notes and any renewals or increases
thereof or other indebtedness of the Borrower or any Guarantor
created pursuant to the Loan Documents or those which have
been
-35-
<PAGE> 42
heretofore disclosed to Banks in the Borrower's Financial
Statements or on Schedule "8" hereto; or
(ii) taxes, assessments or other government
charges which are not yet due or are being contested in good
faith by appropriate action promptly initiated and diligently
conducted, if such reserve as shall be required by GAAP shall
have been made therefor and levy and execution thereon have
been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a
loan or financing transaction) incurred in the ordinary course
of business as such business is being conducted on the
Effective Date; or
(iv) renewals and extensions of any or all of the
foregoing.
(g) Dividends. Borrower will not declare or pay any cash
dividends, or purchase, redeem or otherwise acquire for value any of
its stock (common or preferred) now or hereafter outstanding, return
any capital to stockholders or make any distribution of its assets to
its stockholders as such; provided, however, that the foregoing
restriction shall not apply to cash dividends paid on preferred stock
after the Term Loan is paid in full, both principal and interest, and
so long as no Event of Default has occurred and is continuing or would
occur as a result of the payment of any such cash dividends.
(h) Loans and Advances. The Borrower and Guarantors shall
not and shall not permit any Subsidiary to, make or permit to remain
outstanding any loans or advances to or in any Person or entity, except
that the foregoing restriction shall not apply to:
(i) loans or advances of the material details of
which have been set forth in the Financial Statements to
Borrower or Guarantors heretofore furnished to Bank or
otherwise heretofore been disclosed to the Bank on Schedule
"9" hereto; or
(ii) advances made, or accounts receivable created
in the ordinary course of Borrower's or Guarantors' oil and
gas businesses.
(i) Sale or Discount of Receivables. The Borrower and the
Guarantors will not, and will not permit any Subsidiary to, discount or
sell with recourse, or sell for less than the greater of the face or
market value thereof, any material portion of its notes receivable or
accounts receivable other than in the ordinary course of business.
(j) Nature of Business. The Borrower and the Guarantors
will not, nor will they permit any Subsidiary to, permit any material
change to be made in the character of its business as carried on
immediately following the merger referred to in Section 11(a)(vii)
hereof.
(k) Transactions with Affiliates. The Borrower and the
Guarantors will not, and they will not permit any Subsidiary to, enter
into any transaction with any Affiliate, except transactions upon terms
that
-36-
<PAGE> 43
are no less favorable to it than would be obtained in a transaction
negotiated at arm's length with an unrelated third party.
(l) Hedging Transaction. The Borrower and the Guarantors
will not, and they will not permit any Subsidiary to, enter into any
transaction providing for hedging, forward sale or swap of crude oil or
natural gas, except that the foregoing prohibition shall not apply to
contracts which meet all of the following requirements:
(i) Hedging transactions not more than 75% of the
Borrower's or OK's monthly production forecast for all of the
Borrower's or OK's proved and producing oil properties
pursuant to the Bank's most recent engineering evaluation (a
copy of which will be provided to Borrower after each
Determination Date) or not more than 75% of the Borrower's or
OK's monthly production forecast of all of the Borrower's or
OK's proved and producing gas properties pursuant to the
Bank's most recent engineering evaluation; and
(ii) Contracts with maturities of 12 months or
less.
(m) Investments. Neither Borrower nor either Guarantor
shall, nor shall they permit any Subsidiary to, make any non-oil and
gas investments (oil and gas investments shall include investments in
the equity securities of oil and gas companies) in any Person or
entity.
(n) Subsidiaries. Neither Borrower nor either Guarantor
shall, nor shall they permit any Subsidiary to, invest in any
additional Subsidiaries, or otherwise organize or acquire, any
Subsidiaries after the Effective Date.
(o) Amendment to Articles of Incorporation or Bylaws.
Neither Borrower nor either Guarantor will, nor will they permit any
Subsidiary to, permit any amendment to, or any alteration of, the
Articles of Incorporation or Bylaws of the Borrower, either Guarantor
or any Subsidiary.
14. EVENTS OF DEFAULT. Any one or more of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) The Borrower shall fail to pay when due or declared
due the principal of, and the interest on, any of the Notes, or any fee
or any other indebtedness of the Borrower incurred pursuant to this
Agreement or any other Loan Document; or
(b) Any representation or warranty made by the Borrower or
either Guarantor under this Agreement, or in any certificate or
statement furnished or made to Administrative Agent pursuant hereto, or
in connection herewith, or in connection with any document furnished
hereunder, shall prove to be untrue in any material respect as of the
date on which such representation or warranty is made (or deemed made),
or any representation, statement (including financial statements),
certificate, report or other data furnished or to be furnished or made
by the Borrower or either Guarantor under any Loan Document, including
this Agreement, proves to have been untrue in any material respect, as
of the date as of which the facts therein set forth were stated or
certified; or
-37-
<PAGE> 44
(c) Default shall be made in the due observance or
performance of any of the covenants or agreements of the Borrower or
either Guarantor contained in the Loan Documents, including this
Agreement or Default or Event of Default shall occur under any of the
Loan Documents (excluding covenants contained in Section 13 of the
Agreement for which there is no cure period) and such Default or Event
of Default shall continue for more than thirty (30) days after notice
thereof from Administrative Agent to Borrower; or
(d) Default shall be made in the due observance and
performance of any of the covenants and agreement of the Borrower or
either Guarantor contained in Section 13 of the Agreement; or
(e) Default shall be made in respect of any obligation for
borrowed money, other than the Notes, for which the Borrower or either
Guarantor are liable (directly, by assumption, as guarantor or
otherwise), or any obligations secured by any mortgage, pledge or other
security interest, lien, charge or encumbrance with respect thereto, on
any asset or property of the Borrower or either Guarantor or in respect
of any agreement relating to any such obligations, and such default
shall continue beyond the applicable grace period, if any; or
(f) Either Borrower, either Guarantor or any of their
Subsidiaries shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking an appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action authorizing the foregoing; or
(g) An involuntary case or other proceeding, shall be
commenced against Borrower, either Guarantor, or any of their
Subsidiaries seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) days or an order for relief shall be entered against Borrower,
either Guarantor or any of their Subsidiaries under the federal
bankruptcy laws as now or hereinafter in effect; or
(h) A final judgment or order for the payment of money in
excess of $1,000,000 (or judgments or orders aggregating in excess of
$1,000,000) shall be rendered against Borrower, either Guarantor or any
of their Subsidiaries and such judgments or orders shall continue
unsatisfied and unstayed for a period of thirty (30) days; or
(i) In the event the Total Outstandings shall at any time
exceed the Borrowing Base established for the Revolving Notes, and the
Borrower shall fail to comply with the provisions of Section 9(b)
hereof; or
(j) A Change of Management shall occur.
-38-
<PAGE> 45
Upon occurrence of any Event of Default specified in Subsections 13(f)
and (g) hereof, the entire principal amount due under the Notes and all
interest then accrued thereon, and any other liabilities of the Borrower
hereunder, shall become immediately due and payable all without notice and
without presentment, demand, protest, notice of protest or dishonor or any
other notice of default of any kind, all of which are hereby expressly waived
by the Borrower. In any other Event of Default, Administrative Agent, upon the
request of Majority Banks, shall by notice to the Borrower declare the
principal of, and all interest then accrued on, the Notes and any other
liabilities hereunder to be forthwith due and payable, whereupon the same shall
forthwith become due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other notice of any kind,
all of which the Borrower hereby expressly waives, anything contained herein or
in the Note or Notes to the contrary notwithstanding. Nothing contained in
this Section 14 shall be construed to limit or amend in any way the Events of
Default enumerated in the Note or Notes, or any other Loan Document executed in
connection with the transaction contemplated herein.
Upon the occurrence and during the continuance of any Event of Default,
the Banks are hereby authorized at any time and from time to time, without
notice to the Borrower or either Guarantor (any such notice being expressly
waived by the Borrower and each Guarantor), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by any of the Banks to or for the
credit or the account of the Borrower and either Guarantor against any and all
of the indebtedness of the Borrower under the Notes and the Loan Documents,
including this Agreement, irrespective of whether or not the Banks shall have
made any demand under the Loan Documents, including this Agreement or the Notes
and although such indebtedness may be unmatured. Any amount set-off by any of
the Banks shall be applied against the indebtedness owed the Banks by the
Borrower pursuant to this Agreement and the Notes. The rights of the Banks
under this Section 14 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Banks may have. Within
five (5) Business Days after any such set-off or appropriation by the Banks,
the Banks shall give the Borrower or either Guarantor, as the case may be,
written notice thereof. However, a failure to give such notice will not affect
the validity of the set-off or appropriation.
15. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Banks, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right. The
rights of the Banks hereunder shall be in addition to all other rights provided
by law. No modification or waiver of any provision of the Loan Documents,
including this Agreement, or the Notes nor consent to departure therefrom,
shall be effective unless in writing, and no such consent or waiver shall
extend beyond the particular case and purpose involved. No notice or demand
given in any case shall constitute a waiver of the right to take other action
in the same, similar or other circumstances without such notice or demand.
16. NOTICES. Any notices or other communications required or
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in writing (which may be by facsimile
transmission) and must be personally delivered or mailed by prepaid certified
or registered mail to the party to whom such notice or communication is
directed at the address of such party as follows: (a) BORROWER: NATIONAL
ENERGY GROUP, INC., 4925 Greenville Avenue, Suite 1400, Dallas, Texas 75206,
Facsimile No. (214) 692-9310, Attention: Miles D. Bender, President; (b)
GUARANTORS: c/o NEG-OK, INC., 4925 Greenville Avenue, Suite 1400, Dallas,
Texas 75206, Facsimile No. (214) 692-9310, Attention: Miles D. Bender; (c)
BANKS: c/o ADMINISTRATIVE AGENT, BANK ONE, TEXAS, N.A., 1717 Main Street,
Dallas, Texas 75201, Facsimile No. (214) 290-2627, Attention:
-39-
<PAGE> 46
Wm. Mark Cranmer, Vice President; and (c) any Bank at its address shown on the
signature page hereto and on any amendment hereto. Any such notice or other
communication shall be deemed to have been given (whether actually received or
not) on the day it is personally delivered or delivered by facsimile as
aforesaid or, if mailed, on the third day after it is mailed as aforesaid. Any
party may change its address for purposes of this Agreement by giving notice of
such change to the other party pursuant to this Section 16.
17. EXPENSES. The Borrower shall pay (i) all reasonable and
necessary out-of-pocket expenses of Administrative Agent, including reasonable
fees and disbursements of counsel for Administrative Agent, in connection with
the preparation of this Agreement, any waiver or consent hereunder or any
amendment hereof or any default or Event of Default or alleged default or Event
of Default hereunder; (ii) all reasonable and necessary out-of-pocket expenses
of Administrative Agent, including reasonable fees and disbursements of special
counsel for Administrative Agent in connection with the preparation of any
participation agreement for a participant or participants requested by the
Borrower or any amendment thereof and (iii) if a Default or an Event of Default
occurs and is continuing, all reasonable and necessary out-of-pocket expenses
incurred by the Banks, including fees and disbursements of counsel, in
connection with such default and Event of Default and collection and other
enforcement proceedings resulting therefrom. Provided, however, that
Administrative Agent's legal fees incurred in connection with the negotiation,
title review and closing of the transaction described in this Agreement shall
not exceed $125,000 plus expenses; provided further however that in the event
of a material change in the transaction described in this Agreement, the
counsel for the Administrative Agent shall have the right to negotiate with
Borrower for additional compensation. The Borrower shall indemnify the Banks
against any transfer taxes, document taxes, assessments or charges made by any
governmental authority by reason of the execution, delivery and filing of the
Loan Documents.
18. THE ADMINISTRATIVE AGENT AND THE BANKS.
(a) Appointment and Authorization. Each Bank hereby
appoints Administrative Agent as its nominee and agent, in its name and
on its behalf: (i) to act as nominee for and on behalf of such Bank in
and under all Loan Documents; (ii) to arrange the means whereby the
funds of Banks are to be made available to the Borrower under the Loan
Documents; (iii) to take such action as may be requested by any Bank
under the Loan Documents (when such Bank is entitled to make such
request under the Loan Documents); (iv) to receive all documents and
items to be furnished to Banks under the Loan Documents; (v) to be the
secured party, mortgagee, beneficiary, and similar party in respect of,
and to receive, as the case may be, any collateral for the benefit of
Banks; (vi) to promptly distribute to each Bank all material
information, requests, documents and items received from the Borrower
under the Loan Documents; provided, however, that the information and
reports required by Section 12(a)(iii) hereof will be delivered by
Administrative Agent to any Bank only upon the request of such Bank;
(vii) to promptly distribute to each Bank such Bank's Pro Rata Part of
each payment or prepayment (whether voluntary, as proceeds of insurance
thereon, or otherwise) in accordance with the terms of the Loan
Documents and (viii) to deliver to the appropriate Persons requests,
demands, approvals and consents received from Banks. Each Bank hereby
authorizes Administrative Agent to take all actions and to exercise
such powers under the Loan Documents as are specifically delegated to
such Administrative Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. With respect to its
commitments hereunder and the Notes issued to it, Administrative Agent
and any successor Administrative Agent shall have the same rights under
the Loan Documents as any other Bank and may exercise the same as
though it were not the Administrative Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include
-40-
<PAGE> 47
Administrative Agent and any successor Administrative Agent in its
capacity as a Bank. Administrative Agent and any successor
Administrative Agent and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of and generally engage in
any kind of business with the Borrower or either Guarantor, and any
person which may do business with the Borrower or either Guarantor, all
as if Administrative Agent and any successor Administrative Agent were
not Administrative Agent hereunder and without any duty to account
therefor to the Banks; provided that, if any payments in respect of any
property (or the proceeds thereof) now or hereafter in the possession
or control of Administrative Agent which may be or become security for
the obligations of the Borrower arising under the Loan Documents by
reason of the general description of indebtedness secured or of
property contained in any other agreements, documents or instruments
related to any such other business shall be applied to reduction of the
obligations of the Borrower arising under the Loan Documents, then each
Bank shall be entitled to share in such application according to its
Pro Rata Part thereof. Each Bank, upon request of any other Bank,
shall disclose to all other Banks all indebtedness and liabilities,
direct and contingent, of the Borrower or either Guarantor to such Bank
as of the time of such request.
(b) Note Holders. From time to time as other Banks become
a party to this Agreement Administrative Agent shall obtain execution
by the Borrower of additional Notes in amounts representing the
Commitment of each such new Bank, up to an aggregate face amount of all
such Revolving Notes not exceeding $100,000,000 and all such Term Notes
not exceeding $5,000,000. The obligation of such Bank shall be
governed by the provisions of this Agreement, including but not limited
to, the obligations specified in Section 2 hereof. From time to time,
Administrative Agent may require that the Banks exchange their Notes
for newly issued Notes to better reflect the Commitments of the Banks.
Administrative Agent may treat the payee of any Note as the holder
thereof until written notice of transfer has been filed with it, signed
by such payee and in form satisfactory to Administrative Agent.
(c) Consultation with Counsel. Banks agree that
Administrative Agent may consult with legal counsel selected by
Administrative Agent and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such
counsel.
(d) Documents. Administrative Agent shall not be under a
duty to examine or pass upon the validity, effectiveness,
enforceability, genuineness or value of any of the Loan Documents or
any other instrument or document furnished pursuant thereto or in
connection therewith, and Administrative Agent shall be entitled to
assume that the same are valid, effective, enforceable and genuine and
what they purport to be.
(e) Resignation or Removal of Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, Administrative Agent may resign at any time by
giving written notice thereof to Banks and the Borrower, and
Administrative Agent may be removed at any time with or without cause
by Majority Banks. If no successor Administrative Agent has been so
appointed by Majority Banks (and approved by the Borrower) and has
accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or removal of
the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of Banks, appoint a successor Administrative
Agent. Any successor Administrative Agent must be approved by
Borrower, which approval will not be unreasonably withheld. Upon the
acceptance of any appointment as Administrative Agent
-41-
<PAGE> 48
hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the
provisions of this Section 18 shall continue in effect for its benefit
in respect to any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
(f) Responsibility of Administrative Agent. It is
expressly understood and agreed that the obligations of Administrative
Agent under the Loan Documents are only those expressly set forth in
the Loan Documents and that Administrative Agent, as the case may be,
shall be entitled to assume that no Default or Event of Default has
occurred and is continuing, unless Administrative Agent, as the case
may be, has actual knowledge of such fact or has received notice from a
Bank or the Borrower that such Bank or the Borrower consider that a
Default or an Event of Default has occurred and is continuing and
specifying the nature thereof. Neither Administrative Agent nor any of
their directors, officers, attorneys or employees shall be liable for
any action taken or omitted to be taken by them under or in connection
with the Loan Documents, except for its or their own gross negligence
or willful misconduct. Administrative Agent shall incur no liability
under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper
party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment, or which
may seem to it to be necessary or desirable.
Administrative Agent shall not be responsible to Banks for any
of the Borrower's or Guarantors' recitals, statements, representations
or warranties contained in any of the Loan Documents, or in any
certificate or other document referred to or provided for in, or
received by any Bank under, the Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
or any of the Loan Documents or for any failure by the Borrower or
either Guarantor to perform any of their obligations hereunder or
thereunder. Administrative Agent may employ agents and
attorneys-in-fact and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
The relationship between Administrative Agent and each Bank is
only that of agent and principal and has no fiduciary aspects. Nothing
in the Loan Documents or elsewhere shall be construed to impose on
Administrative Agent any duties or responsibilities other than those
for which express provision is therein made. In performing its duties
and functions hereunder, Administrative Agent does not assume and shall
not be deemed to have assumed, and hereby expressly disclaims, any
obligation or responsibility toward or any relationship of agency or
trust with or for the Borrower, either Guarantor or any of their
beneficiaries or other creditors. As to any matters not expressly
provided for by the Loan Documents, Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of all
Banks and such instructions shall be binding upon all Banks and all
holders of the Notes; provided, however, that Administrative Agent
shall not be required to take any action which is contrary to the Loan
Documents or applicable law.
-42-
<PAGE> 49
Administrative Agent shall have the right to exercise or
refrain from exercising, without notice or liability to the Banks, any
and all rights afforded to Administrative Agent, as the case may be, by
the Loan Documents or which Administrative Agent may have as a matter
of law; provided, however, Administrative Agent shall not (i) except as
provided in Section 7(b) hereof, without the consent of Majority Banks
designate the amount of the Borrowing Base (provided, however, that any
increase in the Borrowing Base shall require the consent of all Banks)
or (ii) without the consent of Majority Banks, take any other action
with regard to amending the Loan Documents, waiving any default under
the Loan Documents or taking any other action with respect to the Loan
Documents which requires consent of Majority Banks. Provided further,
however, that no amendment, waiver, or other action shall be effected
pursuant to the preceding clause (ii) without the consent of all Banks
which: (i) would increase the Commitment amount of any Bank, (ii) would
reduce any fees hereunder, or the principal of, or the interest on, any
Bank's Note, (iii) would postpone any date fixed for any payment of any
fees hereunder, or any principal or interest of any Bank's Note or
Notes, (iv) would materially increase any Bank's obligations hereunder
or would materially alter Administrative Agent's obligations to any
Bank hereunder, (v) would release Borrower from its obligation to pay
any Bank's Note or Notes, (vi) release any of the Collateral, or (vii)
would amend this sentence. For purposes of this paragraph, a Bank
shall be deemed to have consented to any such action by Administrative
Agent upon the passage of five (5) Business Days after written notice
thereof is given to such Bank in accordance with Section 16 hereof,
unless such Bank shall have previously given Administrative Agent
notice, complying with the provision of Section 16 hereof, to the
contrary. Administrative Agent shall not have liability to Banks for
failure or delay in exercising any right or power possessed by
Administrative Agent pursuant to the Loan Documents or otherwise unless
such failure or delay is caused by the gross negligence of the
Administrative Agent.
(g) Independent Investigation. Each Bank severally
represents and warrants to Administrative Agent that it has made its
own independent investigation and assessment of the financial condition
and affairs of the Borrower and either Guarantor in connection with the
making and continuation of its participation hereunder and has not
relied exclusively on any information provided to such Bank by
Administrative Agent in connection herewith, and each Bank represents,
warrants and undertakes to Administrative Agent that it shall continue
to make its own independent appraisal of the credit worthiness of the
Borrower and either Guarantor while the Notes are outstanding or its
commitments hereunder are in force. Administrative Agent shall not be
required to keep itself informed as to the performance or observance by
the Borrower and either Guarantor of this Agreement or any other
document referred to or provided for herein or to inspect the
properties or books of the Borrower and either Guarantor. Other than
as provided in this Agreement, Administrative Agent shall not have any
duty, responsibility or liability to provide any Bank with any credit
or other information concerning the affairs, financial condition or
business of the Borrower and either Guarantor which may come into the
possession of Administrative Agent.
(h) Indemnification. Banks agree to indemnify
Administrative Agent, ratably according to their Commitment Percentage,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any proper and reasonable kind or nature whatsoever which may be
imposed on, incurred by or asserted against Administrative Agent in any
way relating to or arising out of the Loan Documents or any action
taken or omitted by Administrative Agent under the Loan Documents,
provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting
-43-
<PAGE> 50
from Administrative Agent's gross negligence or willful misconduct.
Each Bank shall be entitled to be reimbursed by the Administrative
Agent for any amount such Bank paid to Administrative Agent under this
Section 18(h) to the extent the Administrative Agent has been
reimbursed for such payments by the Borrower or any other Person.
(i) Benefit of Section 18. The agreements contained in
this Section 18 are solely for the benefit of Administrative Agent and
the Banks and are not for the benefit of, or to be relied upon by, the
Borrower, either Guarantor, any affiliate of the Borrower or either
Guarantor or any other person.
(j) Pro Rata Treatment. Subject to the provisions of this
Agreement, each payment (including each prepayment) by the Borrower or
either Guarantor and collection by Banks (including offsets) on account
of the principal of and interest on the Notes and fees provided for in
this Agreement, payable by the Borrower or either Guarantor shall be
made Pro Rata; provided, however, in the event that any Defaulting Bank
shall have failed to make an Advance as contemplated under Section 2
hereof and Administrative Agent or another Bank or Banks shall have
made such Advance, payment received by Administrative Agent for the
account of such Defaulting Bank or Banks shall not be distributed to
such Defaulting Bank or Banks until such Advance or Advances shall have
been repaid in full to the Bank or Banks who funded such Advance or
Advances.
(k) Assumption as to Payments. Except as specifically
provided herein, unless Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to
Banks hereunder that the Borrower will not make such payment in full,
Administrative Agent may, but shall not be required to, assume that the
Borrower has made such payment in full to Administrative Agent on such
date and Administrative Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Borrower
shall not have so made such payment in full to Administrative Agent,
each Bank shall repay to Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such Bank until
the date such Bank repays such amount to Administrative Agent, at the
interest rate applicable to such portion of the applicable Revolving
Loan or the applicable Term Loan.
(l) Other Financings. Without limiting the rights to
which any Bank otherwise is or may become entitled, such Bank shall
have no interest, by virtue of this Agreement or the Loan Documents, in
(a) any present or future loans from, letters of credit issued by, or
leasing or other financial transactions by, any other Bank to, on
behalf of, or with the Borrower or either Guarantor (collectively
referred to herein as "Other Financings") other than the obligations
hereunder; (b) any present or future guarantees by or for the account
of the Borrower or either Guarantor which are not contemplated by the
Loan Documents; (c) any present or future property taken as security
for any such Other Financings; or (d) any property now or hereafter in
the possession or control of any other Bank which may be or become
security for the obligations of the Borrower or either Guarantor
arising under any loan document by reason of the general description of
indebtedness secured or property contained in any other agreements,
documents or instruments relating to any such Other Financings.
-44-
<PAGE> 51
(m) Interests of Banks. Nothing in this Agreement shall
be construed to create a partnership or joint venture between Banks for
any purpose. Administrative Agent, Banks and the Borrower and each
Guarantor recognize that the respective obligations of Banks under the
Commitment shall be several and not joint and that neither
Administrative Agent, nor any of Banks shall be responsible or liable
to perform any of the obligations of the other under this Agreement.
Each Bank is deemed to be the owner of an undivided interest in and to
all rights, titles, benefits and interests belonging and accruing to
Administrative Agent under the Security Instruments, including, without
limitation, liens and security interests in any collateral, fees and
payments of principal and interest by the Borrower under the Commitment
on a Pro Rata basis. Each Bank shall perform all duties and
obligations of Banks under this Agreement in the same proportion as its
ownership interest in the Loans outstanding at the date of
determination thereof.
(n) Investments. Whenever Administrative Agent in good
faith determines that it is uncertain about how to distribute to Banks
any funds which it has received, or whenever Administrative Agent in
good faith determines that there is any dispute among the Banks about
how such funds should be distributed, Administrative Agent may choose
to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Administrative Agent in good faith believes
that the uncertainty or dispute will not be promptly resolved, or if
Administrative Agent is otherwise required to invest funds pending
distribution to the Banks, Administrative Agent may invest such funds
pending distribution (at the risk of the Borrower). All interest on
any such investment shall be distributed upon the distribution of such
investment and in the same proportions and to the same Persons as such
investment. All monies received by Administrative Agent for
distribution to the Banks (other than to the Person who is
Administrative Agent in its separate capacity as a Bank) shall be held
by the Administrative Agent pending such distribution solely as
Administrative Agent for such Banks, and Administrative Agent shall
have no equitable title to any portion thereof.
19. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND
DELIVERED, AND IS INTENDED TO BE PERFORMED, IN DALLAS, DALLAS COUNTY, TEXAS,
AND THE SUBSTANTIVE LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND
INSTRUMENTS REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
20. INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provisions shall be fully
severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of the Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
21. MAXIMUM INTEREST RATE. Regardless of any provisions contained
in this Agreement or in any other documents and instruments referred to herein,
the Banks shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on the Notes any amount in excess of the
Maximum Rate, and in the event any Bank ever receives, collects or applies as
interest any such excess, of if an acceleration of the maturities of any Notes
or if any prepayment by the Borrower result in the Borrower having paid any
interest in excess of the Maximum Rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Notes for which such excess was received, collected or applied, and, if the
principal balance of such Notes is paid in full, any remaining excess shall
forthwith be paid to the Borrower. All sums paid or agreed
-45-
<PAGE> 52
to be paid to the Banks for the use, forbearance or detention of the
indebtedness evidenced by the Notes and/or this Agreement shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
Maximum Rate. In determining whether or not the interest paid or payable under
any specific contingency exceeds the Maximum Rate of interest permitted by law,
the Borrower and the Banks shall, to the maximum extent permitted under
applicable law (i) characterize any non-principal payment as an expense, fee or
premium, rather than as interest; (ii) exclude voluntary prepayments and the
effect thereof; and (iii) compare the total amount of interest contracted for,
charged or received with the total amount of interest which could be contracted
for, charged or received throughout the entire contemplated term of the Notes
at the Maximum Rate.
22. AMENDMENTS. Except as otherwise provided in Section 18(f)
hereof, this Agreement may be amended only by an instrument in writing executed
by an authorized officer of the party against whom such amendment is sought to
be enforced.
23. MULTIPLE COUNTERPARTS. This Agreement may be executed in a
number of identical separate counterparts, each of which for all purposes is to
be deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a
counterpart of this Agreement has been executed by all parties hereto.
24. CONFLICT. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the Loan Documents, the
terms or provisions contained in this Agreement shall be controlling.
25. SURVIVAL. All covenants, agreements, undertakings,
representations and warranties made in the Loan Documents, including this
Agreement, the Notes or other documents and instruments referred to herein
shall survive all closings hereunder and shall not be affected by any
investigation made by any party.
26. PARTIES BOUND. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates; provided, however, that the Borrower
may not, without the prior written consent of the Administrative Agent, assign
any rights, powers, duties or obligations hereunder.
27. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Bank shall have the right to sell, assign or
transfer all or any part of its Note or Notes, its Commitment and its
rights and obligations hereunder to one or more Affiliates, Banks,
financial institutions, pension plans, investment funds, or similar
Persons or to a Federal Reserve Bank; provided, that in connection with
each sale, assignment or transfer (other than to an Affiliate, a Bank
or a Federal Reserve Bank), the applicable Bank shall obtain the
consent of the Borrower, and the Administrative Agent, which consents
will not be unreasonably withheld, and the assignee, transferee or
recipient shall have, to the extent of such sale, assignment, or
transfer, the same rights, benefits and obligations as it would if it
were such Bank and a holder of such Note, Commitment and rights and
obligations, including, without limitation, the right to vote on
decisions requiring consent or approval of all Banks or Majority Banks
and the obligation to fund its Commitment; provided, further, that (1)
each such sale, assignment, or transfer (other than to an Affiliate, a
Bank or a Federal Reserve Bank) shall be in an aggregate principal
amount not less than
-46-
<PAGE> 53
$5,000,000, (2) each remaining Bank shall at all times maintain a
Commitment then outstanding in an aggregate principal amount at least
equal to $5,000,000; (3) no Bank may offer to sell its Note or Notes,
Commitment, rights and obligations or interests therein in violation of
any securities laws; and (4) no such assignments (other than to a
Federal Reserve Bank) shall become effective until the assigning Bank
delivers to Administrative Agent and Borrower copies of all written
assignments and other documents evidencing any such assignment. An
assignment fee in the amount of $2,500 for each such assignment (other
than to an Affiliate, a Bank, a Federal Reserve Bank or pursuant to a
syndication by the Syndication Agent or the Administrative Agent) will
be payable to Administrative Agent by assignor or assignee. Within
five (5) Business Days after its receipt of copies of any assignment
and the other documents relating thereto and the following described
Note or Notes, Borrower shall execute and deliver to Administrative
Agent (for delivery to the relevant assignee) a new Note or Notes
evidencing such assignee's assigned Commitment and if the assignor Bank
has retained a portion of its Commitment, a replacement Note in the
principal amount of the Commitment retained by the assignor (except as
provided in the last sentence of this paragraph (a) such Note or Notes
to be in exchange for, but not in payment of, the Note or Notes held by
such Bank). On and after the effective date of an assignment
hereunder, the assignee shall for all purposes be a Bank, party to this
Agreement and any other Loan Document executed by the Banks and shall
have all the rights and obligations of a Bank under the Loan Documents,
to the same extent as if it were an original party thereto, and no
further consent or action by Borrower, Banks or the Administrative
Agent shall be required to release the transferor Bank with respect to
its Commitment assigned to such assignee and the transferor Bank shall
henceforth be so released.
(b) Each Bank shall have the right to grant participations
in all or any part of such Bank's Notes and Commitment hereunder to one
or more pension plans, investment funds, financial institutions or
other Persons, provided, that:
(i) each Bank granting a participation shall
retain the right to vote hereunder, and no participant shall
be entitled to vote hereunder on decisions requiring consent
or approval of such Bank or Majority Banks (except as set
forth in (iii) below);
(ii) in the event any Bank grants a participation
hereunder, such Bank's obligations under the Loan Documents
shall remain unchanged, such Bank shall remain solely
responsible to the other parties hereto for the performance of
such obligations, such Bank shall remain the holder of any
such Note or Notes for all purposes under the Loan Documents,
and Administrative Agent, each Bank and Borrower shall be
entitled to deal with the Bank granting a participation in the
same manner as if no participation had been granted; and
(iii) no participant shall ever have any right by
reason of its participation to exercise any of the rights of
Banks hereunder, except that any Bank may agree with any
participant that such Bank will not, without the consent of
such participant (which consent may not be unreasonably
withheld) consent to any amendment or waiver requiring
approval of all Banks.
-47-
<PAGE> 54
(c) It is understood and agreed that any Bank may provide
to assignees and participants and prospective assignees and
participants financial information and reports and data concerning
Borrower's properties and operations which was provided to such Bank
pursuant to this Agreement.
(d) Upon the reasonable request of either Administrative
Agent or Borrower, each Bank will identify those to whom it has
assigned or participated any part of its Notes and Commitment, and
provide the amounts so assigned or participated.
28. INDEMNITY. The Borrower and the Guarantors agree to indemnify
and hold harmless the Banks and its respective officers, employees, agents,
attorneys and representatives (singularly, an "Indemnified Party", and
collectively, the "Indemnified Parties") from and against any loss, cost,
liability, damage or expense (including the reasonable fees and out-of-pocket
expenses of counsel to the Banks, including all local counsel hired by such
counsel) ("Claim") incurred by the Banks in investigating or preparing for,
defending against or providing evidence, producing documents or taking any
other action in respect of any commenced or threatened litigation,
administrative proceeding or investigation under any federal securities law,
federal or state environmental law, or any other statute of any jurisdiction,
or any regulation, or at common law or otherwise, which is alleged to arise out
of or is based upon any acts, practices or omissions or alleged acts, practices
or omissions of the Borrower or the Guarantors or their agents or arises in
connection with the duties, obligations or performance of the Indemnified
Parties in negotiating, preparing, executing, accepting, keeping, completing,
countersigning, issuing, selling, delivering, releasing, assigning, handling,
certifying, processing or receiving or taking any other action with respect to
the Loan Documents and all documents, items and materials contemplated thereby
even if any of the foregoing arises out of an Indemnified Party's ordinary
negligence. The indemnity set forth herein shall be in addition to any other
obligations or liabilities of the Borrower or the Guarantors to the Banks
hereunder or at common law or otherwise, and shall survive any termination of
this Agreement, the expiration of the Loan and the payment of all indebtedness
of the Borrower or the Guarantors to the Banks hereunder and under the Notes
provided that the Borrower and the Guarantors shall have no obligation under
this Section to the Banks with respect to any of the foregoing arising out of
the gross negligence or willful misconduct of the Banks. If any Claim is
asserted against any Indemnified Party, the Indemnified Party shall endeavor to
notify the Borrower of such Claim (but failure to do so shall not affect the
indemnification herein made except to the extent of the actual harm caused by
such failure). The Indemnified Party shall have the right to employ, at the
Borrower's expense, counsel of the Indemnified Parties' choosing and to control
the defense of the Claim. The Borrower may at its own expense also participate
in the defense of any Claim. Each Indemnified Party may employ separate
counsel in connection with any Claim to the extent such Indemnified Party
believes it reasonably prudent to protect such Indemnified Party. THE PARTIES
INTEND FOR THE PROVISIONS OF THIS SECTION TO APPLY TO AND PROTECT EACH
INDEMNIFIED PARTY FROM THE CONSEQUENCES OF THE APPLICATION OF STRICT LIABILITY
OR THE CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS
THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND
JURISDICTION. THE OBLIGATIONS OF BORROWER AND GUARANTORS UNDER THE LOAN
DOCUMENTS ARE PERFORMABLE IN DALLAS COUNTY, TEXAS. ANY SUIT, ACTION OR
PROCEEDING AGAINST BORROWER OR GUARANTORS WITH RESPECT TO THE LOAN DOCUMENTS OR
ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, MAY BE BROUGHT IN THE
COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE UNITED STATES COURTS
LOCATED IN DALLAS, TEXAS AND BORROWER AND GUARANTORS HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT,
ACTION OR PROCEEDING. BORROWER AND
-48-
<PAGE> 55
GUARANTORS HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS IN ANY SUIT, ACTION
OR PROCEEDING IN SAID COURT BY THE MAILING THEREOF BY BANKS BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER OR GUARANTORS, AS APPLICABLE, AT
THE ADDRESS FOR NOTICES AS PROVIDED IN SECTION 16. BORROWER AND GUARANTORS
HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED IN THE STATE OF
TEXAS, COUNTY OF DALLAS, AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
30. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
NATIONAL ENERGY GROUP, INC.,
a Delaware corporation
By: /s/ Miles D. Bender
------------------------------------
Miles D. Bender
President
GUARANTORS:
NEG-OK, INC.
a Delaware corporation
By: /s/ Miles D. Bender
------------------------------------
Miles D. Bender
President
-49-
<PAGE> 56
BOOMER MARKETING CORPORATION
an Oklahoma corporation
By: /s/ Miles D. Bender
------------------------------------
Miles D. Bender
President
ADMINISTRATIVE AGENT
BANK ONE, TEXAS, N.A.
By: /s/ Wm. Mark Cranmer
------------------------------------
Wm. Mark Cranmer
Vice President
SYNDICATION AGENT
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
------------------------------------
Name:Pascal Poupelle
----------------------------------
Title:Senior Vice President
---------------------------------
-50-
<PAGE> 57
BANKS:
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ Wm. Mark Cranmer
------------------------------------
Wm. Mark Cranmer
Vice President
Address for Notices for operational
matters:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Wm. Mark Cranmer
Telephone No.: (214) 290-2212
Fax No.: (214) 290-2627
Address for Notices for credit matters:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Wm. Mark Cranmer
Telephone No. (214) 290-2212
Fax No.: (214) 290-2627
-51-
<PAGE> 58
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
------------------------------------
Name:Pascal Poupelle
----------------------------------
Title:Senior Vice President
---------------------------------
Address for Notices for operational
matters:
Credit Lyonnais
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Bernadette Archie
Telephone No.: (713) 751-0500
Fax No.: (713) 751-0307
Address for Notices for credit matters:
Credit Lyonnais
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: David Dodd
Telephone No. (713) 751-0500
Fax No.: (713) 751-0307
-52-
<PAGE> 1
REVOLVING NOTE EXHIBIT 10.41
$50,000,000.00 Dallas, Texas August 29, 1996
FOR VALUE RECEIVED, the undersigned, NATIONAL ENERGY GROUP, INC., a
Delaware corporation (referred to herein as "Borrower") hereby unconditionally
promises to pay to the order of BANK ONE, TEXAS, N.A., a national banking
association (referred to herein as "Bank"), at the offices of BANK ONE, TEXAS,
N.A. (the "Administrative Agent") in Dallas County, Texas, the principal sum of
FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00), or so much thereof as may be
advanced and outstanding to or for the benefit of Borrower by Bank pursuant to
the Loan Agreement (as hereinafter defined), in lawful money of the United
States of America together with interest from the date hereof until paid at the
rates specified in the Loan Agreement. All payments of principal and interest
due hereunder are payable at the offices of Agent at 1717 Main Street, 4th
Floor, Bank One Center, P.O. Box 655415, Dallas, Texas 75265-5415, attention:
Energy Department, or at such other address as Bank shall designate in writing
to Borrower.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Loan Agreement.
This Note is executed pursuant to that certain Restated Loan Agreement
dated of even date herewith among the Borrower, the Administrative Agent and
the Banks signatory thereto (the "Loan Agreement"), and is one of the Revolving
Notes referred to therein. This Note is secured by certain Security
Instruments (as such term is defined in the Loan Agreement) of even date
herewith between Borrower and Administrative Agent. Reference is made to the
Loan Agreement and the Security Instruments for a statement of prepayment
rights and obligations of Borrower, description of the properties mortgaged and
assigned, the nature and extent of such security and the rights of the parties
under the Security Instruments in respect to such security and for a statement
of the terms and conditions under which the due date of this Note may be
accelerated. Upon the occurrence of an Event of Default, as that term is
defined in the Loan Agreement and Security Instruments, the holder hereof
(subject to the provisions of the Loan Agreement) (i) may declare forthwith to
be entirely and immediately due and payable the principal balance hereof and
the interest accrued hereon, and (ii) shall have all rights and remedies under
the Loan Agreement and Security Instruments. This Note may be prepaid at any
time in full or in part without any premium or fee in accordance with the terms
and provisions of the Loan Agreement.
Regardless of any provision contained in this Note, the holder hereof
shall never be entitled to receive, collect or apply, as interest on this Note,
any amount in excess of the Maximum Rate (as such term is defined in the Loan
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Rate, Borrower
and the holder hereof shall, to the maximum
<PAGE> 2
extent permitted under applicable law (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) spread the total
amount of interest throughout the entire contemplated term of the obligations
evidenced by this Note and/or referred to in the Loan Agreement so that the
interest rate is uniform throughout the entire term of this Note; provided
that, if this Note is paid and performed in full prior to the end of the full
contemplated term thereof and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, the holder hereof shall refund to
Borrower the amount of such excess or credit the amount of such excess against
the indebtedness evidenced hereby, and, in such event, the holder hereof shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of the Maximum
Rate.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday or public holiday or while the Administrative Agent is
not open for business, such payment shall be made on the next succeeding
business day unless required to be made on a different day pursuant to the
provisions of the Loan Agreement and such extension of time shall in such case
be included in computing interest in connection with such payment.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrower agrees to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrower and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, protest,
notice of protest and nonpayment, as to this Note and as to each and all
installments hereof, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases or changes.
This Note shall be governed by and construed in accordance with the
applicable laws of the United States of America and the laws of the State of
Texas, except that Tex. Rev. Civ. Stat. Ann. art. 5069, Chapter 15 (which
regulates certain revolving credit loan accounts and revolving tri-party
accounts) shall not apply to this Note.
THIS WRITTEN NOTE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-2-
<PAGE> 3
EXECUTED as of the 29th day of August, 1996.
BORROWER:
NATIONAL ENERGY GROUP, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-3-
<PAGE> 1
REVOLVING NOTE EXHIBIT 10.42
$50,000,000.00 Dallas, Texas August 29, 1996
FOR VALUE RECEIVED, the undersigned, NATIONAL ENERGY GROUP, INC., a
Delaware corporation (referred to herein as "Borrower") hereby unconditionally
promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH (referred to
herein as "Bank"), at the offices of BANK ONE, TEXAS, N.A. (the "Administrative
Agent") in Dallas County, Texas, the principal sum of FIFTY MILLION AND NO/100
DOLLARS ($50,000,000.00), or so much thereof as may be advanced and outstanding
to or for the benefit of Borrower by Bank pursuant to the Loan Agreement (as
hereinafter defined), in lawful money of the United States of America together
with interest from the date hereof until paid at the rates specified in the
Loan Agreement. All payments of principal and interest due hereunder are
payable at the offices of Agent at 1717 Main Street, 4th Floor, Bank One
Center, P.O. Box 655415, Dallas, Texas 75265-5415, attention: Energy
Department, or at such other address as Bank shall designate in writing to
Borrower.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Loan Agreement.
This Note is executed pursuant to that certain Restated Loan Agreement
dated of even date herewith among the Borrower, the Administrative Agent and
the Banks signatory thereto (the "Loan Agreement"), and is one of the Revolving
Notes referred to therein. This Note is secured by certain Security
Instruments (as such term is defined in the Loan Agreement) of even date
herewith between Borrower and Administrative Agent. Reference is made to the
Loan Agreement and the Security Instruments for a statement of prepayment
rights and obligations of Borrower, description of the properties mortgaged and
assigned, the nature and extent of such security and the rights of the parties
under the Security Instruments in respect to such security and for a statement
of the terms and conditions under which the due date of this Note may be
accelerated. Upon the occurrence of an Event of Default, as that term is
defined in the Loan Agreement and Security Instruments, the holder hereof
(subject to the provisions of the Loan Agreement) (i) may declare forthwith to
be entirely and immediately due and payable the principal balance hereof and
the interest accrued hereon, and (ii) shall have all rights and remedies under
the Loan Agreement and Security Instruments. This Note may be prepaid at any
time in full or in part without any premium or fee in accordance with the terms
and provisions of the Loan Agreement.
Regardless of any provision contained in this Note, the holder hereof
shall never be entitled to receive, collect or apply, as interest on this Note,
any amount in excess of the Maximum Rate (as such term is defined in the Loan
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Rate, Borrower
and the holder hereof shall, to the maximum
<PAGE> 2
extent permitted under applicable law (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) spread the total
amount of interest throughout the entire contemplated term of the obligations
evidenced by this Note and/or referred to in the Loan Agreement so that the
interest rate is uniform throughout the entire term of this Note; provided
that, if this Note is paid and performed in full prior to the end of the full
contemplated term thereof and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, the holder hereof shall refund to
Borrower the amount of such excess or credit the amount of such excess against
the indebtedness evidenced hereby, and, in such event, the holder hereof shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of the Maximum
Rate.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday or public holiday or while the Administrative Agent is
not open for business, such payment shall be made on the next succeeding
business day unless required to be made on a different day pursuant to the
provisions of the Loan Agreement and such extension of time shall in such case
be included in computing interest in connection with such payment.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrower agrees to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrower and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, protest,
notice of protest and nonpayment, as to this Note and as to each and all
installments hereof, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases or changes.
This Note shall be governed by and construed in accordance with the
applicable laws of the United States of America and the laws of the State of
Texas, except that Tex. Rev. Civ. Stat. Ann. art. 5069, Chapter 15 (which
regulates certain revolving credit loan accounts and revolving tri-party
accounts) shall not apply to this Note.
THIS WRITTEN NOTE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-2-
<PAGE> 3
EXECUTED as of the 29th day of August, 1996.
BORROWER:
NATIONAL ENERGY GROUP, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-3-
<PAGE> 1
EXHIBIT 10.43
TERM NOTE
$2,500,000.00 Dallas, Texas August 29, 1996
FOR VALUE RECEIVED, the undersigned, NATIONAL ENERGY GROUP, INC., a
Delaware corporation (referred to herein as "Borrower") hereby unconditionally
promises to pay to the order of BANK ONE, TEXAS, N.A., a national banking
association (referred to herein as "Bank"), at the offices of BANK ONE, TEXAS,
N.A. (the "Administrative Agent") in Dallas County, Texas, the principal sum of
TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00), or so
much thereof as may be advanced to or for the benefit of Borrower by Bank
pursuant to the Loan Agreement (as hereinafter defined) in lawful money of the
United States of America together with interest from the date hereof until paid
at the rates specified in the Loan Agreement. All payments of principal and
interest due hereunder are payable at the offices of Agent at 1717 Main Street,
4th Floor, Bank One Center, P.O. Box 655415, Dallas, Texas 75265-5415,
attention: Energy Department, or at such other address as Bank shall designate
in writing to Borrower.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Loan Agreement.
This Note is executed pursuant to that certain Restated Loan Agreement
dated of even date herewith among Borrower, the Administrative Agent and the
Banks signatory thereto (the "Loan Agreement"), and is one of the Term Notes
referred to therein. This Note is secured by certain Security Instruments (as
such term is defined in the Loan Agreement) of even date herewith between
Borrower and Administrative Agent. Reference is made to the Loan Agreement and
the Security Instruments for a statement of prepayment rights and obligations
of Borrower, description of the properties mortgaged and assigned, the nature
and extent of such security and the rights of the parties under the Security
Instruments in respect to such security and for a statement of the terms and
conditions under which the due date of this Note may be accelerated. Upon the
occurrence of an Event of Default, as that term is defined in the Loan
Agreement and Security Instruments, the holder hereof (subject to the
provisions of the Loan Agreement) (i) may declare forthwith to be entirely and
immediately due and payable the principal balance hereof and the interest
accrued hereon, and (ii) shall have all rights and remedies under the Loan
Agreement and Security Instruments. This Note may be prepaid at any time in
full or in part without any premium or fee in accordance with the terms and
provisions of the Loan Agreement.
Regardless of any provision contained in this Note, the holder hereof
shall never be entitled to receive, collect or apply, as interest on this Note,
any amount in excess of the Maximum Rate (as such term is defined in the Loan
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific
<PAGE> 2
contingency, exceeds the Maximum Rate, Borrower and the holder hereof shall, to
the maximum extent permitted under applicable law (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) spread
the total amount of interest throughout the entire contemplated term of the
obligations evidenced by this Note and/or referred to in the Loan Agreement so
that the interest rate is uniform throughout the entire term of this Note;
provided that, if this Note is paid and performed in full prior to the end of
the full contemplated term thereof; and if the interest received for the actual
period of existence thereof exceeds the Maximum Rate, the holder hereof shall
refund to Borrower the amount of such excess or credit the amount of such
excess against the indebtedness evidenced hereby, and, in such event, the
holder hereof shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Rate.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday or public holiday or while the Administrative Agent is
not open for business, such payment shall be made on the next succeeding
business day unless required to be made on a different day pursuant to the
provisions of the Loan Agreement and such extension of time shall in such case
be included in computing interest in connection with such payment.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrower agrees to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrower and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, protest,
notice of protest and nonpayment, as to this Note and as to each and all
installments hereof, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases or changes.
THIS WRITTEN NOTE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-2-
<PAGE> 3
EXECUTED as of the 29th day of August, 1996.
BORROWER:
NATIONAL ENERGY GROUP, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-3-
<PAGE> 1
TERM NOTE EXHIBIT 10.44
$2,500,000.00 Dallas, Texas August 29, 1996
FOR VALUE RECEIVED, the undersigned, NATIONAL ENERGY GROUP, INC., a
Delaware corporation (referred to herein as "Borrower") hereby unconditionally
promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH (referred to
herein as "Bank"), at the offices of BANK ONE, TEXAS, N.A. (the "Administrative
Agent") in Dallas County, Texas, the principal sum of TWO MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($2,500,000.00), or so much thereof as may be
advanced to or for the benefit of Borrower by Bank pursuant to the Loan
Agreement (as hereinafter defined) in lawful money of the United States of
America together with interest from the date hereof until paid at the rates
specified in the Loan Agreement. All payments of principal and interest due
hereunder are payable at the offices of Agent at 1717 Main Street, 4th Floor,
Bank One Center, P.O. Box 655415, Dallas, Texas 75265-5415, attention: Energy
Department, or at such other address as Bank shall designate in writing to
Borrower.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Loan Agreement.
This Note is executed pursuant to that certain Restated Loan Agreement
dated of even date herewith among Borrower, the Administrative Agent and the
Banks signatory thereto (the "Loan Agreement"), and is one of the Term Notes
referred to therein. This Note is secured by certain Security Instruments (as
such term is defined in the Loan Agreement) of even date herewith between
Borrower and Administrative Agent. Reference is made to the Loan Agreement and
the Security Instruments for a statement of prepayment rights and obligations
of Borrower, description of the properties mortgaged and assigned, the nature
and extent of such security and the rights of the parties under the Security
Instruments in respect to such security and for a statement of the terms and
conditions under which the due date of this Note may be accelerated. Upon the
occurrence of an Event of Default, as that term is defined in the Loan
Agreement and Security Instruments, the holder hereof (subject to the
provisions of the Loan Agreement) (i) may declare forthwith to be entirely and
immediately due and payable the principal balance hereof and the interest
accrued hereon, and (ii) shall have all rights and remedies under the Loan
Agreement and Security Instruments. This Note may be prepaid at any time in
full or in part without any premium or fee in accordance with the terms and
provisions of the Loan Agreement.
Regardless of any provision contained in this Note, the holder hereof
shall never be entitled to receive, collect or apply, as interest on this Note,
any amount in excess of the Maximum Rate (as such term is defined in the Loan
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Rate, Borrower
and the holder hereof shall, to the maximum
<PAGE> 2
extent permitted under applicable law (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) spread the total
amount of interest throughout the entire contemplated term of the obligations
evidenced by this Note and/or referred to in the Loan Agreement so that the
interest rate is uniform throughout the entire term of this Note; provided
that, if this Note is paid and performed in full prior to the end of the full
contemplated term thereof; and if the interest received for the actual period
of existence thereof exceeds the Maximum Rate, the holder hereof shall refund
to Borrower the amount of such excess or credit the amount of such excess
against the indebtedness evidenced hereby, and, in such event, the holder
hereof shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Rate.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday or public holiday or while the Administrative Agent is
not open for business, such payment shall be made on the next succeeding
business day unless required to be made on a different day pursuant to the
provisions of the Loan Agreement and such extension of time shall in such case
be included in computing interest in connection with such payment.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrower agrees to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrower and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, protest,
notice of protest and nonpayment, as to this Note and as to each and all
installments hereof, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Note, and hereby consent to any and all renewals, extensions, indulgences,
releases or changes.
THIS WRITTEN NOTE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-2-
<PAGE> 3
EXECUTED as of the 29th day of August, 1996.
BORROWER:
NATIONAL ENERGY GROUP, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-3-
<PAGE> 1
UNLIMITED GUARANTY EXHIBIT 10.45
THIS UNLIMITED GUARANTY ("Guaranty") is made as of the 29th day of
August, 1996, by Guarantor (as hereinafter defined) for the benefit of Bank (as
hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms
shall have the meanings indicated below:
(a) The term "Bank" shall mean BANK ONE, TEXAS, N.A.,
whose address for notice purposes is the following:
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Wm. Mark Cranmer
(b) The term "Borrower" (shall mean the following:
National Energy Group, Inc.
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(c) The term "Guarantor" shall mean NEG-OK, INC., a
Delaware corporation, whose address for notice purposes is the
following:
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(d) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Bank of any
kind or character now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to
their acquisition by Bank, be or have been payable to or in favor of a
third party and subsequently acquired by Bank (it being contemplated
that Bank may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
Borrower to Bank now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Bank under any
documents evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii) above, (iv) all
costs and expenses incurred by Bank in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the protection
or preservation of, or realization upon, the collateral securing all
or
<PAGE> 2
any part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
2. Obligations. As an inducement to Bank to extend or continue
to extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter. The liability of Guarantor
hereunder with respect to the Guaranteed Indebtedness shall be limited to the
maximum amount of liability that can be incurred without rendering this
Guaranty, as it relates to the Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.
3. Character of Obligations. This is an absolute, continuing and
unconditional Guaranty of payment and not of collection and if at any time or
from time to time there is no outstanding Guaranteed Indebtedness, the
obligations of the Guarantor with respect to any and all Guaranteed
Indebtedness of Borrower to Bank incurred thereafter shall not be affected.
All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made
by Bank to Borrower shall be conclusively presumed to have been made or
acquired in acceptance hereof. Guarantor shall be primarily liable, jointly
and severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents
and warrants the following to Bank:
(a) This Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor, and the Board of Directors of
Guarantor has determined that this Guaranty may reasonably be expected
to benefit, directly or indirectly, Guarantor;
(b) Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness; provided, however, Guarantor is not relying
on such financial condition or collateral as an inducement to enter
into this Guaranty;
(c) Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition
of Borrower and Guarantor is not relying on Bank to provide such
information to Guarantor either now or in the future;
-2-
<PAGE> 3
(d) Guarantor has the power and authority to execute,
deliver and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith does not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) Guarantor's Articles of Incorporation
or Bylaws;
(e) Neither Bank nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty;
(f) The financial statements and other financial
information regarding Guarantor heretofore and hereafter delivered to
Bank are and shall be true and correct in all material respects and
fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor reflected in the financial statements and other
financial information regarding Guarantor heretofore delivered to Bank
since the date of the last statement thereof; and
(g) As of the date hereof, and after giving effect to
this Guaranty and the obligations evidenced hereby, (i) Guarantor is
and will be solvent, (ii) the fair saleable value of Guarantor's
assets exceeds and will continue to exceed Guarantor's liabilities
(both fixed and contingent), (iii) Guarantor is and will continue to
be able to pay Guarantor's debts as they mature, and (iv) Guarantor
has and will continue to have sufficient capital to carry on its
business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with Bank as
follows:
(a) Guarantor shall not, so long as Guarantor's
obligations under this Guaranty continue, transfer or pledge any
material portion of Guarantor's assets for less than full and adequate
consideration;
(b) Guarantor shall comply with all terms and provisions
of the instruments and agreements evidencing, governing and securing
all or any part of the Guaranteed Indebtedness that apply to
Guarantor; and
(c) Guarantor shall promptly inform Bank of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined
-3-
<PAGE> 4
adversely, might have a material adverse effect upon the financial
condition of Guarantor or upon such security or might cause a default
under any of the instruments or agreements evidencing, governing or
securing all or any part of the Guaranteed Indebtedness, (ii) any
claim or controversy which might become the subject of such litigation
or governmental investigation, and (iii) any material adverse change
in the financial condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice
of acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies
or may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
of Bank, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other
guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives any rights Guarantor has under, or
any requirements imposed by, Chapter 34 of the Texas Business and
Commerce Code, as in effect on the date of this Guaranty or as it may
be amended from time to time.
(c) Bank may at any time, without the consent of or
notice to Guarantor, without incurring responsibility to Guarantor and
without impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange or alter all or any part of the Guaranteed
Indebtedness; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed
Indebtedness; (iii) neglect, delay, omit, fail or refuse to take or
prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any
action in connection with any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (iv) exercise or refrain from exercising any rights
against Borrower or others, or otherwise act or refrain from acting;
(v) settle or compromise all or any part of the Guaranteed
Indebtedness and subordinate the payment of all or any part of the
Guaranteed Indebtedness to the payment of any obligations,
indebtedness or liabilities which may be due or become due to Bank or
others;
-4-
<PAGE> 5
(vi) apply any deposit balance, fund, payment, collections through
process of law or otherwise or other collateral of Borrower to the
satisfaction and liquidation of the indebtedness or obligations of
Borrower to Bank not guaranteed under this Guaranty pursuant to
paragraph 4 herein; and (vii) apply any sums paid to Bank by
Guarantor, Borrower or others to the Guaranteed Indebtedness in such
order and manner as Bank, in its sole discretion, may determine.
(d) Notwithstanding any provision in this Guaranty to the
contrary, Guarantor hereby waives and releases (i) any and all rights
of subrogation, reimbursement, indemnification or contribution which
Guarantor may have, after payment in full or in part of the Guaranteed
Indebtedness, against others liable on all or any part of the
Guaranteed Indebtedness, (ii) any and all rights to be subrogated to
the rights of Bank in any collateral or security for all or any part
of the Guaranteed Indebtedness after payment in full or in part of the
Guaranteed Indebtedness, and (iii) any and all other rights and claims
of such Guarantor against Borrower or any third party as a result of
such Guarantor's payment of all or any part of the Guaranteed
Indebtedness.
(e) Should Bank seek to enforce the obligations of
Guarantor hereunder by action in any court or otherwise, Guarantor
waives any requirement, substantive or procedural, that (i) Bank first
enforce any rights or remedies against Borrower or any other person or
entity liable to Bank for all or any part of the Guaranteed
Indebtedness, including without limitation that a judgment first be
rendered against Borrower or any other person or entity, or that
Borrower or any other person or entity should be joined in such cause,
or (ii) Bank shall first enforce rights against any collateral which
shall ever have been given to secure all or any part of the Guaranteed
Indebtedness or this Guaranty. Such waiver shall be without prejudice
to Bank's right, at its option, to proceed against Borrower or any
other person or entity, whether by separate action or by joinder.
(f) In addition to any other waivers, agreements and
covenants of Guarantor set forth herein, Guarantor hereby further
waives and releases all claims, causes of action, defenses and offsets
for any act or omission of Bank, its directors, officers, employees,
representatives or agents in connection with Bank's administration of
the Guaranteed Indebtedness, except for Bank's willful misconduct and
gross negligence.
7. Obligations Not Impaired.
(a) Guarantor agrees that Guarantor's obligations
hereunder shall not be released, diminished, impaired, reduced or
affected by the occurrence of any one or more of the following events:
(i) the death, disability or lack of corporate
-5-
<PAGE> 6
power of Borrower, Guarantor (except as provided in paragraph 10
herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of
all or any part of the Guaranteed Indebtedness, or any of their
respective property; (iii) the partial or total release or discharge
of Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any other person or entity from the
performance of any obligation contained in any instrument or agreement
evidencing, governing or securing all or any part of the Guaranteed
Indebtedness, whether occurring by reason of law or otherwise; (iv)
the taking or accepting of any collateral for all or any part of the
Guaranteed Indebtedness or this Guaranty; (v) the taking or accepting
of any other guaranty for all or any part of the Guaranteed
Indebtedness; (vi) any failure by Bank to acquire, perfect or continue
any lien or security interest on collateral securing all or any part
of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment
of any collateral securing all or any part of the Guaranteed
Indebtedness or this Guaranty; (viii) any failure by Bank to sell any
collateral securing all or any part of the Guaranteed Indebtedness or
this Guaranty in a commercially reasonable manner or as otherwise
required by law; (ix) any invalidity or unenforceability of or defect
or deficiency in any instrument or agreement evidencing, governing or
securing all or any part of the Guaranteed Indebtedness or this
Guaranty; or (x) any other circumstances which might otherwise
constitute a defense available to, or discharge of, Borrower or any
other guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
(c) In the event Borrower is a corporation, joint stock
association or partnership, or is hereafter incorporated, none of the
following shall affect Guarantor's liability hereunder: (i) the
unenforceability of all or any part of the Guaranteed Indebtedness
against Borrower by reason of the fact that the Guaranteed
Indebtedness exceeds the amount permitted by law; (ii) the act of
creating all or any part of the Guaranteed Indebtedness is ultra
vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority.
Guarantor hereby acknowledges that withdrawal from, or termination of,
any ownership interest in Borrower now or hereafter owned or held by
Guarantor shall not alter, affect or in any way limit the obligations
of Guarantor hereunder.
-6-
<PAGE> 7
8. Actions against Guarantor. In the event of a default in the
payment or performance of all or any part of the Guaranteed Indebtedness when
such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration
or otherwise, Guarantor shall, without notice or demand, promptly pay the
amount due thereon to Bank, in lawful money of the United States, at Bank's
address set forth hereinabove. One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower
is sued or in separate actions, as often as Bank deems advisable. The exercise
by Bank of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of
Bank shall be admissible in evidence in any action or proceeding involving this
Guaranty and shall be prima facie evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum which
is or may become due under this Guaranty, written notice must be delivered to
Bank contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Bank
receives such notice either by: (a) personal delivery to the address and
designated department of Bank identified in subparagraph 1(a) above, or (b)
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to Bank at the address shown in subparagraph 1(a) above. In
the absence of such notice to Bank by Guarantor in compliance with the
provisions hereof, any sum received by Bank on account of the Guaranteed
Indebtedness shall be conclusively deemed paid by Borrower.
10. Notice of Sale. In the event that Guarantor is entitled to
receive any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, certified or registered mail, addressed to
the Guarantor at the address for Guarantor set forth in subparagraph 1(c)
above, five (5) days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
11. Waiver of Bank. No delay on the part of Bank in exercising
any right hereunder or failure to exercise the same shall operate as a waiver
of such right. In no event shall any waiver of the provisions of this Guaranty
be effective unless the same be in writing and signed by an officer of Bank,
and then only in the specific instance and for the purpose given.
12. Successors and Assigns. This Guaranty is for the benefit of
Bank, its successors and assigns. This Guaranty is binding upon Guarantor's
heirs, executors, administrators, personal representatives and successors,
including without limitation any person or entity
-7-
<PAGE> 8
obligated by operation of law upon the reorganization, merger, consolidation or
other change in the organizational structure of Guarantor.
13. Costs and Expenses. Guarantor shall pay on demand by Bank all
costs and expenses (including without limitation all reasonable attorneys'
fees) incurred by Bank in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive
the payment of the Guaranteed Indebtedness.
14. Severability. If any provision of this Guaranty is held by a
court of competent jurisdiction to be illegal, invalid or enforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
15. No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Bank to extend or continue to extend credit to
Borrower.
16. Amendment. No modification or amendment of any provision of
this Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of Bank,
and then shall be effective only in the specific instance and for the purpose
for which given.
17. Cumulative Rights. All rights and remedies of Bank hereunder
are cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any instrument or agreement, and
the exercise of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or remedies.
18. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAWS.
19. Venue. This Guaranty has been entered into in the county in
Texas where Bank's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining
to this Guaranty and venue for any such disputes shall be in the county or
judicial district where the Bank's address for notice purposes is located.
20. Compliance with Applicable Usury Laws. Notwithstanding any
other provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Bank by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
-8-
<PAGE> 9
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Bank to conform strictly to the applicable laws which limit interest rates, and
any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
21. Descriptive Headings. The captions in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
22. Gender. Within this Guaranty, words of any gender shall be
held and construed to include the other gender.
23. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Bank regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Bank that relates to Borrower or any other person or entity.
EXECUTED as of the date first above written.
GUARANTOR:
NEG-OK, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-9-
<PAGE> 1
UNLIMITED GUARANTY EXHIBIT 10.46
THIS UNLIMITED GUARANTY ("Guaranty") is made as of the 29th day of
August, 1996, by Guarantor (as hereinafter defined) for the benefit of Bank (as
hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms
shall have the meanings indicated below:
(a) The term "Bank" shall mean CREDIT LYONNAIS NEW YORK
BRANCH, whose address for notice purposes is the following:
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attn: David Dodd
(b) The term "Borrower" (shall mean the following:
National Energy Group, Inc.
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(c) The term "Guarantor" shall mean NEG-OK, INC., a
Delaware corporation, whose address for notice purposes is the
following:
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(d) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Bank of any
kind or character now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to
their acquisition by Bank, be or have been payable to or in favor of a
third party and subsequently acquired by Bank (it being contemplated
that Bank may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
Borrower to Bank now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Bank under any
documents evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii) above, (iv) all
costs and expenses incurred by Bank in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the protection
or preservation of, or realization upon, the collateral securing all
or
<PAGE> 2
any part of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.
2. Obligations. As an inducement to Bank to extend or continue
to extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter. The liability of Guarantor
hereunder with respect to the Guaranteed Indebtedness shall be limited to the
maximum amount of liability that can be incurred without rendering this
Guaranty, as it relates to the Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.
3. Character of Obligations. This is an absolute, continuing and
unconditional Guaranty of payment and not of collection and if at any time or
from time to time there is no outstanding Guaranteed Indebtedness, the
obligations of the Guarantor with respect to any and all Guaranteed
Indebtedness of Borrower to Bank incurred thereafter shall not be affected.
All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made
by Bank to Borrower shall be conclusively presumed to have been made or
acquired in acceptance hereof. Guarantor shall be primarily liable, jointly
and severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents
and warrants the following to Bank:
(a) This Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor, and the Board of Directors of
Guarantor has determined that this Guaranty may reasonably be expected
to benefit, directly or indirectly, Guarantor;
(b) Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness; provided, however, Guarantor is not relying
on such financial condition or collateral as an inducement to enter
into this Guaranty;
(c) Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition
of Borrower and Guarantor is not relying on Bank to provide such
information to Guarantor either now or in the future;
-2-
<PAGE> 3
(d) Guarantor has the power and authority to execute,
deliver and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith does not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) Guarantor's Articles of Incorporation
or Bylaws;
(e) Neither Bank nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty;
(f) The financial statements and other financial
information regarding Guarantor heretofore and hereafter delivered to
Bank are and shall be true and correct in all material respects and
fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor reflected in the financial statements and other
financial information regarding Guarantor heretofore delivered to Bank
since the date of the last statement thereof; and
(g) As of the date hereof, and after giving effect to
this Guaranty and the obligations evidenced hereby, (i) Guarantor is
and will be solvent, (ii) the fair saleable value of Guarantor's
assets exceeds and will continue to exceed Guarantor's liabilities
(both fixed and contingent), (iii) Guarantor is and will continue to
be able to pay Guarantor's debts as they mature, and (iv) Guarantor
has and will continue to have sufficient capital to carry on its
business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with Bank as
follows:
(a) Guarantor shall not, so long as Guarantor's
obligations under this Guaranty continue, transfer or pledge any
material portion of Guarantor's assets for less than full and adequate
consideration;
(b) Guarantor shall comply with all terms and provisions
of the instruments and agreements evidencing, governing and securing
all or any part of the Guaranteed Indebtedness that apply to
Guarantor; and
(c) Guarantor shall promptly inform Bank of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined
-3-
<PAGE> 4
adversely, might have a material adverse effect upon the financial
condition of Guarantor or upon such security or might cause a default
under any of the instruments or agreements evidencing, governing or
securing all or any part of the Guaranteed Indebtedness, (ii) any
claim or controversy which might become the subject of such litigation
or governmental investigation, and (iii) any material adverse change
in the financial condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice
of acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies
or may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
of Bank, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other
guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives any rights Guarantor has under, or
any requirements imposed by, Chapter 34 of the Texas Business and
Commerce Code, as in effect on the date of this Guaranty or as it may
be amended from time to time.
(c) Bank may at any time, without the consent of or
notice to Guarantor, without incurring responsibility to Guarantor and
without impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange or alter all or any part of the Guaranteed
Indebtedness; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed
Indebtedness; (iii) neglect, delay, omit, fail or refuse to take or
prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any
action in connection with any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (iv) exercise or refrain from exercising any rights
against Borrower or others, or otherwise act or refrain from acting;
(v) settle or compromise all or any part of the Guaranteed
Indebtedness and subordinate the payment of all or any part of the
Guaranteed Indebtedness to the payment of any obligations,
indebtedness or liabilities which may be due or become due to Bank or
others;
-4-
<PAGE> 5
(vi) apply any deposit balance, fund, payment, collections through
process of law or otherwise or other collateral of Borrower to the
satisfaction and liquidation of the indebtedness or obligations of
Borrower to Bank not guaranteed under this Guaranty pursuant to
paragraph 4 herein; and (vii) apply any sums paid to Bank by
Guarantor, Borrower or others to the Guaranteed Indebtedness in such
order and manner as Bank, in its sole discretion, may determine.
(d) Notwithstanding any provision in this Guaranty to the
contrary, Guarantor hereby waives and releases (i) any and all rights
of subrogation, reimbursement, indemnification or contribution which
Guarantor may have, after payment in full or in part of the Guaranteed
Indebtedness, against others liable on all or any part of the
Guaranteed Indebtedness, (ii) any and all rights to be subrogated to
the rights of Bank in any collateral or security for all or any part
of the Guaranteed Indebtedness after payment in full or in part of the
Guaranteed Indebtedness, and (iii) any and all other rights and claims
of such Guarantor against Borrower or any third party as a result of
such Guarantor's payment of all or any part of the Guaranteed
Indebtedness.
(e) Should Bank seek to enforce the obligations of
Guarantor hereunder by action in any court or otherwise, Guarantor
waives any requirement, substantive or procedural, that (i) Bank first
enforce any rights or remedies against Borrower or any other person or
entity liable to Bank for all or any part of the Guaranteed
Indebtedness, including without limitation that a judgment first be
rendered against Borrower or any other person or entity, or that
Borrower or any other person or entity should be joined in such cause,
or (ii) Bank shall first enforce rights against any collateral which
shall ever have been given to secure all or any part of the Guaranteed
Indebtedness or this Guaranty. Such waiver shall be without prejudice
to Bank's right, at its option, to proceed against Borrower or any
other person or entity, whether by separate action or by joinder.
(f) In addition to any other waivers, agreements and
covenants of Guarantor set forth herein, Guarantor hereby further
waives and releases all claims, causes of action, defenses and offsets
for any act or omission of Bank, its directors, officers, employees,
representatives or agents in connection with Bank's administration of
the Guaranteed Indebtedness, except for Bank's willful misconduct and
gross negligence.
7. Obligations Not Impaired.
(a) Guarantor agrees that Guarantor's obligations
hereunder shall not be released, diminished, impaired, reduced or
affected by the occurrence of any one or more of the following events:
(i) the death, disability or lack of corporate
-5-
<PAGE> 6
power of Borrower, Guarantor (except as provided in paragraph 10
herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of
all or any part of the Guaranteed Indebtedness, or any of their
respective property; (iii) the partial or total release or discharge
of Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any other person or entity from the
performance of any obligation contained in any instrument or agreement
evidencing, governing or securing all or any part of the Guaranteed
Indebtedness, whether occurring by reason of law or otherwise; (iv)
the taking or accepting of any collateral for all or any part of the
Guaranteed Indebtedness or this Guaranty; (v) the taking or accepting
of any other guaranty for all or any part of the Guaranteed
Indebtedness; (vi) any failure by Bank to acquire, perfect or continue
any lien or security interest on collateral securing all or any part
of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment
of any collateral securing all or any part of the Guaranteed
Indebtedness or this Guaranty; (viii) any failure by Bank to sell any
collateral securing all or any part of the Guaranteed Indebtedness or
this Guaranty in a commercially reasonable manner or as otherwise
required by law; (ix) any invalidity or unenforceability of or defect
or deficiency in any instrument or agreement evidencing, governing or
securing all or any part of the Guaranteed Indebtedness or this
Guaranty; or (x) any other circumstances which might otherwise
constitute a defense available to, or discharge of, Borrower or any
other guarantor of all or any part of the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
(c) In the event Borrower is a corporation, joint stock
association or partnership, or is hereafter incorporated, none of the
following shall affect Guarantor's liability hereunder: (i) the
unenforceability of all or any part of the Guaranteed Indebtedness
against Borrower by reason of the fact that the Guaranteed
Indebtedness exceeds the amount permitted by law; (ii) the act of
creating all or any part of the Guaranteed Indebtedness is ultra
vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority.
Guarantor hereby acknowledges that withdrawal from, or termination of,
any ownership interest in Borrower now or hereafter owned or held by
Guarantor shall not alter, affect or in any way limit the obligations
of Guarantor hereunder.
-6-
<PAGE> 7
8. Actions against Guarantor. In the event of a default in the
payment or performance of all or any part of the Guaranteed Indebtedness when
such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration
or otherwise, Guarantor shall, without notice or demand, promptly pay the
amount due thereon to Bank, in lawful money of the United States, at Bank's
address set forth hereinabove. One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower
is sued or in separate actions, as often as Bank deems advisable. The exercise
by Bank of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of
Bank shall be admissible in evidence in any action or proceeding involving this
Guaranty and shall be prima facie evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum which
is or may become due under this Guaranty, written notice must be delivered to
Bank contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Bank
receives such notice either by: (a) personal delivery to the address and
designated department of Bank identified in subparagraph 1(a) above, or (b)
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to Bank at the address shown in subparagraph 1(a) above. In
the absence of such notice to Bank by Guarantor in compliance with the
provisions hereof, any sum received by Bank on account of the Guaranteed
Indebtedness shall be conclusively deemed paid by Borrower.
10. Notice of Sale. In the event that Guarantor is entitled to
receive any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, certified or registered mail, addressed to
the Guarantor at the address for Guarantor set forth in subparagraph 1(c)
above, five (5) days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
11. Waiver of Bank. No delay on the part of Bank in exercising
any right hereunder or failure to exercise the same shall operate as a waiver
of such right. In no event shall any waiver of the provisions of this Guaranty
be effective unless the same be in writing and signed by an officer of Bank,
and then only in the specific instance and for the purpose given.
12. Successors and Assigns. This Guaranty is for the benefit of
Bank, its successors and assigns. This Guaranty is binding upon Guarantor's
heirs, executors, administrators, personal representatives and successors,
including without limitation any person or entity
-7-
<PAGE> 8
obligated by operation of law upon the reorganization, merger, consolidation or
other change in the organizational structure of Guarantor.
13. Costs and Expenses. Guarantor shall pay on demand by Bank all
costs and expenses (including without limitation all reasonable attorneys'
fees) incurred by Bank in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive
the payment of the Guaranteed Indebtedness.
14. Severability. If any provision of this Guaranty is held by a
court of competent jurisdiction to be illegal, invalid or enforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
15. No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Bank to extend or continue to extend credit to
Borrower.
16. Amendment. No modification or amendment of any provision of
this Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of Bank,
and then shall be effective only in the specific instance and for the purpose
for which given.
17. Cumulative Rights. All rights and remedies of Bank hereunder
are cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any instrument or agreement, and
the exercise of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or remedies.
18. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAWS.
19. Venue. This Guaranty has been entered into in the county in
Texas where Bank's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining
to this Guaranty and venue for any such disputes shall be in the county or
judicial district where the Bank's address for notice purposes is located.
20. Compliance with Applicable Usury Laws. Notwithstanding any
other provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Bank by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
-8-
<PAGE> 9
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Bank to conform strictly to the applicable laws which limit interest rates, and
any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
21. Descriptive Headings. The captions in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
22. Gender. Within this Guaranty, words of any gender shall be
held and construed to include the other gender.
23. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Bank regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Bank that relates to Borrower or any other person or entity.
EXECUTED as of the date first above written.
GUARANTOR:
NEG-OK, INC.
a Delaware corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-9-
<PAGE> 1
EXHIBIT 10.47
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY ("Guaranty") is made as of the 29th day of
August, 1996, by Guarantor (as hereinafter defined) for the benefit of Bank (as
hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms
shall have the meanings indicated below:
(a) The term "Bank" shall mean BANK ONE, TEXAS, N.A.,
whose address for notice purposes is the following:
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attn: Wm. Mark Cranmer
(b) The term "Borrower" (shall mean the following:
National Energy Group, Inc.
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(c) The term "Guarantor" shall mean BOOMER MARKETING
CORPORATION, an Oklahoma corporation, whose address for notice
purposes is the following:
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(d) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Bank of any
kind or character now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to
their acquisition by Bank, be or have been payable to or in favor of a
third party and subsequently acquired by Bank (it being contemplated
that Bank may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
Borrower to Bank now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Bank under any
documents evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii) above, (iv) all
costs and expenses incurred by Bank in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the
<PAGE> 2
protection or preservation of, or realization upon, the collateral
securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees, and (v)
all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii) and (iv)
above.
2. Obligations. As an inducement to Bank to extend or continue
to extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter. The liability of Guarantor
hereunder with respect to the Guaranteed Indebtedness shall be limited to the
maximum amount of liability that can be incurred without rendering this
Guaranty, as it relates to the Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.
3. Character of Obligations. This is an absolute, continuing and
unconditional Guaranty of payment and not of collection and if at any time or
from time to time there is no outstanding Guaranteed Indebtedness, the
obligations of the Guarantor with respect to any and all Guaranteed
Indebtedness of Borrower to Bank incurred thereafter shall not be affected.
All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made
by Bank to Borrower shall be conclusively presumed to have been made or
acquired in acceptance hereof. Guarantor shall be primarily liable, jointly
and severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents
and warrants the following to Bank:
(a) This Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor, and the Board of Directors of
Guarantor has determined that this Guaranty may reasonably be expected
to benefit, directly or indirectly, Guarantor;
(b) Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness; provided, however, Guarantor is not relying
on such financial condition or collateral as an inducement to enter
into this Guaranty;
(c) Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition
of Borrower and
-2-
<PAGE> 3
Guarantor is not relying on Bank to provide such information to
Guarantor either now or in the future;
(d) Guarantor has the power and authority to execute,
deliver and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith does not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) Guarantor's Articles of Incorporation
or Bylaws;
(e) Neither Bank nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty;
(f) The financial statements and other financial
information regarding Guarantor heretofore and hereafter delivered to
Bank are and shall be true and correct in all material respects and
fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor reflected in the financial statements and other
financial information regarding Guarantor heretofore delivered to Bank
since the date of the last statement thereof; and
(g) As of the date hereof, and after giving effect to
this Guaranty and the obligations evidenced hereby, (i) Guarantor is
and will be solvent, (ii) the fair saleable value of Guarantor's
assets exceeds and will continue to exceed Guarantor's liabilities
(both fixed and contingent), (iii) Guarantor is and will continue to
be able to pay Guarantor's debts as they mature, and (iv) Guarantor
has and will continue to have sufficient capital to carry on its
business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with Bank as
follows:
(a) Guarantor shall not, so long as Guarantor's
obligations under this Guaranty continue, transfer or pledge any
material portion of Guarantor's assets for less than full and adequate
consideration;
(b) Guarantor shall comply with all terms and provisions
of the instruments and agreements evidencing, governing and securing
all or any part of the Guaranteed Indebtedness that apply to
Guarantor; and
-3-
<PAGE> 4
(c) Guarantor shall promptly inform Bank of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the instruments or agreements evidencing, governing or securing all or
any part of the Guaranteed Indebtedness, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice
of acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies
or may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
of Bank, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other
guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives any rights Guarantor has under, or
any requirements imposed by, Chapter 34 of the Texas Business and
Commerce Code, as in effect on the date of this Guaranty or as it may
be amended from time to time.
(c) Bank may at any time, without the consent of or
notice to Guarantor, without incurring responsibility to Guarantor and
without impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange or alter all or any part of the Guaranteed
Indebtedness; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed
Indebtedness; (iii) neglect, delay, omit, fail or refuse to take or
prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or prosecute any
action in connection with any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (iv) exercise or refrain from exercising any rights
against Borrower or others, or otherwise act or refrain from acting;
(v) settle or compromise all or
-4-
<PAGE> 5
any part of the Guaranteed Indebtedness and subordinate the payment of
all or any part of the Guaranteed Indebtedness to the payment of any
obligations, indebtedness or liabilities which may be due or become
due to Bank or others; (vi) apply any deposit balance, fund, payment,
collections through process of law or otherwise or other collateral of
Borrower to the satisfaction and liquidation of the indebtedness or
obligations of Borrower to Bank not guaranteed under this Guaranty
pursuant to paragraph 4 herein; and (vii) apply any sums paid to Bank
by Guarantor, Borrower or others to the Guaranteed Indebtedness in
such order and manner as Bank, in its sole discretion, may determine.
(d) Notwithstanding any provision in this Guaranty to the
contrary, Guarantor hereby waives and releases (i) any and all rights
of subrogation, reimbursement, indemnification or contribution which
Guarantor may have, after payment in full or in part of the Guaranteed
Indebtedness, against others liable on all or any part of the
Guaranteed Indebtedness, (ii) any and all rights to be subrogated to
the rights of Bank in any collateral or security for all or any part
of the Guaranteed Indebtedness after payment in full or in part of the
Guaranteed Indebtedness, and (iii) any and all other rights and claims
of such Guarantor against Borrower or any third party as a result of
such Guarantor's payment of all or any part of the Guaranteed
Indebtedness.
(e) Should Bank seek to enforce the obligations of
Guarantor hereunder by action in any court or otherwise, Guarantor
waives any requirement, substantive or procedural, that (i) Bank first
enforce any rights or remedies against Borrower or any other person or
entity liable to Bank for all or any part of the Guaranteed
Indebtedness, including without limitation that a judgment first be
rendered against Borrower or any other person or entity, or that
Borrower or any other person or entity should be joined in such cause,
or (ii) Bank shall first enforce rights against any collateral which
shall ever have been given to secure all or any part of the Guaranteed
Indebtedness or this Guaranty. Such waiver shall be without prejudice
to Bank's right, at its option, to proceed against Borrower or any
other person or entity, whether by separate action or by joinder.
(f) In addition to any other waivers, agreements and
covenants of Guarantor set forth herein, Guarantor hereby further
waives and releases all claims, causes of action, defenses and offsets
for any act or omission of Bank, its directors, officers, employees,
representatives or agents in connection with Bank's administration of
the Guaranteed Indebtedness, except for Bank's willful misconduct and
gross negligence.
7. Obligations Not Impaired.
-5-
<PAGE> 6
(a) Guarantor agrees that Guarantor's obligations
hereunder shall not be released, diminished, impaired, reduced or
affected by the occurrence of any one or more of the following events:
(i) the death, disability or lack of corporate power of Borrower,
Guarantor (except as provided in paragraph 10 herein) or any other
guarantor of all or any part of the Guaranteed Indebtedness, (ii) any
receivership, insolvency, bankruptcy or other proceedings affecting
Borrower, Guarantor or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any of their respective property; (iii)
the partial or total release or discharge of Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness, or any
other person or entity from the performance of any obligation
contained in any instrument or agreement evidencing, governing or
securing all or any part of the Guaranteed Indebtedness, whether
occurring by reason of law or otherwise; (iv) the taking or accepting
of any collateral for all or any part of the Guaranteed Indebtedness
or this Guaranty; (v) the taking or accepting of any other guaranty
for all or any part of the Guaranteed Indebtedness; (vi) any failure
by Bank to acquire, perfect or continue any lien or security interest
on collateral securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (vii) the impairment of any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty; (viii)
any failure by Bank to sell any collateral securing all or any part of
the Guaranteed Indebtedness or this Guaranty in a commercially
reasonable manner or as otherwise required by law; (ix) any invalidity
or unenforceability of or defect or deficiency in any instrument or
agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness or this Guaranty; or (x) any other
circumstances which might otherwise constitute a defense available to,
or discharge of, Borrower or any other guarantor of all or any part of
the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
(c) In the event Borrower is a corporation, joint stock
association or partnership, or is hereafter incorporated, none of the
following shall affect Guarantor's liability hereunder: (i) the
unenforceability of all or any part of the Guaranteed Indebtedness
against Borrower by reason of the fact that the Guaranteed
Indebtedness exceeds the amount permitted by law; (ii) the act of
creating all or any part of the Guaranteed Indebtedness is ultra
vires; or (iii) the officers or partners creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority.
Guarantor hereby acknowledges that withdrawal
-6-
<PAGE> 7
from, or termination of, any ownership interest in Borrower now or
hereafter owned or held by Guarantor shall not alter, affect or in any
way limit the obligations of Guarantor hereunder.
8. Actions against Guarantor. In the event of a default in the
payment or performance of all or any part of the Guaranteed Indebtedness when
such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration
or otherwise, Guarantor shall, without notice or demand, promptly pay the
amount due thereon to Bank, in lawful money of the United States, at Bank's
address set forth hereinabove. One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower
is sued or in separate actions, as often as Bank deems advisable. The exercise
by Bank of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of
Bank shall be admissible in evidence in any action or proceeding involving this
Guaranty and shall be prima facie evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum which
is or may become due under this Guaranty, written notice must be delivered to
Bank contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Bank
receives such notice either by: (a) personal delivery to the address and
designated department of Bank identified in subparagraph 1(a) above, or (b)
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to Bank at the address shown in subparagraph 1(a) above. In
the absence of such notice to Bank by Guarantor in compliance with the
provisions hereof, any sum received by Bank on account of the Guaranteed
Indebtedness shall be conclusively deemed paid by Borrower.
10. Notice of Sale. In the event that Guarantor is entitled to
receive any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, certified or registered mail, addressed to
the Guarantor at the address for Guarantor set forth in subparagraph 1(c)
above, five (5) days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
11. Waiver of Bank. No delay on the part of Bank in exercising
any right hereunder or failure to exercise the same shall operate as a waiver
of such right. In no event shall any waiver of the provisions of this Guaranty
be effective unless the same be in writing and signed by an officer of Bank,
and then only in the specific instance and for the purpose given.
-7-
<PAGE> 8
12. Successors and Assigns. This Guaranty is for the benefit of
Bank, its successors and assigns. This Guaranty is binding upon Guarantor's
heirs, executors, administrators, personal representatives and successors,
including without limitation any person or entity obligated by operation of law
upon the reorganization, merger, consolidation or other change in the
organizational structure of Guarantor.
13. Costs and Expenses. Guarantor shall pay on demand by Bank all
costs and expenses (including without limitation all reasonable attorneys'
fees) incurred by Bank in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive
the payment of the Guaranteed Indebtedness.
14. Severability. If any provision of this Guaranty is held by a
court of competent jurisdiction to be illegal, invalid or enforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
15. No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Bank to extend or continue to extend credit to
Borrower.
16. Amendment. No modification or amendment of any provision of
this Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of Bank,
and then shall be effective only in the specific instance and for the purpose
for which given.
17. Cumulative Rights. All rights and remedies of Bank hereunder
are cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any instrument or agreement, and
the exercise of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or remedies.
18. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAWS.
19. Venue. This Guaranty has been entered into in the county in
Texas where Bank's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining
to this Guaranty and venue for any such disputes shall be in the county or
judicial district where the Bank's address for notice purposes is located.
20. Compliance with Applicable Usury Laws. Notwithstanding any
other provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any
-8-
<PAGE> 9
part of the Guaranteed Indebtedness, Guarantor and Bank by its acceptance
hereof agree that Guarantor shall never be required or obligated to pay
interest in excess of the maximum nonusurious interest rate as may be
authorized by applicable law for the written contracts which constitute the
Guaranteed Indebtedness. It is the intention of Guarantor and Bank to conform
strictly to the applicable laws which limit interest rates, and any of the
aforesaid contracts for interest, if and to the extent payable by Guarantor,
shall be held to be subject to reduction to the maximum nonusurious interest
rate allowed under said law.
21. Descriptive Headings. The captions in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
22. Gender. Within this Guaranty, words of any gender shall be
held and construed to include the other gender.
23. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Bank regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Bank that relates to Borrower or any other person or entity.
EXECUTED as of the date first above written.
GUARANTOR:
---------
BOOMER MARKETING CORPORATION
an Oklahoma corporation
By: /s/ Miles D. Bender
---------------------
Miles D. Bender
President
-9-
<PAGE> 1
EXHIBIT 10.48
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY ("Guaranty") is made as of the 29th day of
August, 1996, by Guarantor (as hereinafter defined) for the benefit of Bank (as
hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms
shall have the meanings indicated below:
(a) The term "Bank" shall mean CREDIT LYONNAIS NEW YORK
BRANCH, whose address for notice purposes is the following:
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attn: David Dodd
(b) The term "Borrower" (shall mean the following:
National Energy Group, Inc.
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(c) The term "Guarantor" shall mean BOOMER MARKETING
CORPORATION, an Oklahoma corporation, whose address for notice
purposes is the following:
4925 Greenville Avenue, Suite 1400
Dallas, Texas 75206
(d) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower to Bank of any
kind or character now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless of
whether such indebtedness, obligations and liabilities may, prior to
their acquisition by Bank, be or have been payable to or in favor of a
third party and subsequently acquired by Bank (it being contemplated
that Bank may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
Borrower to Bank now existing or hereafter arising by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (ii)
all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Borrower to Bank under any
documents evidencing, securing, governing and/or pertaining to all or
any part of the indebtedness described in (i) and (ii) above, (iv) all
costs and expenses incurred
<PAGE> 2
by Bank in connection with the collection and administration of all or
any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization
upon, the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys'
fees, and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i),
(ii), (iii) and (iv) above.
2. Obligations. As an inducement to Bank to extend or continue
to extend credit and other financial accommodations to Borrower, Guarantor, for
value received, does hereby unconditionally and absolutely guarantee the prompt
and full payment and performance of the Guaranteed Indebtedness when due or
declared to be due and at all times thereafter. The liability of Guarantor
hereunder with respect to the Guaranteed Indebtedness shall be limited to the
maximum amount of liability that can be incurred without rendering this
Guaranty, as it relates to the Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.
3. Character of Obligations. This is an absolute, continuing and
unconditional Guaranty of payment and not of collection and if at any time or
from time to time there is no outstanding Guaranteed Indebtedness, the
obligations of the Guarantor with respect to any and all Guaranteed
Indebtedness of Borrower to Bank incurred thereafter shall not be affected.
All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made
by Bank to Borrower shall be conclusively presumed to have been made or
acquired in acceptance hereof. Guarantor shall be primarily liable, jointly
and severally, with Borrower and any other guarantor of all or any part of the
Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents
and warrants the following to Bank:
(a) This Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor, and the Board of Directors of
Guarantor has determined that this Guaranty may reasonably be expected
to benefit, directly or indirectly, Guarantor;
(b) Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness; provided, however, Guarantor is not relying
on such financial condition or collateral as an inducement to enter
into this Guaranty;
-2-
<PAGE> 3
(c) Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition
of Borrower and Guarantor is not relying on Bank to provide such
information to Guarantor either now or in the future;
(d) Guarantor has the power and authority to execute,
deliver and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith does not and will not violate (i)
any agreement or instrument to which Guarantor is a party, (ii) any
law, rule, regulation or order of any governmental authority to which
Guarantor is subject, or (iii) Guarantor's Articles of Incorporation
or Bylaws;
(e) Neither Bank nor any other party has made any
representation, warranty or statement to Guarantor in order to induce
Guarantor to execute this Guaranty;
(f) The financial statements and other financial
information regarding Guarantor heretofore and hereafter delivered to
Bank are and shall be true and correct in all material respects and
fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor reflected in the financial statements and other
financial information regarding Guarantor heretofore delivered to Bank
since the date of the last statement thereof; and
(g) As of the date hereof, and after giving effect to
this Guaranty and the obligations evidenced hereby, (i) Guarantor is
and will be solvent, (ii) the fair saleable value of Guarantor's
assets exceeds and will continue to exceed Guarantor's liabilities
(both fixed and contingent), (iii) Guarantor is and will continue to
be able to pay Guarantor's debts as they mature, and (iv) Guarantor
has and will continue to have sufficient capital to carry on its
business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with Bank as
follows:
(a) Guarantor shall not, so long as Guarantor's
obligations under this Guaranty continue, transfer or pledge any
material portion of Guarantor's assets for less than full and adequate
consideration;
-3-
<PAGE> 4
(b) Guarantor shall comply with all terms and provisions
of the instruments and agreements evidencing, governing and securing
all or any part of the Guaranteed Indebtedness that apply to
Guarantor; and
(c) Guarantor shall promptly inform Bank of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the instruments or agreements evidencing, governing or securing all or
any part of the Guaranteed Indebtedness, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice
of acceptance of this Guaranty and notice of the incurring of any
obligation, indebtedness or liability to which this Guaranty applies
or may apply and waives presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, diligence in enforcement
and indulgences of every kind, and (ii) the taking of any other action
of Bank, including without limitation giving any notice of default or
any other notice to, or making any demand on, Borrower, any other
guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives any rights Guarantor has under, or
any requirements imposed by, Chapter 34 of the Texas Business and
Commerce Code, as in effect on the date of this Guaranty or as it may
be amended from time to time.
(c) Bank may at any time, without the consent of or
notice to Guarantor, without incurring responsibility to Guarantor and
without impairing, releasing, reducing or affecting the obligations of
Guarantor hereunder: (i) change the manner, place or terms of payment
of all or any part of the Guaranteed Indebtedness, or renew, extend,
modify, rearrange or alter all or any part of the Guaranteed
Indebtedness; (ii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed
Indebtedness; (iii) neglect, delay, omit, fail or refuse to take or
prosecute any action for the collection of all or any part of the
Guaranteed Indebtedness or this Guaranty or to take or
-4-
<PAGE> 5
prosecute any action in connection with any instrument or agreement
evidencing, governing or securing all or any part of the Guaranteed
Indebtedness or this Guaranty; (iv) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or
refrain from acting; (v) settle or compromise all or any part of the
Guaranteed Indebtedness and subordinate the payment of all or any part
of the Guaranteed Indebtedness to the payment of any obligations,
indebtedness or liabilities which may be due or become due to Bank or
others; (vi) apply any deposit balance, fund, payment, collections
through process of law or otherwise or other collateral of Borrower to
the satisfaction and liquidation of the indebtedness or obligations of
Borrower to Bank not guaranteed under this Guaranty pursuant to
paragraph 4 herein; and (vii) apply any sums paid to Bank by
Guarantor, Borrower or others to the Guaranteed Indebtedness in such
order and manner as Bank, in its sole discretion, may determine.
(d) Notwithstanding any provision in this Guaranty to the
contrary, Guarantor hereby waives and releases (i) any and all rights
of subrogation, reimbursement, indemnification or contribution which
Guarantor may have, after payment in full or in part of the Guaranteed
Indebtedness, against others liable on all or any part of the
Guaranteed Indebtedness, (ii) any and all rights to be subrogated to
the rights of Bank in any collateral or security for all or any part
of the Guaranteed Indebtedness after payment in full or in part of the
Guaranteed Indebtedness, and (iii) any and all other rights and claims
of such Guarantor against Borrower or any third party as a result of
such Guarantor's payment of all or any part of the Guaranteed
Indebtedness.
(e) Should Bank seek to enforce the obligations of
Guarantor hereunder by action in any court or otherwise, Guarantor
waives any requirement, substantive or procedural, that (i) Bank first
enforce any rights or remedies against Borrower or any other person or
entity liable to Bank for all or any part of the Guaranteed
Indebtedness, including without limitation that a judgment first be
rendered against Borrower or any other person or entity, or that
Borrower or any other person or entity should be joined in such cause,
or (ii) Bank shall first enforce rights against any collateral which
shall ever have been given to secure all or any part of the Guaranteed
Indebtedness or this Guaranty. Such waiver shall be without prejudice
to Bank's right, at its option, to proceed against Borrower or any
other person or entity, whether by separate action or by joinder.
(f) In addition to any other waivers, agreements and
covenants of Guarantor set forth herein, Guarantor hereby further
waives and releases all claims, causes of action, defenses and offsets
for any act or omission of Bank, its directors, officers, employees,
representatives or agents in connection with
-5-
<PAGE> 6
Bank's administration of the Guaranteed Indebtedness, except for
Bank's willful misconduct and gross negligence.
7. Obligations Not Impaired.
(a) Guarantor agrees that Guarantor's obligations
hereunder shall not be released, diminished, impaired, reduced or
affected by the occurrence of any one or more of the following events:
(i) the death, disability or lack of corporate power of Borrower,
Guarantor (except as provided in paragraph 10 herein) or any other
guarantor of all or any part of the Guaranteed Indebtedness, (ii) any
receivership, insolvency, bankruptcy or other proceedings affecting
Borrower, Guarantor or any other guarantor of all or any part of the
Guaranteed Indebtedness, or any of their respective property; (iii)
the partial or total release or discharge of Borrower or any other
guarantor of all or any part of the Guaranteed Indebtedness, or any
other person or entity from the performance of any obligation
contained in any instrument or agreement evidencing, governing or
securing all or any part of the Guaranteed Indebtedness, whether
occurring by reason of law or otherwise; (iv) the taking or accepting
of any collateral for all or any part of the Guaranteed Indebtedness
or this Guaranty; (v) the taking or accepting of any other guaranty
for all or any part of the Guaranteed Indebtedness; (vi) any failure
by Bank to acquire, perfect or continue any lien or security interest
on collateral securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (vii) the impairment of any collateral securing all
or any part of the Guaranteed Indebtedness or this Guaranty; (viii)
any failure by Bank to sell any collateral securing all or any part of
the Guaranteed Indebtedness or this Guaranty in a commercially
reasonable manner or as otherwise required by law; (ix) any invalidity
or unenforceability of or defect or deficiency in any instrument or
agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness or this Guaranty; or (x) any other
circumstances which might otherwise constitute a defense available to,
or discharge of, Borrower or any other guarantor of all or any part of
the Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or
any part of the Guaranteed Indebtedness is rescinded or must otherwise
be returned by Bank upon the insolvency, bankruptcy or reorganization
of Borrower, Guarantor, any other guarantor of all or any part of the
Guaranteed Indebtedness, or otherwise, all as though such payment had
not been made.
(c) In the event Borrower is a corporation, joint stock
association or partnership, or is hereafter incorporated, none of the
following shall affect Guarantor's liability hereunder: (i) the
unenforceability of all or any part of the
-6-
<PAGE> 7
Guaranteed Indebtedness against Borrower by reason of the fact that
the Guaranteed Indebtedness exceeds the amount permitted by law; (ii)
the act of creating all or any part of the Guaranteed Indebtedness is
ultra vires; or (iii) the officers or partners creating all or any
part of the Guaranteed Indebtedness acted in excess of their
authority. Guarantor hereby acknowledges that withdrawal from, or
termination of, any ownership interest in Borrower now or hereafter
owned or held by Guarantor shall not alter, affect or in any way limit
the obligations of Guarantor hereunder.
8. Actions against Guarantor. In the event of a default in the
payment or performance of all or any part of the Guaranteed Indebtedness when
such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration
or otherwise, Guarantor shall, without notice or demand, promptly pay the
amount due thereon to Bank, in lawful money of the United States, at Bank's
address set forth hereinabove. One or more successive or concurrent actions
may be brought against Guarantor, either in the same action in which Borrower
is sued or in separate actions, as often as Bank deems advisable. The exercise
by Bank of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. The books and records of
Bank shall be admissible in evidence in any action or proceeding involving this
Guaranty and shall be prima facie evidence of the payments made on, and the
outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum which
is or may become due under this Guaranty, written notice must be delivered to
Bank contemporaneously with such payment. Such notice shall be effective for
purposes of this paragraph when contemporaneously with such payment Bank
receives such notice either by: (a) personal delivery to the address and
designated department of Bank identified in subparagraph 1(a) above, or (b)
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to Bank at the address shown in subparagraph 1(a) above. In
the absence of such notice to Bank by Guarantor in compliance with the
provisions hereof, any sum received by Bank on account of the Guaranteed
Indebtedness shall be conclusively deemed paid by Borrower.
10. Notice of Sale. In the event that Guarantor is entitled to
receive any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, certified or registered mail, addressed to
the Guarantor at the address for Guarantor set forth in subparagraph 1(c)
above, five (5) days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
-7-
<PAGE> 8
11. Waiver of Bank. No delay on the part of Bank in exercising
any right hereunder or failure to exercise the same shall operate as a waiver
of such right. In no event shall any waiver of the provisions of this Guaranty
be effective unless the same be in writing and signed by an officer of Bank,
and then only in the specific instance and for the purpose given.
12. Successors and Assigns. This Guaranty is for the benefit of
Bank, its successors and assigns. This Guaranty is binding upon Guarantor's
heirs, executors, administrators, personal representatives and successors,
including without limitation any person or entity obligated by operation of law
upon the reorganization, merger, consolidation or other change in the
organizational structure of Guarantor.
13. Costs and Expenses. Guarantor shall pay on demand by Bank all
costs and expenses (including without limitation all reasonable attorneys'
fees) incurred by Bank in connection with the preparation, administration,
enforcement and/or collection of this Guaranty. This covenant shall survive
the payment of the Guaranteed Indebtedness.
14. Severability. If any provision of this Guaranty is held by a
court of competent jurisdiction to be illegal, invalid or enforceable under
present or future laws, such provision shall be fully severable, shall not
impair or invalidate the remainder of this Guaranty and the effect thereof
shall be confined to the provision held to be illegal, invalid or
unenforceable.
15. No Obligation. Nothing contained herein shall be construed as
an obligation on the part of Bank to extend or continue to extend credit to
Borrower.
16. Amendment. No modification or amendment of any provision of
this Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of Bank,
and then shall be effective only in the specific instance and for the purpose
for which given.
17. Cumulative Rights. All rights and remedies of Bank hereunder
are cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any instrument or agreement, and
the exercise of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights or remedies.
18. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAWS.
19. Venue. This Guaranty has been entered into in the county in
Texas where Bank's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising
-8-
<PAGE> 9
under or pertaining to this Guaranty and venue for any such disputes shall be
in the county or judicial district where the Bank's address for notice purposes
is located.
20. Compliance with Applicable Usury Laws. Notwithstanding any
other provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and Bank by its acceptance hereof agree that Guarantor shall never be required
or obligated to pay interest in excess of the maximum nonusurious interest rate
as may be authorized by applicable law for the written contracts which
constitute the Guaranteed Indebtedness. It is the intention of Guarantor and
Bank to conform strictly to the applicable laws which limit interest rates, and
any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
21. Descriptive Headings. The captions in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
22. Gender. Within this Guaranty, words of any gender shall be
held and construed to include the other gender.
23. Entire Agreement. This Guaranty contains the entire agreement
between Guarantor and Bank regarding the subject matter hereof and supersedes
all prior written and oral agreements and understandings, if any, regarding
same; provided, however, this Guaranty is in addition to and does not replace,
cancel, modify or affect any other guaranty of Guarantor now or hereafter held
by Bank that relates to Borrower or any other person or entity.
EXECUTED as of the date first above written.
GUARANTOR:
BOOMER MARKETING CORPORATION
an Oklahoma corporation
By: /s/ Miles D. Bender
-------------------------------------
Miles D. Bender
President
-9-
<PAGE> 1
EXHIBIT 10.49
ATTENTION __________ COUNTY CLERK, TEXAS:
Recording requested by and when recorded mail to:
BANK ONE, TEXAS, N.A.
c/o Robert N. Rule, Jr.,
Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
AMENDED AND RESTATED
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION
AND FINANCING STATEMENT
THE STATE OF TEXAS )
) KNOW ALL BY THESE PRESENTS:
COUNTIES OF ECTOR, GREGG, )
IRION, NUECES, RUSK )
and YOUNG
WHEREAS, NATIONAL ENERGY GROUP, INC., a Delaware corporation, the
address of which is 1400 One Energy Square, 4925 Greenville Avenue, Dallas,
Texas 75206 (hereinafter referred to as "Grantor"), does hereby execute this
Amended and Restated Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement (hereinafter referred to as the "Deed of
Trust"), for the use and benefit BANK ONE, TEXAS, N.A., national banking
association, the address of which is 1717 Main Street, Dallas, Texas 75201, as
Administrative Agent ("Agent"), for itself and Credit Lyonnais New York Branch,
and each and every other lending institution participating as a "Bank" under,
or which may hereafter participate as a "Bank" under the Loan Agreement, as
hereinafter defined (collectively herein called the "Bank"); covering oil and
gas properties herein described located on lands situated in the Counties of
Ector, Gregg, Irion, Nueces, Rusk and Young, Texas.
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, in hand paid by Bank to
Grantor, the receipt and sufficiency of which are hereby acknowledged and
confessed, Grantor does hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN and
CONVEY unto Wm. Mark Cranmer, as Trustee (hereinafter referred to as the
"Trustee"), for the use and benefit of Bank all right, title and interest now
or at any time hereafter vested in Grantor in and to the following described
properties and interests, to wit:
(a) All oil, gas and mineral interests and other
interests and property of every kind and character described and
referred to in Exhibit "A" attached hereto and made a part hereof by
reference for all purposes as if copied herein in full;
<PAGE> 2
(b) Any and all operating agreements, communitization
agreements, unitization agreements, pooling agreements, declarations
of pooled units, all units created under orders, regulations, rules or
other official acts of any federal, state or other governmental body
or regulatory agencies providing for pooling and unitization, spacing
orders or other well permits and other instruments, whether now or
hereafter made, and the units created thereby, which relate to any of
the properties and interests described or referred to in Exhibit "A",
whether or not such agreements, orders or instruments are described in
Exhibit "A";
(c) All real property covered by any and all of the oil,
gas and mineral leases described or referred to in Exhibit "A" and the
real property described or referred to in Exhibit "A" (hereinafter
collectively referred to as the "Lands"), even though such rights,
titles and interests be incorrectly or insufficiently described or
referred to therein, or a description of a part or all of such rights,
titles and interests be omitted from Exhibit "A";
(d) Any and all oil, gas and mineral leases described or
referred to in Exhibit "A" and any and all oil, gas and mineral leases
covering all or any part of the Lands (herein collectively referred to
as the "Leases"), together with all right, title and interest now or
at any time hereafter vested in Grantor in and to any and all
overriding royalty interests, mineral interests, royalty interests,
net profit interests, oil payments, production payments and all other
interests and properties of every kind and character which relate to
any of the Lands or the Leases, even though such rights, titles and
interests be incorrectly or insufficiently described or referred to
therein, or a description of a part or all of such rights, titles and
interests be omitted from Exhibit "A" together with any and all
renewals, extensions, substitutions, ratifications, supplements,
amendments and replacements of and for any of the Leases or other
interests described or referred to herein;
(e) All personal property, equipment, fixtures,
hereditaments, improvements, easements, permits, licenses, servitudes,
surface leases and rights-of-way situated upon or used or useful or
held for use in connection with the exploration, development or
operation of the foregoing properties and interests, or the
production, treating, storing or transportation of oil, gas and other
hydrocarbons therefrom, including, without limitation, liquid
extraction plants, plant compressors, field gathering systems, valves,
fittings, engines, boilers, meters, cables, wires, towers, tubing and
rods, casing, connections, tanks, batteries, separators, lines, pumps,
pipes, pipelines, structures, buildings, sheds, oil wells, gas wells,
injection wells, other wells, fixtures, tools, machinery, power lines,
telephone and telegraph lines, and other appurtenances, apparatus,
appliances and property of every kind and character, movable or
immovable, now or at any time hereafter located on the Lands, or which
may now or hereafter be used or obtained in connection therewith,
whether or not the same are described or referred to in Exhibit "A",
together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing properties;
(f) All oil, casinghead gas and gas sales, purchase,
exchange and processing contracts and agreements, and all other
contracts, agreements and instruments, whether now in existence or
hereafter made, which relate to any of the properties and interests
described or referred to in Exhibit "A", whether or not such contracts
and agreements are described or referred to in Exhibit "A", together
with any and all renewals, extensions, substitutions,
<PAGE> 3
ratifications, supplements, amendments and replacements of or for any
such contracts, agreements and instruments;
(g) All oil, gas and other hydrocarbons, including,
without limitation, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons, and all products separated,
settled and dehydrated therefrom, and all products refined therefrom,
including, without limitation, kerosene, liquified petroleum gas,
refined lubricating oils, diesel fuel, drip gasoline and natural
gasoline, and all other minerals, and the proceeds thereof, produced
and to be produced from and which accrue or are attributable to any of
the above described or referenced properties and interests, by virtue
of the above described or referenced contracts, agreements and
instruments; and
(h) Any and all proceeds, rents, issues, profits,
products, revenues and other income arising from or by virtue of the
sale, lease or other disposition of, or from any insurance payable
with respect to damage, loss or destruction of, the collateral
described in Subparagraphs (a) through (g) above.
It is expressly understood and agreed by the parties hereto that any
and all decimal fractional interests and/or well names set out in Exhibit "A"
pertaining to any of the properties and interests described or referred to in
Exhibit "A" have been appended for informational purposes only and shall not
limit in any way whatsoever the interest of Grantor in such properties and
interests, or interests derived thereunder, which are subject to this Deed of
Trust.
Grantor's interests in the properties and interests described in
Subparagraphs (a) through (h) above are all hereinafter sometimes collectively
referred to as the "Mortgaged Properties".
TO HAVE AND TO HOLD the Mortgaged Properties, together with all the
rights, hereditaments and appurtenances in anywise appertaining or belonging
thereto, unto Trustee and his successors or substitutes in this trust, and his
and their assigns, in trust and for the uses and purposes hereinafter set
forth, forever.
The term "Grantor's Successors" as used herein, shall mean Grantor's
heirs, executors, legal representatives, successors and assigns. Grantor
hereby binds Grantor and Grantor's Successors to warrant and forever defend,
all and singular, the Mortgaged Properties, unto Trustee and his successors or
substitutes in this trust, and his and their assigns, forever, against every
person whomsoever lawfully claiming or to claim the same or any part thereof.
All capitalized terms used herein and not otherwise defined herein
shall have the same meanings ascribed to such terms in that certain Restated
Loan Agreement of even date herewith among Grantor (sometimes referred to as
"NEG"), as Borrower, NEG-OK, Inc. and Boomer Marketing Corporation, as
Guarantors, Agent, Credit Lyonnais New York Branch, as Syndication Agent, and
Bank, as amended and restated from time to time (the "Loan Agreement").
ARTICLE 1
REPRESENTATIONS AND WARRANTIES
- 3 -
<PAGE> 4
1.1 Grantor hereby expressly represents and warrants to Bank that
(a) the Leases are in full force and effect; (b) Grantor's interests in the
Leases are valid and subsisting on the Lands and entitle Grantor to receive
that proportion of the total production from the Mortgaged Properties indicated
in connection with the descriptions thereof in Exhibit "A"; (c) Grantor has
good, valid and indefeasible title to Grantor's interest in the Leases and to
Grantor's interest in the personal property and fixtures comprising a part of
the Mortgaged Properties or used or obtained in connection therewith, except
for Permitted Liens (as that term is defined in the Loan Agreement) and except
as provided in Exhibit "A" and the right, power and authority to execute and
deliver this Deed of Trust and convey the Mortgaged Properties; (d) the
Mortgaged Properties are free and clear of all claims, liens, encumbrances,
security interests, contracts, agreements, options, preferential purchase
rights or other restrictions or limitations of any nature or kind, except for
Permitted Liens (as defined in the Loan Agreement) and except as expressly
provided herein; (e) all rentals, royalties and other amounts due and payable
under the Leases have been duly paid, and obligations to be performed under the
Leases as to the Lands have been duly performed; (f) the holder shall quietly
enjoy and possess the Mortgaged Properties; (g) Grantor is not a party to, and
none of the hydrocarbons produced from any of the wells located on the Leases
are the subject of, any Advance Payment Contract affecting or relating to any
of the Mortgaged Properties. As used herein, the term "Advance Payment
Contract" means any contract whereby Grantor either (1) receives or becomes
entitled to receive (either directly or indirectly to a third party for
Grantor's account or benefit) any payment (an "Advance Payment") to be applied
toward payment of the purchase price of hydrocarbons produced or to be produced
from any of the Mortgaged Properties and which Advance Payment is paid in
advance of actual delivery of such production to or for the account of the
purchaser regardless of such production, or (2) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of
payment, and, in either of the foregoing instances, the Advance Payment is, or
is to be, applied as payment in full for such production when sold and
delivered or is, or is to be, applied as payment for a portion only of the
purchase price thereof or of a percentage or share of such production; provided
that inclusion of the standard "take or pay" provision in any gas sales or
purchase contract shall not, in and of itself, constitute such contract as an
Advance Payment Contract for the purposes hereof; (h) Grantor and any guarantor
of the Secured Indebtedness (hereinafter defined) are now in a solvent
condition; (i) all financial statements, schedules, certificates, reports and
other documents furnished by Grantor and any guarantor of the Secured
Indebtedness to the holder in connection with the Secured Indebtedness are true
and correct in all material respects and do not omit to state any material fact
or circumstance necessary to make the statements contained therein not
misleading; (j) no bankruptcy or insolvency proceedings are pending
contemplated or threatened by or against Grantor and any guarantor of the
Secured Indebtedness; and (k) no other material judicial or administrative
actions, suits or proceedings are pending, or to the knowledge of Grantor,
contemplated or threatened by or against Grantor and any guarantor of the
Secured Indebtedness.
ARTICLE 2
SECURED INDEBTEDNESS
2.1 This Deed of Trust is given to secure payment and performance
of the following indebtedness, obligations and liabilities, to wit:
(a) The commitment of the Bank to make loans to NEG from
time to time in amounts of up to, in the aggregate, One Hundred Five
Million Dollars ($105,000,000.00) (the "Commitment"), said Commitment
being comprised of the Term Loan Commitment, in the
- 4 -
<PAGE> 5
amount of $5,000,000.00, and the Revolving Commitment, in the amount
of up to $100,000,000.00, together with any and all promissory notes
at any time representing all or any part of the Commitment, any and
all renewals, increases, refundings, substitutions, replacements,
consolidations and/or extensions of or for any such promissory notes,
and without limiting the foregoing, including but not limited to, the
following promissory notes:
(i) That certain Term Note as of even date
herewith in the original principal amount of Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00), executed
by NEG, as maker, payable to the order of Bank One, Texas,
N.A., and containing usual and customary provisions for
collection and attorneys' fees, and any and all renewals,
increases, refundings, substitutions, replacements,
consolidations and/or extensions thereof or therefor, or any
part thereof (herein referred to as the "Bank One Term Note");
(ii) That certain Revolving Note as of even date
herewith in the original principal amount of Fifty Million and
No/100 Dollars ($50,000,000.00), executed by NEG, as maker,
payable to the order of Bank One, Texas, N.A., and containing
usual and customary provisions for collection and attorneys'
fees, and any and all renewals, increases, refundings,
substitutions, replacements, consolidations and/or extensions
thereof or therefor, or any part thereof (herein referred to
as the "Bank One Revolving Note");
(iii) That certain Term Note as of even date
herewith in the original principal amount of Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00), executed
by NEG, as maker, payable to the order of Credit Lyonnais New
York Branch, and containing usual and customary provisions for
collection and attorneys' fees, and any and all renewals,
increases, refundings, substitutions, replacements,
consolidations and/or extensions thereof or therefor, or any
part thereof (herein referred to as the "Credit Lyonnais Term
Note"); and
(iv) That certain Revolving Note as of even date
herewith in the original principal amount of Fifty Million and
No/100 Dollars ($50,000,000.00), executed by NEG, as maker,
payable to the order of Credit Lyonnais New York Branch, and
containing usual and customary provisions for collection and
attorneys' fees, and any and all renewals, increases,
refundings, substitutions, replacements, consolidations and/or
extensions thereof or therefor, or any part thereof (herein
referred to as the "Credit Lyonnais Revolving Note");
which Notes are given in renewal, extension, modification and substitution, but
not in extinguishment of the promissory notes identified and described in the
Prior Deed of Trust (as defined herein).
(b) All indebtedness, obligations and liabilities of
Grantor arising pursuant to the provisions of any loan agreement,
whether now existing or hereafter arising, executed or to be executed
by and between Grantor and Bank, including, without limitation, the
Loan Agreement,
- 5 -
<PAGE> 6
and all supplements, amendments, restatements, modifications and
replacements thereof or therefor, together with any and all renewals,
increases, refundings, substitutions, replacements, consolidations
and/or extensions of or for any such indebtedness, obligations and
liabilities, or any part thereof;
(c) All indebtedness, obligations and liabilities arising
pursuant to the provisions of this Deed of Trust, and any and all
other deeds of trust, mortgages, indentures, security agreements,
pledge agreements, collateral mortgages, collateral chattel mortgages,
assignments, or other conveyances, whether now existing or hereafter
arising, and all supplements, amendments, restatements, modifications
and replacements thereof or therefor, executed or to be executed by
Grantor or any guarantor of the Secured Indebtedness to or for the use
and benefit of Bank, together with any and all renewals, increases,
refundings, substitutions, replacements, consolidations and/or
extensions of or for any such indebtedness, obligations and
liabilities, or any part thereof (hereinafter collectively referred to
as the "Security Instruments");
(d) All loans and advances which Bank may hereafter make
to Grantor and any and all renewals, increases, refundings,
substitutions, replacements, consolidations and/or extensions of any
and all such loans and advances, or any part thereof; and
(e) All other and additional debts, obligations and
liabilities of every kind and character of Grantor now existing or
hereafter arising in favor of Bank, regardless of whether such debts,
obligations and liabilities are direct or indirect, primary or
secondary, joint, several or joint and several, fixed or contingent,
and regardless of whether such present or future debts, obligations
and liabilities may, prior to their acquisition by Bank, be or have
been payable to, or be or have been in favor of, some other persons or
have been acquired by Bank in a transaction with one other than
Grantor together with any and all renewals, increases, refundings,
substitutions, replacements, consolidations and/or extensions of or
for any and all such debts, obligations, and liabilities, or any part
thereof (it being contemplated that Bank may lend additional sums of
money to Grantor from time to time, but shall not be obligated to do
so, and that all such additional sums and loans shall be part of the
"Secured Indebtedness" as hereinafter defined).
The term "Notes," as used herein, shall mean, collectively the Bank
One Term Note, the Bank One Revolving Note, the Credit Lyonnais Term Note and
the Credit Lyonnais Revolving Note. The term "Secured Indebtedness", as used
herein, shall mean all of the indebtedness, obligations and liabilities
described or referred to above in Subsections (a) through (e), inclusive, of
this Section 2.1. The term "holder", as used herein, shall mean the holder or
holders of the Secured Indebtedness or any part thereof.
ARTICLE 3
COVENANTS
3.1 The covenants, agreements and undertakings of Grantor
contained in this Deed of Trust, whether in this Article 3 or elsewhere, are
made by Grantor for Grantor and Grantor's Successors.
- 6 -
<PAGE> 7
3.2 Grantor hereby covenants, agrees and specifically undertakes
hereby:
(a) To maintain, preserve and keep or cause to be
maintained, preserved and kept Grantor's interests in the Mortgaged
Properties and all appurtenances thereto, including, without
limitation, all buildings, improvements, machinery, equipment,
pipelines, fixtures and other personal property of every kind and
character, in respect of the Leases, in good repair, working order and
condition, and from time to time, at Grantor's own expense, do or
cause to be done all necessary and proper repairs, renewals,
replacements and substitutions of the Mortgaged Properties and all
appurtenances thereto, so that at all times the state and condition of
the Mortgaged Properties and all appurtenances thereto will be
preserved and maintained;
(b) To permit or cause to be permitted the holder, its
agents, employees and representatives, at their own risk, to go upon,
examine, inspect and remain on the Mortgaged Properties, and to go
upon the derrick floor of any well or wells at any time drilled or
being drilled thereon, and to strap, gauge, measure and inspect any
and all tanks at any time on the Mortgaged Properties or holding oil,
gasoline or casinghead gasoline therefrom; and Grantor shall do or
cause to be done all things necessary and/or proper to enable the
holder to exercise said rights whenever it so desires;
(c) To promptly notify the Agent in writing if the
validity or priority of this Deed of Trust or any of the rights,
titles, liens or security interests created or evidenced hereby with
respect to the Mortgaged Properties, or any part thereof, shall be
questioned, attacked or endangered, directly or indirectly, and do or
cause to be done all things necessary and/or proper to protect,
warrant and defend title to the Mortgaged Properties unto the Agent
and its successors and assigns at Grantor's sole expense against all
persons whomsoever claiming an interest therein or a lien thereon, but
the Agent shall have the right, at any time, to intervene in any suit
affecting such title and to employ independent counsel in connection
with any such suit to which it may be a party by intervention or
otherwise; and upon demand Grantor agrees to pay the Agent all
reasonable expenses paid or incurred by it in respect of any such suit
affecting title to any such property or affecting the Agent's rights,
titles, liens or security interests hereunder, including, without
limitation, reasonable fees to the holder's attorneys, and Grantor
will indemnify and hold the holder harmless from and against any and
all costs and expenses, including, without limitation, any and all
costs, loss, damage or liability which the Agent may suffer or incur
by reason of the failure of the title to all or any part of the
Mortgaged Properties, or by reason of the failure or inability of
Grantor, for any reason, to convey the rights, titles, liens and
security interests which this Deed of Trust purports to mortgage,
create or assign, and all amounts at any time so payable by Grantor
shall be secured by the lien and security interest hereof and by the
assignment of production herein contained;
(d) At any time and from time to time, upon request by
the Agent and at Grantor's sole expense, forthwith to execute and
deliver or cause to be executed and delivered to the holder and to
record, file or register, any and all additional instruments and
further assurances as may be necessary or proper, in the Agent's
opinion, to effect the intent of these presents;
- 7 -
<PAGE> 8
(e) To promptly furnish the holder with the financial
information, statements, and reports required to be furnished to Bank
in accordance with the Loan Agreement;
(f) To pay all Secured Indebtedness in accordance with
the terms thereof or hereof, or when the maturity thereof be
accelerated in accordance with the terms thereof or hereof;
(g) To promptly pay and discharge or cause to be promptly
paid and discharged all rentals, delay rentals, royalties and
indebtedness accruing under, and to perform or cause to be performed
each and every act, matter or thing required by each and all of the
assignments, deeds, Leases, subleases, contracts and agreements
comprising a part of or affecting Grantor's interests in the Mortgaged
Properties, and to do or cause to be done all other things necessary
to keep unimpaired Grantor's rights with respect thereto and to
prevent any forfeiture thereof or default thereunder;
(h) To do or cause to be done such development work as
may be reasonably necessary to the prudent and economical operation of
the Mortgaged Properties in accordance with the generally accepted
practices of prudent operators in the industry, including all actions
that may be appropriate to protect from diminution the productive
capacity of the Mortgaged Properties and each producing well thereon,
including, without limitation, cleaning out and a reconditioning each
well from time to time, plugging and completing at a different level
or formation each such well, drilling a substitute or replacement well
to conform to changed spacing regulations or to remedy any mechanical,
engineering or operational difficulty encountered during the life of
each such well, and to protect the Mortgaged Property against drainage
whenever, and as often as, is necessary;
(i) To promptly correct and cure any defect, error or
omission which may be discovered in the contents of this Deed of Trust
or in any other Security Instrument or in the execution or
acknowledgement hereof or thereof and in connection therewith,
promptly execute, acknowledge and deliver to the Agent any and all
such corrective or curative instruments as the Agent may in its sole
and absolute discretion deem necessary or appropriate, and pay all
costs and expenses, including, without limitation, the reasonable
attorneys' fees of the holder, in connection with any of the
foregoing;
(j) Keep, or cause to be kept, such part of the Mortgaged
Properties which is of an insurable nature and of a character usually
insured by Persons operating similar properties, insured in all
respects in accordance with the Loan Agreement;
(k) Not sell, trade, transfer, assign, exchange, farmout,
sublease, convey, mortgage, pledge, destroy, remove or otherwise
dispose of the Mortgaged Properties, or any part thereof, except for
the sale of hydrocarbons produced from or attributable to the
Mortgaged Properties or sales permitted by the Loan Agreement, in
compliance with the terms and conditions of this instrument and the
Security Instruments; and
- 8 -
<PAGE> 9
(l) To comply in all respects with the affirmative and
negative covenants contained in the Loan Agreement, as the same may be
supplemented, amended, modified and replaced from time to time.
3.3 Any and all covenants contained in this Deed of Trust may from
time to time, by instrument in writing signed by the holder and delivered to
Grantor, be waived to such extent and in such manner as the holder may consider
appropriate; but no such waiver shall at any time affect or impair the Agent's
rights or liens hereunder, except to the extent so specifically stated in such
written instrument.
3.4 As to any part of the Mortgaged Properties which may be
comprised of interests in the Leases which are other than working interests or
which may be operated by a party or parties other than Grantor, Grantor's
covenants as expressed in this Article 3 are modified to require that Grantor
use its best efforts to obtain compliance with such covenants by the working
interest owners or the operator or operators of such Leases or properties,
including, without limitation, the exercise by Grantor of all rights under any
operating agreements to which Grantor is a party.
ARTICLE 4
DEFAULTS AND REMEDIES
4.1 The term "Event of Default", as used herein, shall mean the
occurrence of any one or more of the following events:
(a) Any Event of Default specified in the Loan Agreement,
any of the Security Instruments or any other agreement or contract
existing at the date hereof or hereinafter entered into between
Grantor, Agent and Bank or any supplement, amendment, modification or
replacement for any such agreement; and/or
(b) The title of Grantor, Agent or Bank to all of the
Mortgaged Properties, or a substantial part thereof, becomes the
subject matter of litigation or other judicial proceeding which, in
the good faith opinion of Bank, would likely result in substantial
impairment or loss of the lien and security interest intended to be
created by this Deed of Trust.
Upon the occurrence of any such Event of Default the Bank shall have
all of the rights and remedies provided for in the Loan Agreement.
4.2 If Grantor should fail, refuse or be unable to pay any sum of
money herein covenanted to be paid by Grantor, or fail, refuse or be unable to
observe, keep or perform any additional covenant, agreement or undertaking
whatsoever contained in this Deed of Trust, the holder may, but shall not be
obligated to, pay said sums of money, or perform or attempt to perform any such
covenant, agreement or undertaking and any such payment so made or expense
reasonably incurred in the performance or attempted performance of any such
covenant, agreement or undertaking shall be, and is hereby declared by Grantor
to be, a part of the Secured Indebtedness, and Grantor promises, upon demand,
to pay to the holder at the office of Agent set forth hereinabove all sums so
advanced or paid by the Agent, with interest at the Base Rate plus two percent
(2%) (the "Default Rate") from the date paid or incurred by the holder. No
such payment by the holder shall in any
- 9 -
<PAGE> 10
way be considered or constitute a waiver of any such default or of the holder's
right to declare the Secured Indebtedness at once due and payable. In addition
to the lien and security interest hereof, the holder shall be subrogated to all
rights and liens securing the payment of any debt, claim, tax or assessment for
the payment of which it shall have made such advance.
4.3 Upon the occurrence of an Event of Default, the Agent may, at
its option, in addition to any and every other remedy, request Trustee to
proceed with foreclosure, and in such event, Trustee is hereby authorized and
empowered, and it shall be its special duty, upon such request of holder, to
sell the Mortgaged Properties, as a whole or in lots or parcels, as Trustee may
deem proper, to the highest bidder or bidders, for cash, at the courthouse door
of the county in the State of Texas wherein the Mortgaged Properties, then
subject to the lien hereof, are situated, provided that if any of the Mortgaged
Properties be situated in more than one county, such sale shall be made in any
county in the State of Texas wherein any part of such Mortgaged Properties
subject to the lien hereof is situated. Any such sale shall be made at public
outcry, between the hours of ten o'clock (10:00) a.m. and four o'clock (4:00)
p.m. and at a time not later than three (3) hours from the time set forth in
the notice hereinafter described, on the first Tuesday in any month after
advertising the time, place and terms of the sale of the Mortgaged Properties,
then subject to the lien hereof, for at least twenty-one (21) days preceding
the date of sale by posting written or printed notice thereof at the courthouse
door of the county where said Mortgaged Properties are situated and by filing
such notice with the County Clerk of such county (provided that where any of
the Mortgaged Properties are situated in more than one county the notice to be
posted and filed for record as herein provided shall be posted at the
courthouse door of each of such counties where said Mortgaged Properties are
situated, and filed for record in each of such counties, and the notices so
posted and filed for record shall designate the county where the Mortgaged
Properties will be sold), which notice may be posted and filed for record by
Trustee acting, or by any person acting for him, and the holder has, at least
twenty-one (21) days preceding the date of sale, served written or printed
notice of the proposed sale by certified mail on each debtor obligated to pay
the Secured Indebtedness according to the records of holder, by the deposit of
such notice, enclosed in a post-paid wrapper, properly addressed to such debtor
at debtor's most recent address as shown by the records of holder, in a post
office or official depository under the care and custody of the United States
Postal Service, and after such sale to make to the purchaser or purchasers
thereunder good and sufficient deeds and assignments, in the name of Grantor,
conveying said property so sold to the purchaser or purchasers with general
warranty of title by Grantor. The sale of any part of the Mortgaged Properties
shall not exhaust the power of sale, but sales may be made from time to time
until all property is sold or the Secured Indebtedness is paid in full. It
shall not be necessary to have present or to exhibit at any such sale any of
the personal property subject to the lien hereof. To the extent permitted by
applicable law, any sale hereunder may be adjourned by announcement at the time
and place appointed for such sale, without further notice except as may be
required by applicable law.
4.4 Upon the occurrence of an Event of Default, the Trustee and/or
the holder may, at their option, and are hereby authorized, prior or subsequent
to the exercise of any and every other remedy, to enter upon the Mortgaged
Properties, or any part thereof, and to take possession of the Mortgaged
Properties in the possession of Grantor or Grantor's Successors, and may
exclude Grantor or Grantor's Successors, and all persons claiming under
Grantor, wholly or partly therefrom; and, holding the same, the Trustee and/or
the holder may exercise without interference from Grantor or Grantor's
Successors, any and all rights which Grantor has with respect to the
management, possession, operation, protection or preservation of the Mortgaged
Properties, and the Trustee and/or the holder may use, administer, manage,
operate and control the Mortgaged Properties and
- 10 -
<PAGE> 11
conduct the business thereof to the same extent as Grantor or Grantor's
Successors might at the time do and may exercise all rights and powers of
Grantor, in the name, place and stead of Grantor, or otherwise as the Trustee
and/or the holder shall deem best. All reasonable costs, expenses and
liabilities of every character incurred by the Trustee and/or the holder
arising pursuant to the exercise of the rights granted in this Section 4.4
shall be a demand obligation owed by Grantor to holder and shall bear interest
at the Default Rate and shall constitute a portion of the Secured Indebtedness
and shall be secured by this Deed of Trust and all of the Security Instruments.
If necessary to obtain the possession provided for hereinabove, the Trustee
and/or the holder, as the case may be, may invoke any one or more actions for
forcible entry and detainer, trespass to try title and restitution. In
connection with any action taken by the Trustee and/or the holder pursuant to
this Section 4.4, neither the Trustee nor the holder shall be liable for any
loss sustained by Grantor resulting from any act or omission of the Trustee or
the holder in managing the Mortgaged Properties, unless such loss is caused by
the willful misconduct or bad faith of the holder or the Trustee. Grantor
hereby agrees to indemnify and hold harmless the Trustee and the holder from
and against any and all liability, loss or damage which may be incurred by
reason of the exercise of rights or remedies hereunder. Should the holder or
Trustee incur any such liability by reason of this Deed of Trust or the
exercise of rights or remedies hereunder or in defense of any such claims or
demands, the amount thereof, including without limitation, costs, expenses and
reasonable attorneys' fees, shall be a demand obligation owing by Grantor to
the holder or the Trustee, as the case may be, and shall bear interest each day
from the date incurred until paid at the Default Rate and shall be a part of
the Secured Indebtedness and shall be secured by this Deed of Trust and all of
the Security Instruments. Grantor hereby consents to, ratifies and confirms
any and all actions of the holder or the Trustee with respect to the Mortgaged
Properties taken under this Section 4.4.
4.5 Trustee is authorized to receive the proceeds of said sale or
sales made pursuant to Section 4.3 hereof and apply the same as follows: First,
to the payment of all necessary costs and expenses incident to the execution of
said trust, including but not limited to a reasonable fee to Trustee, not to
exceed five percent (5%) to be calculated upon the amount realized at said
sale; Second, to the payment of the Secured Indebtedness in such order as the
holder shall elect; and Third, the balance, if any, remaining after the full
and final payment of the Secured Indebtedness, to Grantor or Grantor's
Successors.
4.6 It is agreed that in any deed or deeds given by Trustee or any
substitute Trustee, any and all statements of fact or other recitals therein
made as to the identity of the holder or as to the occurrence or existence of
any default, or as to the acceleration of the maturity of the Secured
Indebtedness, or as to the request to sell, notice of sale, time, place, terms
and manner of sale, and receipt, distribution and application of the money
realized therefrom, or as to the due and proper appointment of a substitute
Trustee, and, without being limited by the foregoing, as to any act or thing
having been duly done by the holder, or any of them if there be more than one,
or by the Trustee or any substitute Trustee, shall be taken by all courts of
law and equity as prima facie evidence that the said statements of recitals
state facts and are true and correct, and Grantor does hereby ratify and
confirm any and all acts that Trustee, or any substitute Trustee, may lawfully
do in the premises by virtue hereof.
4.7 In case the lien and security interest thereof shall be
foreclosed by Trustee's sale or by judicial action, the purchaser at any such
sale shall receive, as an incident to its ownership, immediate possession of
the property purchased, and Grantor agrees for Grantor and for all persons
claiming under Grantor, that if Grantor or any such person shall hold
possession of said property, or any part thereof, subsequent to foreclosure,
Grantor
- 11 -
<PAGE> 12
or the parties so holding possession shall be considered as tenants at
sufferance of the purchaser at foreclosure sale, and anyone occupying the
property after demand for possession thereof shall be guilty of forcible
detainer and shall be subject to eviction and removal, forcible or otherwise,
with or without process of law, and all damages by reason thereof are hereby
expressly waived.
4.8 Upon the occurrence of an Event of Default, the holder may, at
its election, or Trustee may upon written request of the holder, proceed by
suit or suits, at law or in equity, to enforce the payment of the Secured
Indebtedness in accordance with the terms hereof and of the notes or other
instruments evidencing it, to foreclose the lien and security interest of this
Deed of Trust as against all or any portion of the Mortgaged Properties, and to
have said properties sold under the judgment or decree of a court of competent
jurisdiction. On or at any time after the filing of judicial proceedings to
protect or enforce the rights of the holder, the holder, as a matter of right
and without regard to the sufficiency of the security, and without any showing
of insolvency, fraud or mismanagement on the part of Grantor, shall be entitled
to the appointment of a receiver or receivers of the Mortgaged Property, and of
the income, rents, issues, products, profits and proceeds thereof.
4.9 It is agreed that Bank or any other holder may be the
purchaser of the Mortgaged Properties, or of any part thereof, at any sale
thereof whether such sale be under the power of sale hereinabove vested in
Trustee or upon any other foreclosure of the lien and security interest hereof
or otherwise, and Bank or other holder so purchasing shall, upon any such
purchase, acquire good title to the Mortgaged Properties so purchased, free of
the lien and security interest of these presents.
4.10 To the full extent permitted by applicable law, Grantor agrees
that it will not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force providing for any appraisement,
valuation, stay, extension or redemption, and Grantor, for Grantor and
Grantor's Successors, and for any and all persons claiming any interest in the
Mortgaged Properties, hereby waives and releases, except as expressly provided
herein, all rights of redemption, valuation, stay of execution, notice of
intention or the election to accelerate the Secured Indebtedness and all rights
to a marshalling of assets of Grantor, including the Mortgaged Properties, or
to a sale on inverse order of alienation in the event of foreclosure of the
liens and/or security interests hereby created.
4.11 The rights and remedies hereinabove expressly conferred are
cumulative of all other rights and remedies herein, or by law or in equity
provided, and shall not be deemed to deprive the holder or the Trustee of any
such other legal or equitable rights or remedies, by judicial proceedings or
otherwise, appropriate to enforce the conditions, covenants and terms of this
Deed of Trust and of the notes or other instruments evidencing the Secured
Indebtedness, and the employment of any remedy hereunder, or otherwise, shall
not prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies.
4.12 In the event the Mortgaged Properties, or any part thereof,
shall be located in any state other than the State of Texas, the procedures for
foreclosure and all other provisions of this Article 4 relating to remedies
upon default and related matters shall be modified to the extent necessary to
comply with the laws of the state where such properties are located. It is the
intent of Grantor that this Deed of Trust shall be legal and enforceable in any
state where the Mortgaged Properties, or any part thereof, are located and that
the provisions hereof shall be modified only to the extent necessary to comply
with the laws of such state, and that
- 12 -
<PAGE> 13
all other provisions contained herein shall be in no way affected or impaired
by the necessity to so modify some or all of the provisions of this Article 4.
ARTICLE 5
ASSIGNMENT OF PRODUCTION
5.1 In order further to secure the payment of the Secured
Indebtedness, Grantor does hereby TRANSFER, ASSIGN, and CONVEY unto and in
favor of the holder all of the interest of Grantor in the oil, gas, casinghead
gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
other minerals (herein collectively referred to as the "Hydrocarbons"), in and
under, or which may be produced from, the Mortgaged Properties, or allocated
thereto pursuant to pooling or unitization of the Leases or otherwise, together
with all accounts, contract rights, general intangibles, products and proceeds
arising from or derived from the sale, transfer or other disposition of such
Hydrocarbons on and after the date of the execution of this Deed of Trust.
5.2 The foregoing assignment is made upon, and subject to, the
following terms:
(a) The Agent may give written or telegraphic notice to
all of the parties producing, purchasing, taking, possessing or
receiving any such Hydrocarbons, or having in their possession any
such Hydrocarbons belonging to Grantor or such proceeds for which they
or others are accountable to the holder by virtue of the provisions of
this Section 5.2, to hold and dispose of such Hydrocarbons for the
account of the holder and to make payment of such proceeds direct to
the Agent at its principal office, and the Agent shall thereafter
receive, collect and retain, subject to the provisions of Section 5.5,
as part of the Mortgaged Properties, all such Hydrocarbons, all for
the benefit and further security of the Secured Indebtedness.
(b) All parties producing, purchasing, taking,
possessing, processing or receiving any such Hydrocarbons, or having
in their possession any such Hydrocarbons or such proceeds for which
they or others are accountable to the holder by virtue of the
provisions of this Section 5.2, are authorized and directed by
Grantor, upon receipt of notice by the Agent given pursuant to
Subsection 5.2(a) above, to treat and regard the holder as the
assignee and transferee of Grantor and entitled in its place and stead
to receive such Hydrocarbons and proceeds; and such parties and each
of them shall be fully protected in so treating and regarding the
holder and shall be under no obligation to see to the application by
the holder of any such proceeds received by it. Until such notice is
received by such parties, payment of all proceeds attributable to such
Hydrocarbons shall be payable directly to Grantor. Without in any way
limiting the effectiveness of the authorization and direction in the
next preceding sentence, if Grantor shall receive any such proceeds
which under this Section 5.2 are receivable by the holder, Grantor
will hold the same in trust and will remit such proceeds, or cause
such proceeds to be remitted, immediately, to the Agent.
(c) Without limiting the foregoing provisions of this
Article 5, Grantor stipulates that this Article 5 is intended to grant
to the Agent a security interest in Grantor's interest in the
Hydrocarbons to be extracted from or attributable to the Mortgaged
Properties, and in and to the proceeds resulting from the sale thereof
at the well head.
- 13 -
<PAGE> 14
5.3 Grantor covenants, agrees and specifically undertakes hereby,
to cause, after Bank shall have so requested, all pipeline companies or other
purchasers of the Hydrocarbons to pay promptly to the Agent at its principal
office, Grantor's interest in the proceeds derived from the sale thereof, in
accordance with the terms of this assignment, and forthwith to execute,
acknowledge and deliver to such pipeline companies and other purchasers such
further and proper division orders, transfer orders, certificates and other
documents as may be necessary or proper to effect the intent of these presents;
and the holder shall not be required at any time, as a condition to its right
to obtain the proceeds of the Hydrocarbons, to warrant its title thereto or to
make any guaranty whatsoever. In addition, and without limitation, Grantor
covenants, agrees and specifically undertakes hereby, to provide to the holder
the name and address of every pipeline company or other purchaser of the oil,
gas and other minerals produced from or allocated to the Mortgaged Properties
when determined, together with a copy of the applicable purchase and sales
contracts. All expenses incurred by the holder in the collection of such
proceeds shall be repaid promptly by Grantor; and prior to such repayment, such
expenses shall be a part of the Secured Indebtedness.
5.4 Without limitation upon any of the foregoing, Grantor hereby
designates and appoints the Agent as Grantor's true and lawful agent and
attorney-in-fact (with full power of substitution, either generally or for such
periods or purposes as the Agent may from time to time prescribe), with full
power and authority, for and on behalf of and in the name of Grantor and only
upon an Event of Default, to execute, acknowledge and deliver all such division
orders, transfer orders, certificates and other documents of every nature, with
such provisions as may from time to time, in the opinion of the Agent, be
necessary or proper to effect the intent and purpose of the assignment
contained in this Article 5; and to demand, collect, receive and sue for, in
the Agent's own name or in the name of Grantor, all cash, other distributions
or proceeds due or which may become due to Grantor by virtue of the Mortgaged
Properties or any part thereof or interest therein, with the absolute right in
the Agent to rehypothecate, pledge, compromise, settle or discharge the same
and to do all acts and things necessary or convenient for any such purpose,
including, without limitation, the right to give good and sufficient receipts
and releases; to endorse the name of Grantor upon any and all checks, drafts,
money orders and other instruments for the payment of monies which are payable
to Grantor and constitute collections on the Mortgaged Properties; and to
perform such other and further acts and deeds in the name of Grantor which the
Agent may deem necessary and appropriate; and Grantor shall be bound thereby as
fully and effectively as if Grantor had personally executed, acknowledged and
delivered any of the foregoing certificates or documents; as if Grantor had
personally demanded, collected, received and/or sued for any and all cash,
other distributions or proceeds; as if Grantor had personally done any and all
acts and things necessary or convenient for any such purpose; as if Grantor had
personally endorsed Grantor's own name upon any and all checks, drafts, money
orders and other instruments; and as if Grantor personally performed such other
and further acts and deeds in Grantor's own name which the holder deemed
necessary and appropriate; PROVIDED, HOWEVER, notwithstanding anything
contained herein to the contrary, the Assignment of Production contained in
Section 5.1 hereof, and the holders rights thereunder, shall be absolute and
shall not be conditioned upon the occurrence of an Event of Default. The
powers and authorities herein conferred on the Agent may be exercised by the
Agent through any person who, at the time of exercise, is an officer of the
Agent. The power of attorney conferred by this Section 5.4 is granted for
valuable consideration and coupled with an interest and is irrevocable so long
as the Secured Indebtedness, or any part thereof, shall remain unpaid. All
persons dealing with the Agent, or any substitute, shall be fully protected in
treating the powers and authorities conferred by this Section 5.4 as continuing
in full force and effect until advised by the Agent that the Secured
Indebtedness is fully and finally paid.
- 14 -
<PAGE> 15
5.5 All proceeds received by the Agent in collected funds pursuant
to this Article 5 shall be placed in a collateral collection account at the
office of Agent, and the holder is hereby authorized to apply all such proceeds
as follows: First, to the payment of all necessary costs and expenses incident
to the receipt and collection of such proceeds; Second, to the payment of the
Secured Indebtedness in such order as the holder shall elect; and Third, the
balance, if any, remaining after the full and final payment of the Secured
Indebtedness, to Grantor or Grantors Successors.
5.6 Should any person or entity now or hereafter purchasing or
taking any part of the Hydrocarbons fail to make payment promptly to the Agent
for the purchase price of such Hydrocarbons, after notice pursuant to this
Article 5, the holder shall have the right to make or to require Grantor to
make, a change of connection and the right to designate or approve the
purchaser with whose facilities a new connection shall be made, and the holder
shall be without liability or responsibility in connection therewith so long as
ordinary care is used in making such designation.
5.7 The Agent shall never be under any obligation to enforce the
collection of the funds assigned to it hereunder, nor shall it ever be liable
for failure to exercise diligence in the collection of such funds, but it shall
only be accountable for the sums that it shall actually receive.
ARTICLE 6
SECURITY AGREEMENT
6.1 With respect to all personal property and fixtures comprising
a part of the Mortgaged Properties, together with all proceeds and products
thereof (hereinafter collectively referred to as the Collateral"), this Deed of
Trust shall likewise be a security agreement, and for a valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and for the
purpose of further securing payment and performance of the Secured
Indebtedness, Grantor hereby grants to Agent for the benefit of Bank a security
interest in the Collateral including, without limitation, all rights now owned
and at any time hereafter acquired by Grantor in all (a) oil, gas and other
minerals produced from or allocated to the Mortgaged Properties, (b) accounts,
chattel paper and general intangibles arising in connection with the sale or
other disposition of such production, or otherwise associated with the
Mortgaged Properties, and (c) equipment, materials, other personal property,
and fixtures at any time used on or in connection with the Mortgaged Properties
or in connection with such production, (d) geological, geophysical,
engineering, accounting, title, legal and other technical or business data
concerning the Mortgaged Properties, and the Hydrocarbons which are in the
possession of Grantor or in which Grantor can otherwise grant a security
interest, and all books, files, records, seismic data, magnetic media or other
forms of recording or obtaining access to such data, together with all
accessions, additions, proceeds, products, replacements, substitutions, and
modifications to or for any of the foregoing.
6.2 Grantor hereby assigns to Agent Grantor's security interests
and liens and all other interests of Grantor arising pursuant to or perfected
by any instrument to which Grantor is a party affecting real property in which
Grantor is an interest owner, as provided in Section 9.319 of the Texas
Business and Commerce Code (and as provided in any similar provisions, if any,
of the Uniform Commercial Code as enacted in any other state where the
Mortgaged Properties, or any part thereof, are situated), by virtue of the
first sale of Hydrocarbons produced from the Mortgaged Properties.
- 15 -
<PAGE> 16
6.3 Grantor represents and warrants that, except for any financing
statement now in force filed by Bank, or Bank's predecessor-in-interest in and
to the Original Deed of Trust (as hereinafter defined), or as shown on Exhibit
"A", no financing statement covering the Collateral, or any part thereof, has
been filed with any filing officer, and no other security interest now in force
has attached or been perfected in the Collateral, or any part thereof.
6.4 This Deed of Trust shall be effective as a financing statement
filed as a fixture filing with respect to all of the Collateral which is or
will become fixtures related to the Lands and Leases and is to be filed for
record as a financing statement in the real estate records of each county where
any part of the Mortgaged Properties (including such fixtures) is situated.
Such of the Mortgaged Properties which constitute minerals or the like
(including oil and gas) or accounts subject to subsection (e) of Section 9.103
of the Texas Business and Commerce Code (and to similar provisions, if any, of
the Uniform Commercial Code as enacted in any other state where the Mortgaged
Properties are situated) are or will be financed at the wellhead or minehead of
the well or mine located on the Lands described in Exhibit "A". This Deed of
Trust shall also be effective as a financing statement covering such minerals
or the like (including oil and gas) and such accounts, and, where so permitted
or required, is to be filed for record as such a financing statement in the
real estate records for each county where a mortgage on the Mortgaged
Properties would be filed or recorded. The above goods are or are to become
fixtures on the Lands. The record owner of the real estate interest covered by
this Deed of Trust is Grantor.
ARTICLE 7
MISCELLANEOUS
7.1 Upon the full and final payment of the Secured Indebtedness,
this Deed of Trust shall be extinguished and be of no further force and effect;
and the Mortgaged Properties shall become wholly free and clear hereof and all
of the property as assigned hereby shall be automatically reassigned to Grantor
without any further act being required; and the holder, upon the request and at
the expense of Grantor, shall promptly deliver to Grantor such instruments
evidencing the Secured Indebtedness, marked "PAID", and execute and deliver to
Grantor and others a release of this Deed of Trust and such other instruments
of satisfaction as may be appropriate.
7.2 The rights, titles, interests, liens and powers hereunder are
cumulative of each other and of all other rights, titles, interests, liens' and
powers which may now or hereafter exist to secure the payment of the Secured
Indebtedness to the holder, or any part thereof. The security herein and
hereby provided shall not affect or be affected by any other Security
Instrument or by any other or further security heretofore or hereafter taken
for the Secured Indebtedness or any part thereof. Grantor, for Grantor and
Grantor's Successors, and for any and all persons ever claiming any interest in
the Mortgaged Properties, hereby waives all rights of marshalling in event of
foreclosure of the lien hereby created. No failure to exercise and no delay in
exercising on the part of the Agent or the holder any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further
exercise thereof, or the exercise of any other right, power or privilege.
- 16 -
<PAGE> 17
7.3 For all purposes of this instrument, the post office address
of Bank shall be: P.O. Box 655415, Dallas, Texas 75265-5415, Attention: Wm.
Mark Cranmer, Vice President, and the address of Grantor shall be: 1400 One
Energy Square, 4925 Greenville Avenue, Dallas, Texas 75206, Attention: Miles
D. Bender, President.
7.4 No provision herein or in any promissory note, instrument, or
any other loan document executed by Grantor evidencing the Secured Indebtedness
shall require the payment or permit the collection of interest in excess of the
maximum permitted by law. If any excess of interest in such respect as
provided for herein or in any such promissory note, instrument, or any other
loan document, the provisions of this Section 7.4 shall govern, and Grantor
shall not be obligated to pay the amount of such interest to the extent that it
is in excess of the amount permitted by law. The intention of the parties
being to conform strictly to the usury laws now in force, all promissory notes,
instruments and other loan documents executed by Grantor evidencing the Secured
Indebtedness shall be held subject to reduction to the amount allowed under
said usury laws as now or hereafter construed by the courts having
jurisdiction.
7.5 These presents shall be binding upon the Grantor and Grantor's
Successors, and shall inure to the benefit of the Agent, its successors and
assigns, or the holder, as the case may be, and shall be covenants running with
the Lands.
7.6 In the event that any one or more of the provisions contained
in this Deed of Trust shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
7.7 THIS DEED OF TRUST SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT IN THOSE INSTANCES WHERE
THE MORTGAGED PROPERTIES COVERED HEREBY ARE LOCATED IN STATES OTHER THAN THE
STATE OF TEXAS. IN SUCH EVENT, THE LAW IN FORCE IN THE STATE WHERE THE
MORTGAGED PROPERTIES ARE LOCATED SHALL GOVERN THE CONSTRUCTION OF THIS DEED OF
TRUST.
7.8 This Deed of Trust has simultaneously been executed in a
number of identical counterparts, each of which, for all purposes, shall be
deemed an original, and all of which are identical except that, to facilitate
recordation, in any particular counterpart, portions of Exhibit A which
describe properties and interests situated in counties other than the county in
which such particular counterpart is to be recorded may have been omitted.
7.9 The use of any particular pronoun herein shall mean and be
construed to include the plural and singular number of such pronoun, whenever
and wherever appropriate and applicable, and shall mean and be construed to
include the masculine, feminine or neuter gender of such pronoun, whenever and
wherever appropriate and applicable.
7.10 The effective date of the assignment contained in Article 5 is
the date of execution of this Deed of Trust at 7:00 o'clock a.m.
7.11 This Deed of Trust amends and restates that certain Amended
and Restated Deed of Trust, Security Agreement, Assignment of Production, and
Financing Statement (the "Prior Deed of Trust"), effective as of June 30, 1995,
executed by Grantor for the benefit of Bank One Texas, N.A. covering the
properties
- 17 -
<PAGE> 18
described therein, which Prior Deed of Trust is filed of record as more
particularly set forth on Schedule 1 attached hereto. Nothing contained herein
shall be construed to impair the liens and security interests of the Prior Deed
of Trust on any of the properties covered thereby and such liens and security
interests are hereby renewed and extended and shall remain in full force and
effect for all indebtedness now or hereafter outstanding under the Secured
Indebtedness. Bank One, Texas, N.A., individually hereby GRANTS, TRANSFERS AND
ASSIGNS unto Agent, without recourse or warranty, all of its rights, title and
interest to the Prior Deed of Trust existing on the date hereof.
7.12 In the event of a conflict between the terms and provisions of
this Deed of Trust and the terms and provisions of the Loan Agreement, the Loan
Agreement shall control.
IN TESTIMONY WHEREOF, Grantor has caused this instrument to be duly
executed effective as of the 29th day of August, 1996.
NATIONAL ENERGY GROUP, INC.,
a Delaware corporation
By:
-------------------------------------
Miles D. Bender, President
BANK ONE, TEXAS, N.A.,
a national banking association,
individually and as Administrative Agent
By:
-------------------------------------
Wm. Mark Cranmer, Vice President
- 18 -
<PAGE> 19
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for the State of
Texas, on this day personally appeared Miles D. Bender, President of NATIONAL
ENERGY GROUP, INC., a Delaware corporation, known to me to be the person whose
name is subscribed to the foregoing instrument and acknowledged to me that the
same was the act of said corporation and that he executed said instrument as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of August,
1996.
My Commission Expires: Notary Public in and for the
State of Texas
- ------------------------------
-----------------------------------------
Typed or Printed Name of Notary Signature
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned, a Notary Public in and for the State of
Texas, on this day personally appeared Wm. Mark Cranmer, Vice President of
BANK ONE, TEXAS, N.A., a national banking association, known to me to be the
person whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of said corporation and that he executed said
instrument as the act of such corporation for the purposes and consideration
therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of August,
1996.
My Commission Expires: Notary Public in and for the
State of Texas
- ------------------------------
-----------------------------------------
Typed or Printed Name of Notary Signature
- 19 -
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Current Report on Form 8-K
and the Registration Statements (Form S- 3, No. 33-88008, No. 33-62851 and No.
333-01485), as amended, of National Energy Group, Inc. of our report dated
March 30, 1996, except Notes 4 and 13 for which the date is May 10, 1996 with
respect to the consolidated financial statements of Alexander Energy
Corporation included in the Joint Proxy Statement and Prospectus filed with the
Securities and Exchange Commission, as part of, or in conjunction with, the
Registration Statement on Form S-4 (No. 333-9045), as amended.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
September 9, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Form 8-K of National Energy
Group, Inc. dated August 29, 1996, of our report, which includes an explanatory
paragraph relating to the Company's adoption of different methods of accounting
for its oil and gas properties and income taxes, dated February 22, 1994, on
our audit of the consolidated financial statements of American Natural Energy
Corporation and Subsidiaries (the "Company") for the year ended December 31,
1993.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
September 10, 1996
