<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): JANUARY 23, 1998
Gothic Energy Corporation
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(Exact name of Registrant as specified in its Charter)
OKLAHOMA 0-19753 22-2663839
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(State of incorporation (Commission File Number) (IRS Employer
or organization) ID No.)
5727 SOUTH LEWIS AVENUE - SUITE 700 - TULSA, OKLAHOMA 74105
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(Address of principal executive offices)
(918) 749-5666
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 23, 1998, Gothic Energy Corporation (the "Company") purchased,
pursuant to an agreement dated November 25, 1997 with Amoco Production Company,
a subsidiary of Amoco Corporation (the "Amoco Acquisition"), natural gas
producing properties located in the Anadarko and Arkoma Basins of Oklahoma. The
consideration paid consisted of $237.5 million in cash, subject to closing
adjustments, a five-year warrant to purchase 1.5 million shares of Common Stock
exercisable at $3.00 per share, and certain producing properties owned by the
Company having a value of less than $1.0 million. The purchase had an effective
date of December 1, 1997. The Company acquired interests in 705 gross wells and
assumed operations of 296 of the properties. The Amoco Acquisition adds
approximately 229.0 Bcfe of proved reserves with a PV-10 of approximately $233.3
million to the Company's proved reserves as of November 30, 1997. Of the proved
reserves acquired, 96% are natural gas and 72% are producing with net daily
production of approximately 63 Mmcfe.
Approximately $216.4 million of the consideration for the Amoco Acquisition
was financed with borrowings under the Second Restated Loan Agreement. See Item
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5. Other Events. The balance of the consideration was paid out of the proceeds
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from the issuance by the Company of shares of Senior Redeemable Preferred Stock,
Series A (the "Senior Preferred Stock") and common stock purchase warrants and
from the Company's working capital.
ITEM 5. OTHER EVENTS
Credit Facility. On January 23, 1998, the Company entered into a Second
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Restated Loan Agreement (herein referred to as the "Credit Facility") with Bank
One, Texas, N.A. ("Bank One"), as principal and as agent for a syndicate of
lenders, which agreement replaced the Company's credit facility entered into in
January 1996. The Credit Facility consists of a revolving loan with a lending
commitment of $160.0 million, subject to a monthly commitment reduction of $2.0
million commencing February 1, 1998 (the "Revolving Loan"), and a bridge loan
(the "Bridge Loan") with a lending commitment of $60.0 million. The initial
borrowing base under the Revolving Loan is $160.0 million. Proceeds under the
Revolving Loan are available to be used to finance a portion of the purchase
price for the Amoco Acquisition as well as the acquisition and development of
natural gas and oil properties, letters of credit and general corporate
purposes. The Revolving Loan matures on December 31, 2000. Borrowings under the
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Bridge Loan are available to finance a portion of the purchase price for the
Amoco Acquisition. The Bridge Loan is due and payable on June 30, 1998 and is
subject to prepayment out of the Company's excess cash flow, as defined.
Interest on borrowings under the Credit Facility is payable monthly
calculated at the Bank One Base Rate, as determined from time to time by Bank
One, provided, however, so long as the Bridge Loan is outstanding interest on
the Revolving Loan is at the Base Rate plus 0.5% and interest on the Bridge Loan
is at the Base Rate plus 1.0% through March 31, 1998 and at the Base Rate plus
2.0% thereafter. The Company may elect to calculate interest under a London
Interbank Offered Rate ("LIBOR") plus 1.5%, if less than 50% of the borrowing
base is utilized, up to plus 2% if more than 75% of the borrowing base is
utilized, provided, however, so long as the Bridge Loan is outstanding the LIBOR
rate is plus 3.0%. The interest rate under the Credit Facility is subject to a
1.0% increase in the event the Company fails to fulfill timely certain
agreements relating to obtaining additional capital. The Company is required to
pay a fee on the unused portion of the lending commitment equal to 1/2 of 1%
per annum.
Under the Credit Facility, the lenders hold liens on substantially all of
the Company's oil and natural gas properties, whether currently owned or
hereafter acquired, including the properties acquired in the Amoco Acquisition.
The Credit Facility requires, among other things, semi-annual engineering
reports covering oil and natural gas reserves on the basis of which semi-annual
and other redeterminations of the borrowing base and monthly commitment
reduction will be made. The Credit Facility also includes various affirmative
and negative covenants, including, among others, (i) prohibitions against
additional indebtedness unless approved by the lenders, subject to certain
exceptions, (ii) prohibitions against the creation of liens on the assets of the
Company, subject to certain exceptions, (iii) prohibitions against cash
dividends, (iv) maintaining certain hedging positions and interest rate
protection agreements satisfactory to Bank One, (v) prohibitions on asset sales,
subject to certain exceptions, (vi) restrictions on mergers or consolidations,
(vii) a requirement to maintain a ratio of current assets to current liabilities
of 1.0 to 1.0, (viii) a requirement to maintain on a quarterly basis a minimum
tangible net worth of at least (a) $45 million as of January 23, 1998, and (b)
$75 million as of March 31, 1998, plus 50% of net income, if positive, before
extraordinary gains but after extraordinary losses, for the period commencing
April 1, 1998, plus 100% of the net proceeds from the issuance of common or
preferred stock, (ix) a minimum interest coverage ratio of not less than 1.5 to
1.0 as of the end of each quarter for the preceding four quarters beginning with
the quarter ended September 30, 1997 and increasing to 2.0 to 1.0 as of the end
of each quarter for the preceding four quarters beginning with the quarter ended
September 30, 1998, (x)
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issuance of common stock with proceeds of $65.0 million by March 31, 1998, and
(xi) the escrow of interest payments due on the Company's outstanding 12 1/4%
Senior Notes due 2004. Events of default include the non-payment of principal,
interest or fees, a default under other outstanding indebtedness of the Company,
a breach of the Company's representations and warranties contained in the loan
agreement, material judgments, bankruptcy or insolvency, a default under certain
covenants not cured within a grace period, and a change in the management or
control of the Company.
The amount of borrowings available to the Company under the Credit Facility
depend upon the redetermination of the Company's borrowing base by the Bank,
subject to the limits imposed by the lending commitment. The borrowing base is
subject to periodic redetermination, at the discretion of the Bank, based on a
review of Company reserve and other information with the initial scheduled
review to occur on April 1, 1998. A reduction in the borrowing base could
require the Company to repay outstanding indebtedness under the Revolving Loan
in excess of the redetermined borrowing base, and would limit available
borrowings thereunder.
Senior Preferred Stock and Warrants. On January 23, 1998, the Company
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issued an aggregate of 37,000 shares of Senior Preferred Stock with each share
having a liquidation preference of $1,000. The Company has the right to redeem
the Senior Preferred Stock at any time upon payment in cash of 101% of the
liquidation preference, inclusive of accrued but unpaid dividends, and the
shares are mandatorily redeemable on December 31, 2004. The shares of Senior
Preferred Stock are entitled to receive cumulative dividends payable in
additional shares of Senior Preferred Stock at a rate per annum initially of 14%
of the liquidation preference of the Senior Preferred Stock increasing on April
1, 1998 and each 90-day period thereafter that the Senior Preferred Stock
remains outstanding by 1%, but not to exceed a maximum dividend per annum of
20%, excluding any other adjustments to the dividend rate. The Senior Preferred
Stock ranks senior to all classes of the Company's Common Stock and preferred
stock outstanding or hereafter issued. The holders of the shares of Senior
Preferred Stock have no voting rights except (i) as required by Oklahoma law, or
(ii) in the event the shares of Senior Preferred Stock are then outstanding and
so long as such shares remain outstanding, commencing on September 30, 1998 the
holders are entitled to elect two members of the Company's Board of Directors,
on December 31, 1998 the holders are entitled to elect three members of the
Company's Board of Directors, and on March 31, 1999 the holders are entitled to
elect four members of the Company's Board of Directors. Such directors, if
elected, will serve until the shares are redeemed. The dividend rate on the
Senior Preferred Stock is subject to increase under certain circumstances in the
event the Company fails to comply with certain covenants
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relating to the registration under the Securities Act of 1933, as amended, of
shares of Senior Preferred Stock to be offered in exchange for the outstanding
shares of Senior Preferred Stock, a change in control of the Company, or the
failure of the Company to redeem the shares from the proceeds of certain
offerings of its securities. The issuance of the shares provided a portion of
the cash paid as consideration in the Amoco Acquisition and were applied to
payment of a fee in connection with an amendment obtained from the holders of
certain terms of the Company's outstanding 12 1/4% Senior Notes due 2004 thereby
permitting the Amoco Acquisition.
Concurrently with the sale of the Senior Preferred Stock, the Company
issued five-year warrants to purchase an aggregate of 1,175,778 shares of Common
Stock exercisable at the lesser of $2.75 per share or the average of the daily
closing bid prices commencing five days and ending one day before the date of
exercise. The exercise price and number of shares issuable is subject to
adjustment under certain circumstances and the holders have certain rights to
have the shares issuable on exercise of the warrants registered under the
Securities Act or included in a registration statement filed by the Company
under the Securities Act.
General. The foregoing summaries of the Credit Facility, Senior Preferred
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Stock and common stock purchase warrants do not purport to be complete and are
subject to, and qualified in their entirety, by reference to the applicable
agreements.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements of Business Acquired.
It is impracticable for the Registrant to provide the required
financial statements for the business acquired at the time this Current Report
on Form 8-K is filed. Such financial statements will be filed as soon as
practicable but not later than 60 days after the date this Current Report on
Form 8-K is required to be filed.
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(b) Pro Forma Financial Information.
It is impracticable for the Registrant to provide the required pro
forma financial information for the business acquired at the time this Current
Report on Form 8-K is filed. Such pro forma financial information will be filed
as soon as practicable but not later than 60 days after the date this Current
Report on Form 8-K is required to be filed.
(c) Exhibits.
EXHIBIT NUMBER DESCRIPTION
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10.1 Second Restated Loan Agreement Among
the Company, Gothic Energy of Texas,
Inc., Gothic Gas Corporation and Bank
One, Texas, N.A.
10.2 Securities Purchase Agreement dated as
of January 23, 1998
10.3 Certificate of Designation of Preferences
and Rights of Senior Redeemable Preferred
Stock, Series A, as filed with the State
of Oklahoma on January 23, 1998
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EXHIBIT NUMBER DESCRIPTION
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10.4 Warrant Agreement between the Company and
American Stock Transfer & Trust Company,
dated as of January 23, 1998
10.5 Registration Rights Agreement dated as of
January 23, 1998
10.6 Common Stock Registration Rights Agreement
dated as of January 23, 1998
10.7 Warrant to Purchase Common Stock of the
Company expiring November 24, 2002
10.8 First Supplemental Indenture dated January
23, 1998 to Indenture dated September 9,
1997 between the Company and The Bank of
New York, as Trustee
10.9 Second Supplemental Indenture dated
January 27, 1998 to Indenture dated
September 9, 1997 between the Company
and The Bank of New York, as Trustee
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOTHIC ENERGY CORPORATION
Dated: February 6, 1998 By: /s/ Michael K. Paulk
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Michael K. Paulk, President
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Exhibit 10.1
SECOND
RESTATED
LOAN AGREEMENT
AMONG
GOTHIC ENERGY CORPORATION,
GOTHIC ENERGY OF TEXAS, INC.
AND
GOTHIC GAS CORPORATION,
AS BORROWERS
AND
BANK ONE, TEXAS, N.A.
AND THE BANKS NAMED HEREIN
AS BANKS
AND
BANK ONE, TEXAS, N.A.,
AS ADMINISTRATIVE AND
SYNDICATION AGENT
AND
CREDIT LYONNAIS, NEW YORK BRANCH AND BANQUE PARIBAS,
AS CO-DOCUMENTATION AGENTS
JANUARY 23, 1998
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TABLE OF CONTENTS
Page No.
1. Definitions.............................................................. 2
2. Commitments of the Bank..................................................13
(a) Terms of Revolving Commitment.....................................13
(b) Bridge Loan.......................................................14
(c) Procedure for Borrowing...........................................14
(d) Letters of Credit.................................................15
(e) Procedure for Obtaining Letters of Credit.........................16
(f) Voluntary Reduction of Revolving Commitment.......................16
(g) Mandatory Commitment Reductions...................................16
(h) Several Obligations...............................................17
(i) Limited Liability of Texas and Gas................................17
3. Notes Evidencing Loans...................................................17
(a) Form of Revolving Notes...........................................17
(b) Form of Bridge Notes..............................................18
(c) Issuance of Additional Notes......................................18
(d) Interest Rate.....................................................18
(e) Payment of Interest...............................................19
(f) Payment of Principal..............................................19
(g) Payment to Banks..................................................19
(h) Sharing of Payments, Etc..........................................19
(i) Non-Receipt of Funds by the Agent.................................20
(j) Capital Adequacy..................................................20
4. Interest Rates...........................................................20
(a) Options...........................................................20
(b) Interest Rate Determination.......................................21
(c) Conversion Option.................................................22
(d) Recoupment........................................................22
5. Special Provisions Relating to Loans.....................................22
(a) Unavailability of Funds or Inadequacy of Pricing..................22
(b) Reserve Requirements..............................................22
(c) Taxes.............................................................23
(d) Change in Laws....................................................24
(e) Option to Fund....................................................24
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(f) Indemnity.........................................................24
(g) Payments Not at End of Interest Period............................24
6. Collateral Security......................................................25
7. Borrowing Base...........................................................25
(a) Initial Borrowing Base............................................26
(b) Subsequent Determinations of Borrowing Base.......................26
8. Fees.....................................................................28
(a) Unused Commitment Fee.............................................28
(b) Borrowing Base Increase Fee.......................................28
(c) The Letter of Credit Fee..........................................28
(d) Agency Fees.......................................................28
(e) Commitment Fees...................................................28
(f) Structure Fees....................................................28
9. Prepayments..............................................................29
(a) Voluntary Prepayments.............................................29
(b) Mandatory Prepayment For Borrowing Base Deficiency................29
(c) Excess Cash Flow Recapture........................................29
10. Representations and Warranties...........................................29
(a) Creation and Existence............................................29
(b) Power and Authority...............................................29
(c) Binding Obligations...............................................30
(d) No Legal Bar or Resultant Lien....................................30
(e) No Consent........................................................30
(f) Financial Condition...............................................30
(g) Liabilities.......................................................30
(h) Litigation........................................................31
(i) Taxes; Governmental Charges.......................................31
(j) Titles, Etc.......................................................31
(k) Defaults..........................................................31
(l) Casualties; Taking of Properties..................................31
(m) Use of Proceeds; Margin Stock.....................................32
(n) Location of Business and Offices..................................32
(o) Compliance with the Law...........................................32
(p) No Material Misstatements.........................................32
(q) Not A Utility.....................................................33
(r) ERISA.............................................................33
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(s) Public Utility Holding Company Act................................33
(t) Subsidiaries......................................................33
(u) Environmental Matters.............................................33
(v) Liens.............................................................33
11. Conditions of Lending....................................................34
12. Affirmative Covenants....................................................37
(a) Financial Statements and Reports..................................37
(b) Certificates of Compliance........................................38
(c) Accountants' Certificate..........................................39
(d) Taxes and Other Liens.............................................39
(e) Compliance with Laws..............................................39
(f) Further Assurances................................................39
(g) Performance of Obligations........................................40
(h) Insurance.........................................................40
(i) Accounts and Records..............................................41
(j) Right of Inspection...............................................41
(k) Notice of Certain Events..........................................41
(l) ERISA Information and Compliance..................................41
(m) Environmental Reports and Notices.................................42
(n) Compliance and Maintenance........................................42
(o) Operation of Properties...........................................42
(p) Compliance with Leases and Other Instruments......................43
(q) Certain Additional Assurances Regarding Maintenance
and Operations of Properties......................................43
(r) Sale of Certain Assets/Prepayment of Proceeds.....................43
(s) Title Matters.....................................................44
(t) Curative Matters..................................................44
(u) Change of Principal Place of Business.............................44
(v) Cash Collateral Accounts..........................................44
(w) Required Hedging..................................................45
(x) New Equity........................................................45
(y) Escrow of Interest Payments.......................................45
13. Negative Covenants.......................................................45
(a) Negative Pledge...................................................46
(c) Current Ratio.....................................................46
(d) Minimum Interest Coverage Ratio...................................46
(e) Minimum Tangible Net Worth........................................46
(g) Debts, Guaranties and Other Obligations...........................47
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(h) Dividends.........................................................48
(i) Loans and Advances................................................48
(j) Sale or Discount of Receivables...................................48
(k) Nature of Business................................................48
(l) Transactions with Affiliates......................................48
(m) Hedging Transactions..............................................49
(n) Investments.......................................................49
(o) Amendment to Articles of Incorporation or Bylaws..................49
(p) Sale of Assets....................................................50
(q) Proceeds of Production............................................50
(r) Issuance of Preferred Stock......................................50
(s) Amendments, etc. of Senior Unsecured Debt.........................50
(t) Amendments to and Redemption of Preferred Stock or Other Equity...50
(u) Payment or Pre-Payment of Other Indebtedness......................50
14. Events of Default........................................................50
15. The Agent, the Co-Agents and the Banks...................................53
(a) Appointment and Authorization.....................................53
(b) Note Holders......................................................54
(c) Consultation with Counsel.........................................54
(d) Documents.........................................................54
(e) Resignation or Removal of Agent or Co-Agent.......................54
(f) Responsibility of Agent or Co-Agent...............................55
(g) Independent Investigation.........................................57
(h) Indemnification...................................................57
(i) Benefit of Section 15.............................................57
(j) Pro Rata Treatment................................................58
(k) Assumption as to Payments.........................................58
(l) Other Financings..................................................58
(m) Interests of Banks................................................58
(n) Investments.......................................................59
16. Exercise of Rights.......................................................59
17. Notices..................................................................59
18. Expenses.................................................................60
19. Indemnity................................................................60
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20. Governing Law............................................................61
21. Invalid Provisions.......................................................61
22. Maximum Interest Rate....................................................61
23. Amendments...............................................................62
24. Multiple Counterparts....................................................62
25. Conflict.................................................................62
26. Survival.................................................................62
27. Parties Bound............................................................62
28. Assignments and Participations...........................................62
29. Choice of Forum: Consent to Service of Process and Jurisdiction..........64
30. Waiver of Jury Trial.....................................................65
31. Other Agreements.........................................................65
32. Financial Terms..........................................................65
EXHIBITS
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Exhibit "A" - Notice of Borrowing
Exhibit "B" - Revolving Note
Exhibit "C" - Bridge Note
Exhibit "D" - Certificate of Compliance
Exhibit "E" - Form of Assignment and Acceptance Agreement
SCHEDULES
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Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Title Matters
Schedule 8 - Curative Matters
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SECOND RESTATED LOAN AGREEMENT
THIS SECOND RESTATED LOAN AGREEMENT (hereinafter referred to as the
"Agreement") executed as of the 23rd day of January, 1998, by and between GOTHIC
ENERGY CORPORATION, an Oklahoma corporation ("Energy"), GOTHIC ENERGY OF TEXAS,
INC., an Oklahoma corporation ("Texas") and GOTHIC GAS CORPORATION, an Oklahoma
corporation ("Gas") (Energy, Gas and Texas are hereinafter collectively referred
to as "Borrowers" and individually as a "Borrower" ) and BANK ONE, TEXAS, N.A.,
a national banking association ("Bank One"), CREDIT LYONNAIS, NEW YORK BRANCH
("CL") and BANQUE PARIBAS ("Paribas") and each of the financial institutions
which is a party hereto (as evidenced by the signature pages to this Agreement)
or which may from time to time become a party hereto pursuant to the provisions
of Section 28 hereof or any successor or assignee thereof (hereinafter
collectively referred to as "Banks", and individually, "Bank") and Bank One, as
Administrative and Syndication Agent (the "Agent") and CL and Paribas, as Co-
Documentation Agents (the "Co-Agents").
W I T N E S S E T H:
WHEREAS, Borrowers and Bank One entered into a Loan Agreement dated as of
January 19, 1996 (the "Loan Agreement") under the terms of which Bank One
agreed, subject to the satisfaction of certain conditions precedent set forth
therein, to provide Borrowers, Buttonwood Energy Corporation ("Buttonwood") and
Buttonwood Petroleum, Inc., ("Petroleum") with a revolving loan facility in
amounts of up to $20,000,000.00; and
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WHEREAS, the Loan Agreement was amended pursuant to a First Amendment to
Loan Agreement dated as of January 30, 1996, a Second Amendment to Loan
Agreement dated as of May 14, 1996, a Third Amendment to Loan Agreement dated
July 31, 1996 and a Fourth Amendment to Loan Agreement dated as of November 26,
1996 and a Fifth Amendment to Loan Agreement dated December 17, 1997; and
WHEREAS, the Loan Agreement was restated in its entirety pursuant to a
Restated Loan Agreement dated February 17, 1997 (the "Restated Loan Agreement");
and
WHEREAS, the Restated Loan Agreement was amended by a Letter Agreement
dated May 14, 1997, a First Amendment to Restated Loan Agreement dated as of
August 29, 1997 and a Second Amendment to Restated Loan Agreement dated as of
September 8, 1997; and
WHEREAS, the Borrowers and the Banks have agreed to further restate the
Restated Loan Agreement to increase the amount of the reducing revolver, add a
new bridge loan facility and make certain other changes thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree to restate the Loan Agreement as
follows:
1. DEFINITIONS. When used herein the terms "Agent", "Agreement ", "Bank",
"Banks", "Bank One", "Borrower", "Borrowers", "Co-Agents", "CL", "Energy",
"Gas", "Paribas" and "Texas" shall have the meanings indicated above. When used
herein the following terms shall have the following meanings:
(a) Acquisition - The term "Acquisition" is used herein as defined in
-----------
Section 11(a)(vii) hereof.
(b) Advance or Advances - A loan or loans hereunder.
-------------------
(c) Affiliate - 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
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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.
(d) Assignment and Acceptance - A document substantially in the form
-------------------------
of Exhibit "E" hereto.
(e) Borrowing Base - The value assigned by the Banks from time to time
--------------
to the Oil and Gas Properties pursuant to Section 7 hereof. Until the next
determination of the Borrowing Base pursuant to Section 7(b) hereof the
Borrowing Base shall be $160,000,000.
(f) Borrowing Date - The date elected by Borrowers pursuant to Section
--------------
2(b) hereof for an Advance on the Revolving Loan.
(g) Bridge Loan - The $60,000,000 Loan made pursuant to Section 2(b)
-----------
hereof.
(h) Bridge Loan Commitment - As to all Banks, $60,000,000 and as to
----------------------
each Bank at the Effective Date the amount set forth below:
Bank One - $30,000,000
CL - $15,000,000
Paribas - $15,000,000
The Bridge Loan Commitment of each Bank hereunder shall be adjusted from
time to time to reflect assignments made by such Bank pursuant to Section
28 hereof.
(i) Bridge Loan Commitment Percentage - For each Bank, the percentage
---------------------------------
derived by dividing its Bridge Loan Commitment at the time of determination
by the Bridge Loan Commitment of all Banks at the time of determination. At
the Effective Date, the Bridge Loan Commitment Percentages are as follows:
Bank One 50%
CL 25%
Paribas 25%
The Bridge Loan Commitment Percentage of each Bank hereunder shall be
adjusted from time to time to reflect assignments made by such Bank
pursuant to Section 28 hereof.
(j) Bridge Loan Maturity Date - June 30, 1998.
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(k) Bridge Notes - The Bridge Notes described in Section 3 hereof.
------------
(l) Business Day - The normal banking hours during any day (other than
------------
Saturdays or Sundays) that banks are legally open for business in Dallas,
Texas.
(m) Change of Control - A Change of Control shall occur if any Person
-----------------
(or syndicate or group of Persons which is deemed a Person for the purposes
of Sections 13(d) or 14(d)(ii) of the Securities Act of 1934, as amended)
shall acquire, directly or indirectly an amount of issued and outstanding
voting stock of any Borrower (including the acquisition of newly-issued
stock) sufficient to change the control of such Borrower by causing the
election or change of a majority of the directors of such Borrower.
(n) Change of Management - A Change of Management shall occur if
--------------------
Michael Paulk ever ceases to act as President of Energy and a replacement
for such officer, acceptable to Agent and the Co-Agents, is not appointed
within thirty (30) days thereafter.
(o) Commitments - The Revolving Commitment and the Bridge Loan
-----------
Commitment.
(p) Current Assets - The total of the Borrowers' consolidated current
--------------
assets determined in accordance with GAAP, plus, as of any date, the
current unused availability on the Revolving Commitment.
(q) Current Liabilities - The total of Borrowers' consolidated current
-------------------
obligations as determined in accordance with GAAP, excluding therefrom
current maturities due on the Revolving Loan.
(r) Defaulting Bank - The term "Defaulting Bank" is used herein as
---------------
defined in Section 3(g) hereof.
(s) EBITDA - Earnings for any period before provision for interest
------
expense, income taxes, depreciation, depletion and amortization for such
period, as determined in accordance with GAAP.
(t) Effective Date - The date of this Agreement.
--------------
(u) Eligible Assignee - Any of (i) a Bank or any Affiliate of a Bank;
-----------------
(ii) a commercial bank organized under the laws of the United States, or
any state thereof, and
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having a combined capital and surplus of at least $100,000,000; (iii) a
commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development, or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000.00, provided that such bank is acting
through a branch or agency located in the United States; and (iv) a Person
that is primarily engaged in the business of commercial banking and that
(A) is a subsidiary of a Bank, (B) a subsidiary of a Person of which a Bank
is a subsidiary, or (C) a Person of which a Bank is a subsidiary.
(v) Environmental Laws - 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. (S)9601, et
--
seq., the Resource Conservation and Recovery Act, as amended by the
---
Hazardous Solid Waste Amendment of 1984, 42 U.S.C.A. (S)6901, et seq.,
-- ---
the Clean Air Act, 42 U.S.C.A. (S)1251, et seq., the Toxic Substances
-- ---
Control Act, 15 U.S.C.A. (S)2601, et seq., The Oil Pollution Act of 1990,
-- ---
33 U.S.G. (S)2701, et seq., and all other laws, statutes, codes, acts,
-- ---
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
order and restrictions of any federal, state, county, municipal and other
governments, 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. (S)9601, et seq., as amended, as
-- ---
each of the foregoing may be amended from time to time.
(w) Environmental Liability - 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 costs 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 reasonably be expected to individually or in the aggregate have a
Material Adverse Effect.
(x) Environmental Lien - 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 reasonably be expected to
have a Material Adverse Effect.
(y) Equity Condition - The term "Equity Condition" is used herein as
----------------
defined in that Certain Consent Solicitation Statement dated as of January
7, 1998 from Energy to the holders of the Senior Unsecured Notes.
-10-
<PAGE>
(z) ERISA - The Employee Retirement Income Security Act of 1974, as
-----
amended.
(aa) Eurodollar Business Day - A Business Day on which dealings in
-----------------------
U.S. Dollar deposits are carried on in the London interbank market.
(bb) Eurodollar Interest Period - 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), three (3) or six (6) months thereafter as
selected by the Borrowers 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), three (3) or six (6) months thereafter, as
selected by the Borrowers pursuant to Section 4(a)(ii); provided, however,
that (i) 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, (ii) 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 (iii) any Eurodollar
Interest Period which would otherwise expire after the Maturity Date shall
end on such Maturity Date.
(cc) Eurodollar Loan - 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 was not in effect at a particular time.
(dd) Eurodollar Margin - The Eurodollar Margin in effect from day to
-----------------
day shall be:
(i) At any time any amount is outstanding on the Bridge Loan,
three percent (3%); or
(ii) When there is no outstanding balance on the Bridge Loan:
(A) two percent (2%) per annum whenever the Total
Outstandings are greater than 75% of the Borrowing Base in effect
at the time in question;
-11-
<PAGE>
(B) one and three-quarters percent (1.75%) 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
(C) one and one-half percent (1.50%) per annum whenever the
Total Outstandings are 50% or less of the Borrowing Base in
effect at the time in question; and
(iii) in addition to the foregoing, if Borrowers do not satisfy
the Equity Condition, an additional margin of one percent (1%) per
annum shall be added to the applicable Eurodollar Margin specified
above in either (dd)(i) or (ii); and
(iv) in addition to the foregoing, if Borrowers do not satisfy
the Subordinated Notes Condition, an additional margin of one percent
(1%) per annum shall be added to the applicable Eurodollar Margin
specified above in either (dd)(i) or (ii).
(ee) Eurodollar Rate - With respect to each Eurodollar Interest
---------------
Period, the rate of interest per annum (rounded up, if necessary, to the
nearest 1/16 of 1%) at which deposits in immediately available and freely
transferable funds in U.S. Dollars are offered to the Agent (at
approximately 10:00 a.m., Dallas, Texas time two 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 Agent shall, in the absence of
error, be conclusive and binding.
(ff) Excess Cash Flow - EBITDA less (i) the Monthly Commitment
----------------
Reduction in effect from time to time, (ii) accrued interest on the Senior
Unsecured Notes, any other senior unsecured notes, any subordinated
unsecured notes and on the Notes, (iii) capital expenditures used for the
development of oil and gas properties in an amount not exceeding during any
calendar month the amount of $1,500,000, said amounts to be calculated
monthly beginning with the month ended December 31, 1997.
(gg) Financial Statements - Balance sheets, income statements,
--------------------
statements of cash flow and appropriate footnotes and schedules, prepared
in accordance with GAAP.
(hh) GAAP - Generally accepted accounting principles, consistently
----
applied.
(ii) Indenture - That certain Indenture dated as of September 9, 1997
---------
by and among Energy, as Issuer, Texas and Gas, as Guarantors, and The Bank
of New York, as
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<PAGE>
Trustee, pursuant to which the 12 1/4% Series A Senior Notes due 2004 and
the 12-1/4% Series B Senior Notes due 2004 were issued.
(jj) Interest Payment Date - The earlier of (i) the last day of each
---------------------
Interest Period or (ii) the last day of each calendar month.
(kk) Interest Period - Any Prime Rate Interest Period, or Eurodollar
---------------
Interest Period.
(ll) Letters of Credit - The term "Letters of Credit" is used herein
-----------------
as defined in Section 2(d) hereof.
(mm) Lien - Any mortgage, deed of trust, pledge, security interest,
----
assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
(nn) Loans - The Revolving Loan and the Bridge Loan.
-----
(oo) Loan Documents - This Agreement, the Notes, the Security
--------------
Instruments and all other documents executed in connection with the
transaction described in this Agreement.
(pp) Majority Banks - While any amounts are owed under the Bridge
--------------
Loan, Banks holding 100% of the Commitments or if the Commitments have been
terminated, Banks holding 100% of the outstanding Loans. After the Bridge
Loan is repaid in full, both principal and interest, Banks holding 66-2/3%
or more of the Commitments or if the Commitments have been terminated,
Banks holding 66-2/3% of the outstanding Loans.
(qq) Material Adverse Effect - Any circumstance or event which could
-----------------------
have a material adverse effect on (i) the assets or properties,
liabilities, financial condition, business, operations, affairs or
circumstances of the Borrowers, or (ii) the ability of the Borrowers to
carry out their respective businesses as of the date of this Agreement or
as proposed at the date of this Agreement to be conducted or to meet their
obligations under the Note, this Agreement or the other Loan Documents on a
timely basis.
(rr) Maximum Rate - At any particular time in question, the maximum
------------
non-usurious rate of interest which under applicable law may then be
charged on the Note. 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 Borrowers from time to time as the effective date
of each change in such Maximum Rate.
(ss) Minimum Interest Coverage Ratio - The ratio of EBITDA to the sum
-------------------------------
of
-13-
<PAGE>
Total Interest Expense plus any preferred stock dividends paid in cash
during the period being measured.
(tt) Monthly Commitment Reduction - The term "Monthly Commitment
----------------------------
Reduction" is used herein, as defined in Section 2(g) hereof.
(uu) Net Income - Borrowers' consolidated net income after income
----------
taxes calculated in accordance with GAAP.
(vv) Notes - The Revolving Notes and the Bridge Notes, substantially
-----
in the form of Exhibit "B" and "C" hereto issued or to be issued hereunder
to each Bank, respectively, to evidence the indebtedness to such Bank
arising by reason of the Advances on the Revolving Loan and the Bridge
Loan, together with all modifications, renewals and extensions thereof or
any part thereof.
(ww) Oil and Gas Properties - All oil, gas and mineral properties and
----------------------
interests, related personal properties, in which Borrowers grant to the
Banks either a first and prior lien and security interest pursuant to
Section 6 hereof or negative pledge pursuant to Section 13 hereof.
(xx) Other Financing - The term "Other Financing" is used herein as
---------------
defined in Section 15(l) hereof.
(yy) Payor - The term "Payor" is used herein as defined in Section
-----
3(i)hereof.
(zz) Permitted Liens - The term Permitted Lien 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 which would not (when considered cumulatively with the matters
discussed in clause (i) above) deprive any Borrower of any material right
in respect of any such Borrower'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 has set aside 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
any Borrower's assets or properties and that do not individually or in the
aggregate, cause a
-14-
<PAGE>
Material Adverse Effect; (v) materialmen's, mechanic's, repairman's,
employee's, warehousemen's, landlord'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 any Borrower in connection with the construction, maintenance,
development, transportation, storage or operation of such Borrower's assets
or properties to the extent not delinquent (or which, if delinquent, are
being contested in good faith by appropriate proceedings and for which such
Borrower has set aside 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 assets and
properties which were in existence at the time such Borrower's assets and
properties were originally acquired by such Borrower 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 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 such Borrower's assets and properties in any manner, and all
applicable laws, rules and orders from any governmental authority; (x)
landlord's liens; (xi) Liens incurred pursuant to the Security Instruments;
and (xii) Liens existing at the date of this Agreement which have been
disclosed to Banks in the Borrowers' September 30, 1997 Financial
Statements or identified in Schedule "1" hereto.
(aaa) Person - 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.
(bbb) Plan - Any plan subject to Title IV of ERISA and maintained by
----
any Borrower, or any such plan to which a Borrower is required to
contribute on behalf of its employees.
(ccc) Prime Rate - As of any date, the fluctuating rate of interest
----------
per annum established from time to time by Agent as its Prime Rate (which
rate of interest may not be the lowest, best or most favorable rate of
interest which Agent may charge on loans to its customers). Each change in
the Prime Rate shall become effective without prior
-15-
<PAGE>
notice to Borrowers automatically as of the opening of business on the date
of such change in the Prime Rate.
(ddd) Prime Rate Interest Period - With respect to any Prime Rate
--------------------------
Loan, the period ending on the first day of each month, provided, however,
that (i) if any Prime 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 Prime Rate Interest Period would
otherwise end after the Maturity Date such Interest Period shall end on the
Maturity Date.
(eee) Prime Rate Loans - Any loan during any period which bears
----------------
interest based upon the Prime Rate or which would bear interest based upon
the Prime Rate if the Maximum Rate ceiling was not in effect at that
particular time.
(fff) Prime Rate Margin - The Prime Rate Margin in effect from day to
-----------------
day shall be:
(i) for Revolving Loans, the Prime Rate Margin shall be:
(A) one-half of one percent (.50%) when any amount is
outstanding on the Bridge Loan; and
(B) at any other time, the Prime Rate Margin shall be 0%;
(ii) for the Bridge Loans, the Prime Rate Margin shall be:
(A) one percent (1%) from the Effective Date through
March 31, 1998; and
(B) thereafter, the Prime Rate Margin shall be two
percent (2%); and
(iii) in addition to the foregoing, if Borrowers do not satisfy
the Equity Condition, an additional margin of one percent (1%) per
annum shall be added to the applicable Prime Rate Margin specified
above in either (fff)(i) or (ii); and
(iv) in addition to the foregoing, if Borrowers do not satisfy
the Subordinated Notes Condition, an additional one percent (1%) per
annum shall be added to the applicable Prime Rate Margin specified
above in either (fff) (i) or (ii).
-16-
<PAGE>
(ggg) Pro Rata or Pro Rata Part - For each Bank, (i) for all purposes
-------------------------
where no Loan is outstanding, such Bank's Revolving Commitment Percentage
for matters relating to the Revolving Commitment and its Bridge Loan
Commitment Percentage for matters relating to the Bridge Loan Commitment
and (ii) otherwise, the proportion which the portion of the outstanding
Loans owed to such Bank bears to the aggregate outstanding Loans owed to
all Banks at the time in question (calculated separately for each Bank for
the Revolving Loan and the Bridge Loan).
(hhh) Reimbursement Obligations - At any time, the obligations of the
-------------------------
Borrowers in respect of all Letters of Credit then outstanding to reimburse
amounts paid by any Bank in respect of any drawing or drawings under a
Letter of Credit.
(iii) Required Payment - The term "Required Payment" is used herein
----------------
as defined in Section 3(i) hereof.
(jjj) Revolving Commitment - (A) For all Banks, the lesser of (i)
-------------------- ------
$160,000,000 or (ii) the Borrowing Base, in each case as reduced from time
to time pursuant to Sections 2, 7 and 11(a)(xvi) hereof, and (B) as to any
Bank, its obligation to make Advances hereunder on the Revolving Loan and
purchase participations in Letters of Credit issued hereunder by the Agent
in amounts not exceeding, in the aggregate, an amount equal to such Bank's
Revolving Loan Commitment Percentage times the total Revolving Commitment
as of any date. At the Effective Date, each Bank's Revolving Commitment
shall be as follows:
Bank One - $80,000,000
CL - $40,000,000
Paribas - $40,000,000
The Revolving Commitment of each Bank hereunder shall be adjusted from time
to time to reflect assignments made by such Bank pursuant to Section 28
hereof. Each reduction in the Revolving Commitment shall result in a Pro
Rata reduction in each Bank's Revolving Commitment.
(kkk) Revolving Commitment Percentage - For each
-------------------------------
Bank the percentage derived by dividing its Revolving Commitment at the
time of the determination by the Revolving Commitments of all Banks at the
time of determination. At the Effective Date, the Revolving Commitment
Percentages are as follows:
Bank One 50%
CL 25%
Paribas 25%
-17-
<PAGE>
The Revolving Commitment Percentage of each Bank hereunder shall be
adjusted from time to time to reflect assignments made by such Bank
pursuant to Section 28 hereof.
(lll) Revolving Loan - Loan or loans made under the Revolving
--------------
Commitment pursuant to Section 2 hereof.
(mmm) Revolving Maturity Date - December 31, 2000.
-----------------------
(nnn) Revolving Notes - The Revolving Notes described in Section 3
hereof.
(ooo) Security Instruments - The term Security Instruments is used
--------------------
collectively herein to mean this Agreement, all Deeds of Trust, Mortgages,
Security Agreements, Assignments of Production and Financing Statements,
all Pledge Agreements, Security Agreements and other collateral documents
covering the Oil and Gas Properties and related personal property,
equipment, oil and gas inventory, stock and partnership interest and
proceeds of the foregoing, all such documents to be in form and substance
satisfactory to Agent.
(ppp) Senior Unsecured Notes - The 12-1/4% Series A Senior Notes due
----------------------
2004 and the 12 1/4% Series B Senior Notes due 2004 issued by Energy
pursuant to the Indenture.
(qqq) Subordinated Notes Condition - The term "Subordinated Notes
----------------------------
Condition" is used herein as defined in that certain Consent Solicitation
Statement dated as of January 7, 1998, from Energy to the holders of the
Senior Unsecured Notes.
(rrr) Subsidiary - 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 the time directly or indirectly owned
by any Borrower or another subsidiary.
(sss) Tangible Net Worth - An amount equal to the Borrowers'
------------------
consolidated stockholders equity, as determined in accordance with GAAP.
(ttt) Total Interest Expense - Borrowers' total interest expense for
----------------------
any period, as determined in accordance with GAAP.
(uuu) Total Outstandings - As of any date, the sum of (i) the total
------------------
principal balance outstanding on the Revolving Notes, plus (ii) the total
face amount of all outstanding Letters of Credit, plus (iii) the total
amount of all unpaid Reimbursement Obligations.
-18-
<PAGE>
(vvv) Tranche - A Eurodollar Loan or a Prime Rate Loan.
-------
(www) Unscheduled Redeterminations - 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 which are made (A) at the
reasonable request of Borrowers, (B) at any time it appears to Agent or
Majority Banks, in the exercise of their reasonable discretion, that either
(i) there has been a decrease in the value of the Oil and Gas Properties,
or (ii) an event has occurred which is reasonably expected to have a
Material Adverse Effect.
2. COMMITMENTS OF THE BANK.
(a) Terms of Revolving Commitment. On the terms and conditions
-----------------------------
hereinafter set forth, each Bank agrees severally to make Advances to the
Borrowers from time to time during the period beginning on the Effective
Date and ending on the Revolving Maturity Date in such amounts as the
Borrowers may request up to an amount not to exceed, in the aggregate
principal amount outstanding at any time, the Revolving Commitment less the
Total Outstandings. Upon the satisfaction of all of the conditions
precedent set forth in Section 11 hereof, all outstanding Revolving Loans
and Letters of Credit under the Restated Loan Agreement shall be deemed to
be Revolving Loans and Letters of Credit hereunder and the Banks shall be
deemed to have bought and sold participations, as appropriate, such that
each Bank shall hold its Pro Rata Part of such existing Revolving Loans and
Letters of Credit. The obligation of the Borrowers hereunder shall be
evidenced by this Agreement and the Revolving Notes issued in connection
herewith, said Revolving 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 Event of Default (as hereinafter
defined) has occurred and is continuing or if any event or condition has
occurred or failed to occur which with the passage of time or service of
notice, or both, would constitute an Event of Default. Each Advance under
the Revolving Commitment shall be an aggregate amount of at least $100,000
or a whole number multiple thereof. Irrespective of the face amount of the
Revolving Note or Notes, the Banks shall never have the obligation to
Advance any amount or amounts in excess of the Revolving Commitment or to
increase the Revolving Commitment. The total number of Tranches under the
Revolving Commitment which may be outstanding at any time hereunder shall
never exceed five (5), whether such Tranches are Prime Rate Loans,
Eurodollar Loans, or a combination thereof.
(b) Bridge Loan. On the terms and conditions hereinafter set forth,
-----------
the Banks agree severally to make Advances to the Borrowers on the
Effective Date in amounts not
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<PAGE>
to exceed, for any Bank, such Bank's Bridge Loan Commitment Any amount not
advanced on the Effective Date shall not thereafter be available and no
portion thereof, once repaid, may be reborrowed by Borrowers. The Bridge
Loan shall constitute a Prime Rate Loan at all times.
(c) Procedure for Borrowing. Whenever the Borrowers desire an
-----------------------
Advance hereunder, they shall give 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 "A" attached
hereto and shall be received by 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 Prime Rate Loan, or (ii) three Eurodollar Business Days prior to any
proposed Borrowing Date in the case of Eurodollar Loans. Each Notice of
Borrowing shall specify (i) the Borrowing Date (which, if at Prime Rate
Loan, shall be a Business Day and if a Eurodollar Loan, a Eurodollar
Business Day), (ii) the principal amount to be borrowed, (iii) the portion
of the Advance constituting Prime Rate Loans and/or Eurodollar Loans, (iv)
if any portion of the proposed Advance is to constitute Eurodollar Loans,
the initial Interest Period selected by Borrower pursuant to Section 4
hereof to be applicable thereto, and (v) the date upon which such Advance
is required. Upon receipt of such Notice, 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 Prime Rate Loan, or at least
three (3) days' notice of each Advance prior to funding in the case of a
Eurodollar Loan, each Bank shall provide 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, Agent shall make
available to the Borrowers at the same office, in like funds, the aggregate
amount of such requested Advance. Neither Agent nor any Bank shall incur
any liability to the Borrowers in acting upon any Notice referred to above
which 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
Borrowers or for otherwise acting in good faith under this Section 2(b).
Upon funding of Advances by Banks in accordance with this Agreement,
pursuant to any such Notice, the Borrowers shall have effected Advances
hereunder.
(d) Letters of Credit. On the terms and conditions hereinafter set
-----------------
forth, the Agent shall from time to time during the period beginning on the
Effective Date and ending on the Revolving Maturity Date upon request of
Borrowers issue standby and/or commercial Letters of Credit for the account
of Borrowers (the "Letters of Credit") in such face amounts as Borrowers
may request, but not to exceed in the aggregate face amount at any time
outstanding the sum of Ten Million Dollars ($10,000,000.00). The
-20-
<PAGE>
face amount of all Letters of Credit issued and outstanding hereunder shall
be considered as Advances for Borrowing Base purposes and all payments made
by the Agent on such Letters of Credit shall be considered as Advances
under the Revolving Notes. Each Letter of Credit issued for the account of
Borrowers hereunder shall (i) be in favor of such beneficiaries as
specifically requested by Borrowers, (ii) have an expiration date not
exceeding the earlier of (a) one year or (b) the Revolving Maturity Date,
and (iii) contain such other terms and provisions as may be required by
Bank. Each Bank (other than Agent) agrees that, upon issuance of any Letter
of Credit hereunder, it shall automatically acquire a participation in the
Agent's liability under such Letter of Credit in an amount equal to such
Bank's Revolving Commitment Percentage of such liability, and each Bank
(other than Agent) thereby shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and shall be
unconditionally obligated to Agent to pay and discharge when due, its
Revolving Commitment Percentage of Agent's liability under such Letter of
Credit. The Borrowers, and each of them, hereby unconditionally agree to
pay and reimburse the Agent for the amount of each demand for payment under
any Letter of Credit that is in substantial compliance with the provisions
of any such Letter of Credit at or prior to the date on which payment is to
be made by the Agent to the beneficiary thereunder, without presentment,
demand, protest or other formalities of any kind. Upon receipt from any
beneficiary of any Letter of Credit of any demand for payment under such
Letter of Credit, the Agent shall promptly notify the Borrowers of the
demand and the date upon which such payment is to be made by the Agent to
such beneficiary in respect of such demand. Forthwith upon receipt of such
notice from the Agent, Borrowers shall advise the Agent whether or not they
intend to borrow hereunder to finance their obligations to reimburse the
Agent, and if so, submit a Notice of Borrowing as provided in Section 2(c)
hereof. If Borrowers fail to so advise Agent and thereafter fail to
reimburse Agent, the Agent shall notify each Bank of the demand and the
failure of the Borrowers to reimburse the Agent, and each Bank shall
reimburse the Agent for its Revolving Commitment Percentage of each such
draw paid by the Agent and unreimbursed by the Borrowers. All such amounts
paid by Agent and/or reimbursed by the Banks shall be treated as an Advance
or Advances under the Revolving Commitment, which Advances shall be
immediately due and payable and shall bear interest at the Maximum Rate.
(e) Procedure for Obtaining Letters of Credit. The amount and date of
-----------------------------------------
issuance, renewal, extension or reissuance of a Letter of Credit pursuant
to the Banks' commitment above in Section 2(d) shall be designated by
Borrowers' written request delivered to Agent at least three (3) Business
Days prior to the date of such issuance, renewal, extension or reissuance.
Concurrently with or promptly following the delivery of the request for a
Letter of Credit, Borrowers shall execute and deliver to the Agent an
application and agreement with respect to the Letters of Credit, said
application and agreement to be in the form used by the Agent. The Agent
shall not be obligated to issue,
-21-
<PAGE>
renew, extend or reissue such Letters of Credit if (A) the amount thereon
when added to the face amount of the outstanding Letters of Credit plus any
Reimbursement Obligations exceeds Ten Million Dollars ($10,000,000.00) or
(B) the amount thereof when added to the Total Outstandings would exceed
the Revolving Commitment. Borrowers agree to pay the Agent for the benefit
of the Banks commissions for issuing the Letters of Credit (calculated
separately for each Letter of Credit) in an amount equal to the greater of
(i) one percent (1%) per annum on the maximum face amount of the Letter of
Credit or (ii) $500.00. Borrower further agrees to pay Agent an additional
fronting fee equal to one-eighth of one percent (.125%) per annum on the
maximum face amount of each Letter of Credit. Such commissions shall be
payable prior to the issuance of each Letter of Credit and thereafter on
each anniversary date of such issuance while such Letter of Credit is
outstanding.
(f) Voluntary Reduction of Revolving Commitment. The Borrowers may at
-------------------------------------------
any time, or from time to time, upon not less than three (3) Business Days
prior written notice to Agent, reduce or terminate the Revolving
Commitment; provided, however, that (i) each reduction in the Revolving
Commitment must be in the amount of $500,000 or more, in increments of
$100,000 and (ii) each reduction must be accompanied by a prepayment of the
Revolving Notes in the amount by which the outstanding principal balance of
the Revolving Notes exceeds the Revolving Commitment as reduced pursuant to
this Section 2.
(g) Mandatory Commitment Reductions -
-------------------------------
(i) Monthly Commitment Reduction. The Borrowing Base and the
----------------------------
Revolving Commitment shall be reduced as of the first day of each month
beginning February 1, 1998 by an amount determined by the Banks
pursuant to Section 7(b) hereof (the "Monthly Commitment Reduction").
The Monthly Commitment Reduction shall be $2,000,000 beginning on
February 1, 1998, with like reductions continuing on the first day of
each month thereafter until redetermined pursuant to Section 7(b)
hereof. If as a result of any such Monthly Commitment Reduction, the
Total Outstandings ever exceed the Revolving Commitment then in effect,
the Borrowers shall make the mandatory prepayment of principal required
pursuant to Section 9(b) hereof.
(ii) Other Commitment Reductions. The Borrowing Base and the
---------------------------
Revolving Commitment shall be permanently reduced from time to time by
the amount of (i) any prepayment required by Section 12(r) hereof upon
the sale of assets and (ii) any reduction on the Revolving Commitment
made by Borrowers from the proceeds of the sale of any Other Unsecured
Debt (as hereinafter defined) or any equity. If, as a result of any
such reduction in the Revolving
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<PAGE>
Commitment, the Total Outstandings ever exceed the Revolving Commitment
then in effect, the Borrowers shall make the mandatory prepayment of
principal required pursuant to Section 9(b) hereof.
(h) Several Obligations. The obligations of the Banks under the
-------------------
Commitments 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 be required to lend hereunder any amount in excess of
its legal lending limit.
(i) Limited Liability of Texas and Gas. While the obligations of the
----------------------------------
Borrowers under this Agreement and the Notes shall be joint and several
obligations of Energy, Texas and Gas, the liability of Texas and Gas
thereunder shall be limited to the maximum amount of liability that can be
incurred without rendering the obligations of Texas and Gas under the Loan
Documents voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer, and not for any greater amount.
3. NOTES EVIDENCING LOANS. The loans described above in Section 2 shall
be evidenced by promissory notes of Borrowers as follows:
(a) Form of Revolving Notes - The Revolving Loan shall be evidenced
-----------------------
by a Note or Notes in the aggregate face amount of $160,000,000, and shall
be in the form of Exhibit "B" hereto with appropriate insertions (each a
"Revolving Note"). Notwithstanding the face amount of the Revolving Notes,
the actual principal amount due from the Borrowers 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 Borrowers' obligation to pay the
principal amount thereof, only to the extent of the unpaid principal amount
of the loans. Irrespective of the face amount of the Revolving Notes, no
Bank shall ever be obligated to advance on the Revolving Commitment any
amount in excess of its Revolving Commitment then in effect.
(b) Form of Bridge Notes - The Bridge Loan shall be evidenced by a
--------------------
Bridge Note or Notes in the aggregate face amount of $60,000,000, and shall
be in the form of Exhibit "C" hereto with appropriate insertions (each a
"Bridge Note").
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<PAGE>
(c) Issuance of Additional Notes - At the Effective Date there shall
----------------------------
be outstanding (i) one Revolving Note in the aggregate face amount of
$80,000,000 payable to the order of Bank One, (ii) one Revolving Note in
the aggregate face amount of $40,000,000 payable to the order of CL, (iii)
one Revolving Note in the aggregate face amount of $40,000,000 payable to
the order of Paribas, (iv) one Bridge Note, in the aggregate face amount of
$30,000,000 payable to the order of Bank One, (v) one Bridge Note in the
aggregate face amount of $15,000,000 payable to order of CL and (vi) one
Bridge Note in the aggregate face amount of $15,000,000 payable to the
order of Paribas. From time to time new Notes may issued to other Banks as
such Banks become parties to this Agreement. Upon request from Agent, the
Borrowers shall execute and deliver to Agent any such new or additional
Notes. From time to time as new Notes are issued the 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 Rates - The unpaid principal balance of the Notes shall
--------------
bear interest from time to time as follows:
(i) Revolving Notes. Interest on the Revolving Notes shall
---------------
bear interest from time to time as set forth in Section 4 hereof;
(ii) Bridge Notes. The unpaid principal balance of the Bridge
------------
Notes shall bear interest from time to time as set forth in Sections
4(a)(i) and (d) hereof.
(e) Payment of Interest - Interest on the Notes shall be payable on
-------------------
each Interest Payment Date.
(f) Payment of Principal -
--------------------
(i) Revolving Notes. Principal of the Revolving Note or Notes
---------------
shall be due and payable to the 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 an acceleration of the amount due or pursuant to
the mandatory prepayment provisions of Section 9(b) or 9(c) hereof.
(ii) Bridge Notes. Principal of the Bridge Note or Notes shall
------------
be due and payable to the Agent for the ratable benefit of the Banks
on the Bridge Loan Maturity Date unless earlier due in whole or in
part as a result of an acceleration of the amount due or pursuant to
the mandatory prepayment provisions of Section 9(c) hereof;
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<PAGE>
(g) Payment to Banks - Each Bank's Pro Rata Part of payment or
----------------
prepayment of the Loans shall be directed by wire transfer to such Bank by
the Agent at the address provided to the 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
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 Agent or another Bank or Banks shall have made such Advance,
payment received by 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
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 Agent. If Agent fails to transfer any
principal amount to any Bank as provided above, then Agent shall promptly
direct such principal amount by wire transfer to such Bank.
(h) Sharing of Payments, Etc. - If any Bank shall obtain any payment
-------------------------
(whether voluntary, involuntary, or otherwise) on account of the Loans,
(including, without limitation, any set-off) which is in excess of its Pro
Rata Part of payments on either of the Loans, 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 Borrowers agree 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 Borrowers in the amount of
such participation.
(i) Non-Receipt of Funds by the Agent - Unless the Agent shall have
---------------------------------
been notified by a Bank or the Borrowers (the "Payor") prior to the date on
which such Bank is to make payment to the Agent of the proceeds of a Loan
to be made by it hereunder or the Borrowers are to make a payment to the
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 Agent, the 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 Agent, the recipient of such payment shall, on demand, pay to the Agent
the amount made available to it together with interest
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<PAGE>
thereon in respect of the period commencing on the date such amount was
made available by the Agent until the date the Agent recovers such amount
at the rate applicable to such portion of the applicable 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 its Pro Rata
Part of the Commitments, then within fifteen (15) days after demand by such
Bank, the Borrowers 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.
4. INTEREST RATES.
(a) Options.
-------
(i) Prime Rate Loans. Borrowers agree 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 Prime Rate Loan from the date the
proceeds thereof are made available to Borrowers until maturity
(whether by acceleration or otherwise), at a varying rate per annum
equal to the lesser of (i) the Maximum Rate (defined herein), or (ii)
the sum of the Prime Rate plus the Prime Rate Margin. Subject to the
provisions of this Agreement as to prepayment, the principal of the
Notes representing Prime Rate Loans shall be payable as specified in
Section 3(f) hereof and the interest in respect of each Prime 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 Prime Rate Loan, shall bear interest, payable on
demand, at a rate per annum equal to the Maximum Rate.
(ii) Eurodollar Loans. Borrowers agree to pay interest
----------------
calculated on the basis of a year consisting of 360 days with respect
to the
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<PAGE>
unpaid principal amount of each Eurodollar Loan from the date the
proceeds thereof are made available to Borrowers 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 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 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), Borrowers shall have the
option, subject to compliance by Borrowers 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), three (3) or six (6) month period. If Agent shall not
have received timely notice of a designation of such Interest Period
as herein provided, Borrowers shall be deemed to have elected to
convert all maturing Eurodollar Loans to Prime Rate Loans.
(b) Interest Rate Determination. The Agent shall determine each
---------------------------
interest rate applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrowers of each rate of interest so determined and
its determination thereof shall be conclusive absent error.
(c) Conversion Option. Borrowers may elect from time to time (i) to
-----------------
convert all or any part of its Eurodollar Loans to Prime Rate Loans by
giving 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, (ii) to convert all or any part of
its Prime Rate Loans (other than the Bridge Loans) to Eurodollar Loans by
giving the 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 on
the Notes.
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<PAGE>
(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 Note 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 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) in good
faith determines that the Eurodollar Interest Rate will not adequately
reflect the cost to such Bank of maintaining or funding the Eurodollar
Loans for such Interest Period, the obligations of the Banks to make the
Eurodollar Loans, as the case may be, 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 the Agent in writing, and
Agent shall promptly notify Borrowers in writing, and Borrowers shall
either repay the outstanding Eurodollar Loans, as the case may be, owed to
Banks, without penalty, on the last day of the current Interest Period or
convert the same to Prime Rate Loans in the case of Eurodollar 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 any Bank 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 loans, 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 any Bank 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 any Bank in making or maintaining its
Eurodollar Loans or to reduce any amount (or the effective return on any
amount) received by any Bank hereunder, then Borrowers shall pay to the
Banks upon demand of any Bank 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.
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<PAGE>
The Banks shall give notice to Borrowers upon 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 Borrowers and shall be conclusive as to such determination and such
amount, absent error.
(c) Taxes. Both principal and interest on the Notes evidencing the
-----
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 Loans or on any payment on the Notes evidencing the Loans
made to any Bank, then, and in any such event, Borrowers shall pay to the
Banks upon demand of any Bank such additional amounts as may be necessary
so that every net payment of principal and interest on the Notes evidencing
the 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 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 any Bank of principal of or interest on the
Notes evidencing the 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 such Bank or Banks) then Borrowers will pay the
amount of loss to the extent that such loss is caused by such a change. The
Banks shall give notice to Borrowers upon becoming aware of the amount of
any loss incurred by any Bank through enactment or promulgation of any such
law which materially changes the basis of taxation of payments to one or
more of the Banks. The Banks shall also give notice on 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 Borrowers 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 Borrowers in writing and
Borrowers shall either repay the outstanding Eurodollar Loans owed to the
Banks, without penalty, on the last day of the current Interest Periods
(or, if any Bank may not lawfully continue to maintain and fund such
Eurodollar Loans, immediately), or Borrowers may convert such Eurodollar
Loans at such appropriate time to Prime Rate Loans.
(e) Option to Fund. The Banks shall each have the option if the
--------------
Borrowers elect a Eurodollar Loan, to purchase one or more deposits in
order to fund or maintain its
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<PAGE>
funding of the principal balance of its Note 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.
Any 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 shall be made as if such
Bank 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.
Any Bank may fund the outstanding principal balance of the Notes which is
to be subject to any Eurodollar Loan from any branch or office of such Bank
as any Bank may designate from time to time.
(f) Indemnity. Borrowers shall indemnify and hold harmless the Banks
---------
against all reasonable and necessary out-of-pocket costs and expenses which
the Banks may sustain (i) as a consequence of any default by Borrowers
under this Agreement, or (ii) as a result of the making of any loan or
loans as a Eurodollar Loan under this Agreement.
(g) Payments Not at End of Interest Period. If the Borrowers make 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
or fail to make, borrow or convert a Eurodollar Loan on the date requested,
then Borrowers 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 any
Bank is able to redeposit such principal amount so paid for the balance of
the Interest Period, by the interest earned by such Bank as a result of so
redepositing such principal amount, plus (ii) any expense or penalty
incurred by the Bank in redepositing such principal amount. A certificate
of any Bank setting forth the basis for the determination of the amount
owed by Borrowers pursuant to this Section 5(g) shall be delivered to the
Borrowers and shall be conclusive in the absence of manifest error.
6. COLLATERAL SECURITY. To secure the performance by Borrowers of their
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, Borrowers have heretofore
granted and assigned to Bank One a first and prior Lien on certain of
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<PAGE>
their Oil and Gas Properties, certain related equipment, oil and gas inventory,
the general partnership interest in the Sycamore Gas System, the stock in
Sycamore Pipeline, Inc. and certain bank accounts and proceeds of the foregoing.
Contemporaneously with the execution of this Agreement and the Notes, the
Borrowers shall grant and assign to Agent for the ratable benefit of the Banks a
first and prior security interest and Lien on certain of their Oil and Gas
Properties being acquired as of the Effective Date and on certain escrow
accounts. The Liens held by Bank One on the Oil and Gas Properties shall be
assigned, as of the Effective Date, to the Agent for the ratable benefit of the
Banks. The Oil and Gas Properties heretofore and herewith mortgaged to the Agent
shall represent not less than 90% of the Engineered Value (as hereinafter
defined) of Borrower's Oil and Gas Properties as of the Effective Date. All Oil
and Gas Properties and other collateral in which Borrowers have heretofore
granted to Bank One, or herewith granted or hereafter grants to Agent for the
ratable benefit of the Banks a first and prior Lien (to the satisfaction of the
Agent) in accordance with this Section 6, as such properties and interests are
from time to time constituted, are hereinafter collectively called the
"Collateral".
The granting and assigning of such security interests and Liens by
Borrowers shall be pursuant to Security Instruments in form and substance
reasonably satisfactory to the Agent. Concurrently with the delivery of each of
the Security Instruments or within a reasonable time thereafter, Borrowers shall
furnish to the Agent mortgage and title opinions and other title information
satisfactory to Agent with respect to the title and Lien status of Borrowers'
interests in not less than 90% of the Engineered Value of the Oil and Gas
Properties covered by the Security Instruments as Agent shall have designated.
"Engineered Value" for this purpose shall mean future net revenues discounted at
the discount rate being used by the Agent as of the date of any such
determination utilizing the pricing parameters used in the engineering report
furnished to the Agent for the ratable benefit of the Banks, pursuant to
Sections 7 and 12 hereof. Borrowers will cause to be executed and delivered to
the Agent, in the future, additional Security Instruments if the Agent
reasonably deems such are necessary to insure perfection or maintenance of
Banks' security interests and Liens in the Oil and Gas Properties or any part
thereof.
7. BORROWING BASE.
(a) Initial Borrowing Base. At the Effective Date, the Borrowing Base
----------------------
shall be $160,000,000. Upon payment of the Release Price required pursuant
to Section 11(a)(xvi), the Borrowing Base shall be reduced to $156,450,000.
(b) Subsequent Determinations of Borrowing Base. Subsequent
-------------------------------------------
determinations of the Borrowing Base shall be made by the Banks at least
semi-annually on April 1 and October 1 of each year beginning April 1, 1998
or as Unscheduled Redeterminations. In connection with, and as of, each
determination of the Borrowing Base, the Banks shall also redetermine the
Monthly Commitment Reduction. The
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<PAGE>
Borrowers shall furnish to the Banks as soon as possible but in any event
no later than March 1 of each year, beginning March 1, 1998, with an
Engineering Report in form and substance satisfactory to the Agent prepared
by an independent petroleum engineering acceptable to Agent covering the
Oil and Gas Properties utilizing economic and pricing parameters used by
Agent as established from time to time, together with such other
information concerning the value of the Oil and Gas Properties as the Agent
shall deem necessary to determine the value of the Oil and Gas Properties.
By September 1 of each year, or within thirty (30) days after either (i)
receipt of notice from Agent that the Banks require an Unscheduled
Redetermination, or (ii) the Borrowers give notice to Agent of their desire
to have an Unscheduled Redetermination performed, the Borrowers shall
furnish to the Banks an engineering report in form and substance
satisfactory to Agent prepared by Borrower's in-house engineering staff
valuing the Oil and Gas Properties utilizing economic and pricing
parameters used by the Agent as established from time to time, together
with such other information, reports and data concerning the value of the
Oil and Gas Properties as Agent shall deem reasonably necessary to
determine the value of such Oil and Gas Properties. Agent shall by notice
to the Borrowers no later than April 1 and October 1 of each year, or
within a reasonable time thereafter (herein called the "Determination
Date"), notify the Borrowers of the designation by the Banks of the new
Borrowing Base and Monthly Commitment Reduction for 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 Agent shall notify the Borrowers within a reasonable time after receipt
of all requested information of the new Borrowing Base and Monthly
Commitment Reduction, and such new Borrowing Base and Monthly Commitment
Reduction shall continue until the next Determination Date. If the
Borrowers do not furnish all such information, reports and data by any date
specified in this Section 7(b), unless such failure is of no fault of the
Borrowers, the Banks may nonetheless designate the Borrowing Base and
Monthly Commitment Reduction at any amounts which the Banks in their
discretion determine 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 and Monthly
Commitment Reduction based upon the loan collateral value which such Bank
in its discretion (using such methodology, assumptions and discounts rates
as such 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 Borrowers 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 Borrowers
and their affiliates) as such Bank customarily considers in evaluating
similar oil and gas credits, but such Bank in its discretion shall not be
required to give any additional
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<PAGE>
positive value to any Oil and Gas Property over the current economic and
pricing parameters used by such 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. All determinations or Unscheduled Redeterminations of the
Borrowing Base and the Monthly Commitment Reduction require the approval of
100% of the Banks. If the Banks cannot otherwise agree on the Borrowing
Base or the Monthly Commitment Reduction, each Bank shall submit in writing
to the 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 prepayment required to be made
pursuant to Section 12(r) hereof. The Borrowing Base shall be additionally
reduced from time to time pursuant to the provisions of Sections 2(f) and
2(g) hereof. It is expressly understood that the Banks have no obligation
to designate the Borrowing Base or the Monthly Commitment Reduction at any
particular amounts, except in the exercise of their discretion, whether in
relation to the Revolving Commitment or otherwise. Provided, however, that
the Banks shall not have the obligation to designate a Borrowing Base in an
amount in excess of the Revolving Commitment or its legal or internal
lending limits. If Energy is ever required to purchase or redeem any of the
Senior Unsecured Notes, or any other senior unsecured notes or subordinated
unsecured notes which are permitted to be issued pursuant to the terms
hereof ("Other Unsecured Debt"), or if any portion of the Senior Unsecured
Notes or Other Unsecured Debt become due for any reason, or if any of the
Borrowers wish to incur Other Unsecured Debt or issue additional equity,
the Agent, either of the Co-Agents or Majority Banks may, at their option,
require an Unscheduled Redetermination; provided, however, that nothing
contained herein shall be construed to permit any issuance, purchase or
redemption of the Senior Unsecured Notes or Other Unsecured Debt, which is
otherwise prohibited under the terms and provisions of this Agreement.
8. FEES.
(a) Unused Commitment Fee. The Borrowers shall pay to Agent for the
---------------------
ratable benefit of the Banks an unused commitment fee (the "Unused
Commitment Fee") equivalent to one-half of one percent (1/2%) per annum on
the daily average of the unadvanced amount of the Revolving Commitment. The
Unused Commitment Fee shall be payable in arrears on the last Business Day
of each calendar quarter beginning March 31, 1998 with the final fee
payment due on the Maturity Date for any period then ending for which the
Unused Commitment Fee shall not have been theretofore paid. In the event
the Revolving Commitment terminates on any date prior to the end of any
such monthly period, the Borrowers shall pay to the Agent for the ratable
benefit of the Banks, on the date of such termination, the total Unused
Commitment Fee due for the period in which such termination occurs.
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<PAGE>
(b) Borrowing Base Increase Fee. From and after the Effective Date,
---------------------------
Borrowers shall pay to the Agent for the ratable benefit of the Banks a
Borrowing Base increase fee (the "Borrowing Base Increase Fee") equal to
one-fourth of one percent (1/4%) of the amount of any increase in the
Borrowing Base from the amount of the Borrowing Base set as of the most
recent determination (whether on a Determination Date or on the date of an
Unscheduled Redetermination), said fee to be payable upon notice to
Borrowers of such increase. No Borrowing Base Increase Fee shall be due in
connection with the execution of this Agreement and the closing of the
transactions described herein.
(c) The Letter of Credit Fee. Borrowers shall pay to the Agent the
------------------------
Letter of Credit fees required above in Section 2(e).
(d) Agency Fees. The Borrowers shall pay to the Agent certain fees
-----------
for acting as Agent hereunder in amounts to be negotiated between the
Borrowers and the Agent.
(e) Commitment Fees. Borrowers shall pay to Agent for the ratable
---------------
benefit of the Banks, the Commitment Fees described in the Engagement
Letter dated November 5, 1997 among Bank One Capital Markets, the Agent and
the Borrowers, and in the Commitment Letter dated January 8, 1998 among the
Agent, the Co-Agents and the Borrowers (the "Commitment Letter").
(f) Structure Fees. Borrowers shall pay to the Agent for the ratable
--------------
benefit of the Agent and the Co-Agents, the Structure Fee described in the
Commitment Letter.
9. PREPAYMENTS.
(a) Voluntary Prepayments. Subject to the provisions of Section 5(g)
---------------------
hereof, the Borrowers 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 three (3) Eurodollar Business Day's
notice to Agent in the case of Eurodollar Loan Tranches and without notice
in the case of Prime Rate Loan Tranches and shall be in a minimum amount of
$500,000 or any larger multiple thereof or the unpaid balance on the 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 Borrowers shall, within thirty
(30) days after notification from
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<PAGE>
the Agent, either (A) by instruments reasonably satisfactory in form and
substance to the Bank, provide the Agent with collateral with value and
quality in amounts satisfactory to all of the 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. If the Total Outstandings ever
exceed the Revolving Commitment as a result of a Monthly Commitment
Reduction or any other required reduction in the Revolving Commitment, then
in such event, Borrowers shall immediately prepay the principal amount of
the Revolving Notes in an amount at least equal to such excess plus accrued
interest to the date of prepayment.
(c) Excess Cash Flow Recapture. During any period that the Bridge
--------------------------
Loan, or any part thereof, is outstanding, the Borrowers shall on or before
the fifteenth (15th) day of each month beginning February 15, 1998, make a
principal prepayment on the Bridge Loan equal to the total monthly Excess
Cash Flow for the next preceding month.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks to enter
into this Agreement, the Borrowers 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. Each Borrower is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was formed and is duly qualified in all
jurisdictions wherein failure to qualify may result in a Material Adverse
Effect. Each Borrower has all power and authority to own its properties and
assets and to transact the business in which it is engaged.
(b) Power and Authority. Each Borrower is duly authorized and
-------------------
empowered to create and issue the Notes; and each Borrower is duly
authorized and empowered to execute, deliver and perform the Loan
Documents, including this Agreement; and all corporation action on each
Borrower's part requisite for the due creation and issuance of the Notes
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 each Borrower, enforceable in
accordance with its 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 creditors rights generally).
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<PAGE>
(d) No Legal Bar or Resultant Lien. The Notes and the Loan Documents,
------------------------------
including this Agreement, do not and will not, to the best of each of the
Borrower's knowledge violate any provisions of any contract, agreement,
law, regulation, order, injunction, judgment, decree or writ to which each
Borrower is subject, or result in the creation or imposition of any lien or
other encumbrance upon any assets or properties of any Borrower, other than
those contemplated by this Agreement.
(e) No Consent. The execution, delivery and performance by each
----------
Borrower of the Notes and the Loan Documents, including this Agreement, and
any document executed in connection with the Acquisition (the "Acquisition
Documents"), does 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
(i) consents required for federal, state and, in some instances, private
leases, right of ways and other conveyances or encumbrances of oil and gas
leases, (ii) consents required by the Acquisition Documents, if any, and
(iii) consents required by the Indenture, all of which consents have been
obtained by the Borrowers.
(f) Financial Condition. The audited Financial Statements of Energy
-------------------
dated December 31, 1996 and the unaudited consolidated and consolidating
Financial Statements of Energy dated September 30, 1997, 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 the Borrowers 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 Borrowers which is reasonably
expected to have a Material Adverse Effect, except as disclosed to the
Banks in Schedule "2" attached hereto.
(g) Liabilities. No Borrower has any material (individually or in the
-----------
aggregate) liability, direct or contingent, except as disclosed to the
Banks in the Financial Statements and on Schedule "3" attached hereto. No
unusual or unduly burdensome restrictions, restraint, or hazard exists by
contract, law or governmental regulation or otherwise relative to the
business, assets or properties of any Borrower 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
any Borrower threatened against or affecting any Borrower 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.
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<PAGE>
(i) Taxes; Governmental Charges. Each Borrower has filed all tax
---------------------------
returns and reports required to be filed and has 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. Each Borrower has good and defensible title to all
------------
of its respective assets, including without limitation, the Oil and Gas
Properties, free and clear of all liens or other encumbrances except
Permitted Liens.
(k) Defaults. No Borrower 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 any Borrowers 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 Borrowers delivered to Banks, neither the
business nor the assets or properties of any Borrower have 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 Revolving
-----------------------------
Commitment will be used by the Borrowers for the purposes (i) of funding a
portion of the Acquisition, (ii) of acquisition and development of oil and
gas properties, (iii) for Letters of Credit, and (iv) for general corporate
purposes. The proceeds of the Bridge Loan Commitment will be used to fund
and close the Acquisition. Borrowers are not engaged principally or as one
of their 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.
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<PAGE>
No Borrower nor any person or entity acting on behalf of any Borrower
has taken or will take any action which might cause the loans hereunder or
any of the Loan 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 Borrowers are located at the address
stated in Section 17 hereof.
(o) Compliance with the Law. To the best of each Borrower's
-----------------------
knowledge, no Borrower:
(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which any Borrower,
or any of its assets or properties are 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 its 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 any Borrower 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. No Borrower 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 (vii) provision of sewer service
to others.
(r) ERISA. Each Borrower is 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 any Borrowers.
-38-
<PAGE>
(s) Public Utility Holding Company Act. No Borrower 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. All of the Borrowers' Subsidiaries are listed on
------------
Schedule "5" hereto.
(u) Environmental Matters. Except as disclosed on Schedule "6", no
---------------------
Borrower (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 received 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 any Borrowers are or may be
liable which may reasonably be expected to result in a Material Adverse
Effect.
(v) Liens. Except (i) as disclosed on Schedule "1" hereto and (ii)
-----
for Permitted Liens, the assets and properties of the Borrowers are free
and clear of all liens and encumbrances.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement, and the obligation to make
the initial Advance or issue any initial Letter of Credit under the
Revolving Commitment or make the initial Advance under the Bridge Loan
shall be subject to satisfaction of the following conditions precedent:
(i) Execution and Delivery. The Borrowers shall each have
----------------------
executed and delivered the Agreement and other required documents,
including mortgages covering the Acquisition properties, all in form
and substance satisfactory to the Agent;
(ii) Legal Opinion. The Agent shall have received from
-------------
Borrowers' legal counsel a favorable legal opinion in form and
substance satisfactory to it (i) as to the matters set forth in
Subsections 10(a), (b), (c), (d), (e) and (h) hereof and
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<PAGE>
(ii) as to such other matters as Agent or its counsel may reasonably
request, including, but not limited to, matters relating to the stock
of Sycamore Pipeline, Inc. being acquired by Gas;
(iii) Corporate Resolutions. The Agent shall have received
---------------------
appropriate certified corporate resolutions of each Borrower;
(iv) Good Standing. The Agent shall have received evidence of
-------------
existence and good standing for each Borrower;
(v) Incumbency. The Agent shall have received a signed
----------
certificate of each Borrower, certifying the names of the officers of
such Borrower authorized to sign loan documents on behalf of such
Borrower, together with the true signatures of each such officer. The
Agent may conclusively rely on such certificate until the Bank
receives a further certificate of any Borrower canceling or amending
the prior certificate and submitting signatures of the officers named
in such further certificate;
(vi) Articles of Incorporation and Bylaws. The Agent shall
------------------------------------
have received copies of the Articles of Incorporation of each Borrower
and all amendments thereto, certified by the Secretary of State of the
State of its incorporation, and a copy of the bylaws of each Borrower
and all amendments thereto, certified by each Borrower as being true,
correct and complete;
(vii) Closing of the Amoco Acquisition. The Agent shall have
--------------------------------
received satisfactory evidence of the closing of the transaction
described in the Purchase and Sale Agreement between Amoco Production
Company and Energy dated November 24, 1997 (the "Acquisition");
(viii) New Equity. Agent shall have received satisfactory
----------
evidence of the issuance by Energy of new equity prior to the
Effective Date on terms acceptable to all of the Banks and the receipt
of net proceeds from such issuance equal to at least the sum of
$15,000,000 plus an amount equal to (i) cash consent fees paid to the
holders of Senior Unsecured Notes for the consent required below in
Section 11(xi); and (ii) any other fees paid in connection with the
issuance of such new equity;
(ix) Available Cash. Agent shall have received satisfactory
--------------
evidence that the Borrowers have available cash on the Effective Date
of at least $15,000,000, including therein for such purposes, the
amount escrowed with Agent pursuant to the requirements of Section
11(x) hereof;
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<PAGE>
(x) Escrow of Interest Payment. The Agent shall have received
--------------------------
satisfactory evidence of the escrow by Energy of the March 1998 semi-
annual interest payment on the Senior Unsecured Notes;
(xi) Consent of Holders of Senior Unsecured Notes. The Agent
--------------------------------------------
shall have received satisfactory evidence of the receipt by Energy of
the required consents of the holders of the Senior Unsecured Notes to
the financing transactions described in this Agreement, which consents
shall contain the agreement of such holders to the optional redemption
of the Senior Unsecured Notes at a repurchase price equal to 100% of
the principal amount of the Senior Unsecured Notes plus accrued but
unpaid interest if redeemed on or before March 31, 1998, and 101% of
the principal amount of the Senior Unsecured Notes plus accrued but
unpaid interest if redeemed during the period from April 1 through
April 30, 1998, and which consents, together with any consideration
paid in connection therewith, shall be acceptable to all of the Banks;
(xii) Additional Unsecured Notes. The Agent shall have received
--------------------------
satisfactory evidence of the filing of the necessary documentation, if
any, with the Securities and Exchange Commission to (A) issue at least
$25,000,000 in additional Senior Unsecured Notes or issue a new senior
unsecured note issue of up to $125,000,000 to replace the Senior
Unsecured Notes, and (B) issue up to $100,000,000 in new subordinated
unsecured notes, all of the terms of which are satisfactory to all of
the Banks;
(xiii) No Default Under the Senior Unsecured Notes. The Agent
-------------------------------------------
shall have received satisfactory evidence that the Borrowers are not
in default under the provisions of the Indenture;
(xiv) Payment of Fees. The Agent shall have received payment in
---------------
full of all fees due the Agent, the Co-Agent and the Banks at the
Effective Date.
(xv) Assignment of Liens. Bank One shall have executed
-------------------
appropriate documentation to assign all Liens previously held by it to
itself, as Agent for the benefit of the Banks.
(xvi) Payment of Release Price. The Agent shall have received
------------------------
payment of $3,550,000 from Borrowers pursuant to Section 12(r) hereof
representing the Release Price for Oil and Gas Properties sold by
Borrowers to Amoco Production Company in connection with the closing
of the Acquisition and certain properties excluded from the
Acquisition because of preferential rights, said amount to be
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<PAGE>
applied Pro Rata to the Revolving Loans as a reduction of the
Revolving Commitment. After such reduction, both the Revolving
Commitment and the Borrowing Base shall be $156,450,000.
(xvii) Representation and Warranties. The representations and
-----------------------------
warranties of Borrowers 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);
(xviii) No Default. No 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;
(xix) Other Documents. Agent shall have received such other
---------------
instruments and documents incidental and appropriate to the
transaction provided for herein as Bank or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(xx) Legal Matters Satisfactory. All legal matters incident
--------------------------
to the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of the Borrowers.
(b) The obligation of the Banks to make any Advance or issue any
Letter of Credit under the Revolving Commitment or to make the Bridge Loan
(including the initial Advance) shall be subject to the following
additional conditions precedent that, at the date of making each such
Advance and after giving effect thereto:
(i) Representation and Warranties. The representations and
-----------------------------
warranties of Borrowers 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);
(ii) No Default. No 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 a Default;
(iii) Other Documents. Agent shall have received such other
---------------
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
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<PAGE>
(iv) Legal Matters Satisfactory. All legal matters incident
--------------------------
to the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of the Borrowers.
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 the required percentage of the Banks
prior to the date of deviation. The Borrowers will at all times comply with the
covenants contained in this Section 12 from the date hereof and for so long as
the Commitments are in existence or any amount is owed to the Agent, the Co-
Agent or the Banks under this Agreement or the other Loan Documents.
(a) Financial Statements and Reports. Each Borrower shall promptly
--------------------------------
furnish to the Agent from time to time upon request such information
regarding the business and affairs and financial condition of Borrowers, as
the Agent may reasonably request, and will furnish to the 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 beginning with the fiscal year ended December 31,
1997, the annual audited consolidated and consolidating Financial
Statements of Borrowers, prepared in accordance with GAAP accompanied
by an unqualified opinion rendered by an independent accounting firm
reasonably acceptable to the 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), beginning with the fiscal quarter ended March 31, 1998,
the quarterly unaudited consolidated and consolidating Financial
Statements of Borrowers prepared in accordance with GAAP;
(iii) Report on Properties. As soon as available and in any
--------------------
event on or before March 1 and September 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
Agent under such Section 7 on the Oil and Gas Properties;
(iv) Monthly Production Reports. Within 30 days after the end
--------------------------
of each month, a monthly report, in form and substance satisfactory to
the Agent, indicating the next preceding month's sales volume, sales
revenues, production taxes, operating expense and net operating income
from the Oil and Gas Properties, with detailed calculations and
worksheets, all in form and substance satisfactory to Agent;
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<PAGE>
(v) SEC Reports. As soon as available, and in any event
-----------
within five (5) days of filing, copies of all filings by Energy with
the Securities and Exchange Commission;
(vi) Monthly Excess Cash Flow Certificate. As soon as
------------------------------------
available, and in any event by the 15th day of each month beginning
February 15, 1998, provide the Agent with a monthly Excess Cash Flow
certificate, in form and substance satisfactory to the Agent showing
the calculation of the Excess Cash Flow for the next preceding month;
(vii) Additional Information. Promptly upon request of the
----------------------
Agent from time to time any additional financial information or other
information that the 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 the 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 for the months coinciding with the end of each
calendar quarter, Borrowers will furnish or cause to be furnished to the
Agent a certificate in the form of Exhibit "C" attached hereto, signed by
the President or Chief Financial Officer of each Borrower, (i) stating that
each Borrower has fulfilled in all material respects its 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 a
Default has occurred, specifying the Default and the nature and status
thereof; (ii) to the extent requested from time to time by the Agent,
specifically affirming compliance of each Borrower in all material respects
with any of its 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 Sections 13(b), (c) and (d); and
(iv) containing or accompanied by such financial or other details,
information and material as the 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,
Borrowers will furnish a
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<PAGE>
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 Borrowers'
compliance with Sections 13(b), (c) and (d) of this Agreement.
(d) Taxes and Other Liens. The Borrowers will pay and discharge
---------------------
promptly all taxes, assessments and governmental charges or levies imposed
upon the Borrowers or upon the income or any assets or property of
Borrowers as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a Lien or
other encumbrance upon any or all of the assets or property of any
Borrowers and which could reasonably be expected to result in a Material
Adverse Effect; provided, however, that no Borrower 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 if such Borrower
shall have set up adequate reserves therefor, if required, under GAAP.
(e) Compliance with Laws. Each Borrower 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 all federal, state, county, municipal and other
governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(f) Further Assurances. The Borrowers will cure promptly 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 Borrowers
at their sole expense will promptly execute and deliver to 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 to correct any omissions in the Notes or
more fully to state the obligations set out herein.
(g) Performance of Obligations. The Borrowers will pay the Notes and
--------------------------
other obligations incurred by it hereunder according to the reading, tenor
and effect thereof and hereof; and Borrowers will do and perform every act
and discharge all of the obligations provided to be performed and
discharged by the Borrowers under the Loan Documents, including this
Agreement, at the time or times and in the manner specified.
(h) Insurance. The Borrowers 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
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<PAGE>
is customary in the case of persons engaged in the same or similar
businesses and similarly situated. Upon request of the Agent, the Borrowers
will furnish or cause to be furnished to the Agent from time to time a
summary of the respective insurance coverage of each Borrower in form and
substance satisfactory to the Agent, and, if requested, will furnish the
Agent copies of the applicable policies. Upon demand by Agent any insurance
policies covering any such property shall be endorsed (i) 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 Agent, (ii) 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 (iii) to provide for such
other matters as the Agent may reasonably require. The Borrowers 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 its liability for injury to persons or 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 Borrowers
shall at all times maintain cost of control of well insurance with respect
to the Oil and Gas Properties which shall insure the Borrowers against
seepage and pollution expense; redrilling expense; and cost of control of
well; fires, blowouts, etc., if deemed economical in the reasonable
discretion of the Borrowers. Additionally, the Borrowers 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. Each Borrower 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 such Borrower's auditors.
(j) Right of Inspection. Each Borrower will permit any officer,
-------------------
employee or agent of the Banks to examine such Borrower'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 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 the
Banks' and the Agent's rights and remedies under the Notes, this Agreement
and the other Loan Documents.
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<PAGE>
(k) Notice of Certain Events. The Borrowers shall promptly notify
------------------------
the Agent if any Borrower learns of the occurrence of (i) any event which
constitutes a Default together with a detailed statement by any Borrower of
the steps being taken to cure the Default; (ii) any legal, judicial or
regulatory proceedings affecting any Borrower, or any of the assets or
properties of any Borrower which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect; (iii) any dispute between
any Borrower 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; (iv) any event or circumstance which
requires the prepayment, purchase or redemption of any of the Senior
Unsecured Notes, any default or event of default that occurs under the
Indenture or under any subsequent indenture executed by Borrowers in
connection with the issuance of additional notes which are approved by the
Banks pursuant to Section 13(f) hereof, with a detailed statement of steps
being taken to cure such default or event of default, or (v) any other
matter which in any Borrower's reasonable opinion could have a Material
Adverse Effect.
(l) ERISA Information and Compliance. The Borrowers will promptly
--------------------------------
furnish to the 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 chief
financial officer of Borrowers specifying the nature thereof, what action
such Borrower 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 Borrowers will deliver to
---------------------------------
the Agent (i) promptly upon its becoming available, one copy of each report
sent by any Borrower to any court, governmental agency or instrumentality
pursuant to any Environmental Law, (ii) notice, in writing, promptly upon
any Borrower'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; (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 any Borrower would have a duty to report to any
court or government agency or instrumentality, or (iii) the existence of
any Environmental Lien on any properties or assets of any Borrower, and
such Borrower shall immediately deliver a copy of any such notice to Agent.
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<PAGE>
(n) Compliance and Maintenance. The Borrowers will (i) observe and
--------------------------
comply in all material respects with all Environmental Laws; (ii) except as
provided in Subsections 12(o) and 12(p) 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 Borrowers exercised in good faith; (iii) take or cause to be
taken whatever actions are necessary or desirable to prevent an event or
condition of default by any Borrower 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 Agent upon request evidence
satisfactory to Agent that there are no Liens, claims or encumbrances on
the Oil and Gas Properties, except laborers', vendors', repairmen's,
mechanics', worker's, or materialmen's liens arising by operation of law or
incident to the construction or improvement of property if the obligations
secured thereby are not yet due or are being contested in good faith by
appropriate legal proceedings or Permitted Liens.
(o) Operation of Properties. Except as provided in Subsection 12(p)
-----------------------
and (q) below, the Borrowers 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 Borrowers 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.
(p) Compliance with Leases and Other Instruments. The Borrowers will
--------------------------------------------
pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by any
Borrower (or required to keep unimpaired in all material respects the
rights of any Borrower in Oil and Gas Properties) accruing under, and
perform or cause to be performed in all material respects each and every
act, matter, or thing required of any Borrower by each and all of the
assignments, deeds, leases, subleases, contracts, and agreements in any way
relating to any Borrower or any of the
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<PAGE>
Oil and Gas Properties and do all other things necessary of any Borrower to
keep unimpaired in all material respects the rights of any Borrower
thereunder and to prevent the forfeiture thereof or default thereunder;
provided, however, that nothing in this Agreement shall be deemed to
require any Borrower 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 any Borrower 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 any Borrower exercised in good faith, it
is not in the best interest of the any Borrower 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 Borrowers, the
Borrowers shall not be obligated to perform any undertakings contemplated
by the covenants and agreement contained in Subsections 12(o) or 12(p)
hereof which are performable only by such operators and are beyond the
control of the Borrowers; however, the Borrowers 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 Borrowers
---------------------------------------------
will immediately pay over to the Agent for the ratable benefit of the Banks
as a prepayment of principal on the Revolving Notes, an amount equal to
100% of the Release Price received by any Borrower from the sale of the Oil
and Gas Properties, which sale has been approved in advance by the Majority
Banks. The term "Release Price" as used herein shall mean a price
determined by the Majority Banks in their discretion based upon the loan
collateral value which such Banks in their discretion (using such
methodology, assumptions and discounts rates as such Banks customarily use
in assigning collateral value to oil and gas properties, oil and gas
gathering systems, gas processing and plant operations) assign to such Oil
and Gas Properties at the time in question. Any such prepayment of
principal on the Revolving Notes required by this Section 12(r), shall not
be in lieu of, but shall be in addition to, any Monthly Commitment
Reduction or any mandatory prepayment of principal required to be paid
pursuant to Section 9(b) hereof. Any amount in excess of the Release Price
received by the Borrower from any such sale shall be applied as a
prepayment of principal on the Bridge Loan until the same is paid in full,
principal and interest. Any such prepayment of principal on the Bridge Loan
shall not be in lieu of, but shall be in addition to, any mandatory
prepayment of principal required to be made pursuant to Section 9(c)
hereof.
(s) Title Matters. Within ninety (90) days after the date hereof
-------------
with respect to the Oil and Gas Properties acquired in the Acquisition and
those Oil and Gas Properties listed on Schedule "7" hereto, furnish Agent
with title opinions and/or title information
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<PAGE>
reasonably satisfactory to Agent showing good and defensible title of
Borrowers to such Oil and Gas Properties subject only to the Permitted
Liens. As to any Oil and Gas Properties hereafter mortgaged to Agent,
Borrowers will promptly (but in no event more than thirty (30) days
following such mortgaging), furnish Agent with title opinions and/or title
information reasonably satisfactory to Agent showing good and defensible
title of Borrowers to such Oil and Gas Properties subject only to Permitted
Liens.
(t) Curative Matters. Within sixty (60) days after the date hereof
----------------
with respect to matters listed on Schedule "8" and, thereafter, within
sixty (60) days after receipt by Borrowers from Agent or its counsel of
written notice of title defects the Agent reasonably requires to be cured,
Borrowers shall either (i) provide such curative information, in form and
substance satisfactory to Agent, or (ii) substitute Oil and Gas Properties
of value and quality satisfactory to the Agent for all of Oil and Gas
Properties for which such title curative was requested but upon which
Borrowers elected not to provide such title curative information, and,
within sixty (60) days of such substitution, provide title opinions or
title information satisfactory to the Agent covering the Oil and Gas
Properties so substituted.
(u) Change of Principal Place of Business. Each Borrower shall give
-------------------------------------
Agent at least thirty (30) days prior written notice of its intention to
move its principal place of business from the address set forth in Section
17 hereof.
(v) Cash Collateral Accounts. Borrowers shall establish and maintain
------------------------
with Agent one or more operating accounts for each Borrower (the "Operating
Accounts") and lockbox accounts for each Borrower ("Lockbox Accounts"), the
maintenance of each of which shall be subject to such rules and regulations
as the Agent shall from time to time specify. Such accounts shall be
maintained with the Agent until all amounts due hereunder and under the
Notes have been paid in full. Borrowers shall within ten (10) days of the
Effective Date instruct and cause all monetary proceeds of production from
the Oil and Gas Properties to be remitted to their respective Lockbox
Accounts. Such proceeds of production shall not be redirected without the
prior written consent of the Agent until such time as all indebtedness due
Banks by Borrowers has been paid in full and the Commitments have been
terminated. If no Event of Default (and no event which, with notice or
lapse of time or both, would become an Event of Default) has occurred and
is continuing, the full balance of the Lockbox Accounts each day will be
deposited into the Operating Accounts. The Borrowers hereby grant a
security interest to Banks in and to the Lockbox Accounts and the Operating
Accounts (collectively, the "Cash Collateral Accounts") and all checks,
drafts and other items ever received by any Bank for deposit therein. If
any Event of Default shall occur and be continuing, Agent shall have the
immediate right, without prior notice or demand, to take and apply against
the Borrowers' obligations hereunder any and all funds legally and
beneficially owned by the Borrowers then or thereafter on deposit in the
Cash Collateral Accounts for the ratable benefit of the Banks.
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<PAGE>
(w) Required Hedging. Within thirty (30) days of the Effective Date,
----------------
Borrowers shall have (i) entered into hedges satisfactory to Majority Banks
covering Borrowers' Oil and Gas Properties with counterparties acceptable
to the Banks and (ii) interest rate protection agreements satisfactory to
Majority Banks providing interest rate protection.
(x) New Equity. By March 31, 1998, Energy shall issue new common
----------
stock with proceeds thereof of at least $65,000,000, the application of
which shall be determined by 100% of the Banks. Notwithstanding any other
provision hereof, any amendment, modification or waiver of compliance with
this covenant shall require the consent of 100% of the Banks.
(y) Escrow of Interest Payments. Borrowers shall maintain at all
---------------------------
times in an escrow account with Agent or an affiliate of Agent, for the
benefit of the Banks an amount equal to the next semi-annual interest
payment due on any senior unsecured notes, including, without limitation,
the Senior Unsecured Notes. The Borrowers hereby grant a security interest
to Banks in such escrow account and all checks, drafts and other items ever
received by any Bank for deposit therein. If any Event of Default shall
occur and be continuing, Agent shall have the immediate right, without
prior notice or demand, to take and apply against the Borrowers'
obligations hereunder any and all funds then or thereafter on deposit in
such escrow accounts for the ratable benefit of the Banks. Notwithstanding
any other provision hereof, any amendment, modification or waiver of
compliance with this covenant shall require the consent of 100% of the
Banks.
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 the required percentage of the Banks
prior to the date of deviation. The Borrowers will at all times comply with the
covenants contained in this Section 13 from the date hereof and for so long as
the Revolving Commitment is in existence or any amount is owed to the Agent, the
Co-Agents or the Banks under this Agreement or the other Loan Documents.
(a) Negative Pledge. Borrowers shall not 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
(b) sell, lease, transfer or otherwise dispose of, in any fiscal
year, any of its assets except for (A) sales, leases, transfers or other
dispositions made in the ordinary
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<PAGE>
course of Borrowers' oil and gas businesses and (B) sales made with the
consent of Majority Banks which are made pursuant to, and in full
compliance with, Section 12(r) hereof
(c) Current Ratio. The Borrowers will not allow their ratio of
-------------
Current Assets to Current Liabilities to be less than 1.0 to 1.0 as of the
end of any fiscal quarter.
(d) Minimum Interest Coverage Ratio. The Borrowers will not allow
-------------------------------
their consolidated Minimum Interest Coverage Ratio to be less than (i) 1.5
to 1.0 as of the end of each calendar quarter for the preceding four
quarters beginning with the quarter ending September 30, 1997 and (ii) 2.0
to 1.0 as of the end of each calendar quarter for the preceding four
quarters beginning with the quarter ending September 30, 1998.
(e) Minimum Tangible Net Worth. The Borrowers' Tangible Net Worth
--------------------------
will not, be less than (i) as of the Effective Date, the sum of (x)
$10,000,000 plus (y) the amount of net proceeds received by Borrowers from
the issuance of the new equity required pursuant to Section 11(a)(viii)
hereof, (ii) $75,000,000 as of March 31, 1998, and (iii) $75,000,000 plus
fifty percent (50%) of Net Income, if positive, before extraordinary gains
but after extraordinary losses, for the period commencing on April 1, 1998,
and ending at the end of the fiscal quarter being tested, plus one hundred
(100%) of the proceeds from the issuance of common or preferred stock
during such quarter, net of reasonable and customary costs, expenses and
commissions relating to such issue. Borrowers' required Minimum Tangible
Net Worth shall for any period be reduced by the amount of any net loss
reported by Borrowers as a result of any charges incurred in accordance
with GAAP in connection with the refinance of the Senior Unsecured Notes.
Notwithstanding any other provision hereof, any amendment, modification or
waiver of compliance with this covenant at the Effective Date or for the
period ending March 31, 1998, shall require the consent of 100% of the
Banks.
(f) Consolidations and Mergers. No Borrower will consolidate or
--------------------------
merge with or into any other Person, except that any Borrower may merge
with another Person if such Borrower is the surviving entity in such merger
and if, after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing.
(g) Debts, Guaranties and Other Obligations. Without the consent of
---------------------------------------
100% of the Banks, no Borrower will incur, create, assume or in any manner
become or be liable in respect of any indebtedness, nor will any Borrower
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
-52-
<PAGE>
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 renewal or increase thereof, or other
indebtedness of the Borrowers heretofore disclosed to Banks in the
Borrowers' Financial Statements or on Schedule "4" 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
lending transaction) incurred in the ordinary course of business,
including, but not limited to indebtedness for drilling, completing,
leasing and reworking oil and gas wells; or
(iv) indebtedness owed by one Borrower to another Borrower as a
result of intercompany loans or advances; or
(v) indebtedness evidenced by the Senior Unsecured Notes; or
(vi) up to an additional $25,000,000 in senior unsecured notes
issued on terms acceptable to 100% of the Banks and no more
restrictive than those set forth in the Indenture for the Senior
Unsecured Notes; provided, however, that in lieu of the issuance of
such additional senior unsecured notes, the Borrowers may replace the
existing Senior Unsecured Notes with a new issue of senior unsecured
notes in amounts of up to $125,000,000, said replacement senior
unsecured notes to be on terms acceptable to 100% of the Banks and no
more restrictive than those set forth in the aforesaid Indenture
provided, further, however, that any net proceeds resulting from any
increase in the amount of the Senior Unsecured Notes from the amount
outstanding at the Effective Date shall be applied to the prepayment
of the Revolving Loans and/or the Bridge Loans as determined by the
Agent and the Co-Agents, and the Revolving Commitment shall be
permanently reduced by such amount of the prepayment or prepayments.
(vii) up to $100,000,000 in subordinated unsecured notes issued
on terms acceptable to 100% of the Banks, provided all net proceeds
from such issuance are applied to the prepayment of the Revolving
Loans and/or the Bridge Loans, as determined by the Agent and the Co-
Agents.
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<PAGE>
(h) Dividends. No Borrower will declare or pay any cash dividend,
---------
purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders, or make any
distribution of its assets to its stockholders as such, except the
foregoing shall not apply to cash dividends paid by one Borrower to another
Borrower; provided, however, that immediately before and after giving
effect thereto no (i) Default or Event of Default or (ii) Borrowing Base
deficiency or requirement to make any mandatory prepayment of principal
pursuant to Section 9(b) hereof, shall exist.
(i) Loans and Advances. No Borrower shall 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 to any person, the material details of
which have been set forth in the Financial Statements of the Borrowers
heretofore furnished to Banks; or
(ii) advances made in the ordinary course of such Borrower's oil
and gas business; or
(iii) loans or advances among Borrowers.
(j) Sale or Discount of Receivables. No Borrower will discount or
-------------------------------
sell with recourse, or sell for less than the greater of the face or market
value thereof, any of its notes receivable or accounts receivable.
(k) Nature of Business. No Borrower will permit any material change
------------------
to be made in the character of its business as carried on at the date
hereof.
(l) Transactions with Affiliates. No Borrower will enter into any
----------------------------
transaction with any Affiliate, except transactions upon terms that are no
less favorable to it than would be obtained in a transaction negotiated at
arm's length with an unrelated third party.
(m) Hedging Transactions. Except as provided for in Section 12(w),
--------------------
no Borrower will enter into any transaction providing (i) for the hedging,
forward sale, swap or any deviation thereof of crude oil or natural gas or
other commodities, or (ii) for a swap, collar, floor, cap, option,
corridor, or other contract which is intended to reduce or eliminate the
risk of fluctuation in interest rates, as such terms are referred to in the
-54-
<PAGE>
capital markets, except the foregoing prohibitions shall not apply to (x)
transactions consented to in writing by the Banks which are on terms
acceptable to the Banks, or (y) Pre-Approved Contracts. The term "Pre-
Approved Contracts" as used herein shall mean any contract or agreement (i)
to hedge, forward, sell or swap crude oil or natural gas or otherwise sell
up to 75% of the Borrowers' monthly production forecast for all of
Borrowers' proved and producing oil and gas properties for the period
covered by the proposed hedging transaction, (ii) with a maturity of twelve
(12) months or less, (iii) with "strike prices" per barrel greater than the
Agent's forecasted price in the most recent engineering evaluation of the
Borrowers' oil and gas properties, adjusted for the difference between the
forecasted price and the Borrowers' actual product price as determined by
Agent, and (iv) with counter-parties to the hedging agreement which are
approved by Agent.
(n) Investments. No Borrower shall make any investments in any
-----------
person or entity, except such restriction shall not apply to:
(i) investments and direct obligations of the United States of
America or any agency thereof;
(ii) investments in certificates of deposit issued by the Banks
or certificates of deposit with maturities of less than one year,
issued by other commercial banks in the United States having capital
and surplus in excess of $500,000,000 and which have a rating of (A)
50 or above by Sheshunoff and (B) "B" or above by Keef-Bruett; or
(iii) investments in insured money market funds, Eurodollar
investment accounts and other similar accounts at Agent or such
investment with maturities of less than ninety (90) days at other
commercial banks having capital and surplus in excess of $500,000,000
and which have a rating of (A) 50 or above by Sheshunoff and (B) "B"
or above by Keef-Bruett.
(o) Amendment to Articles of Incorporation or Bylaws. No Borrower
------------------------------------------------
will permit any amendment to, or any alteration of, its Articles of
Incorporation or Bylaws other than amendments, modifications or alterations
to Energy's Articles of Incorporation necessary to allow for the sale of
new common stock.
(p) Sale of Assets. No Borrower shall sell, transfer or otherwise
--------------
dispose of any of its assets, except for production from oil, gas and
mineral properties and other assets sold in the ordinary course of such
Borrower's business.
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<PAGE>
(q) Proceeds of Production. No Borrower shall redirect the payment
----------------------
of the proceeds of production from the Oil and Gas Properties to anyone or
any place other than to the Lockbox Account at the Agent.
(r) Issuance of Preferred Stock. Borrowers shall not issue any
---------------------------
preferred stock after the Effective Date without the consent of Majority
Banks.
(s) Amendments, etc. of Senior Unsecured Debt. Except as
-----------------------------------------
specifically permitted hereby, Borrowers shall not make or allow to be made
(a) any amendments or modifications to the Indenture or any indenture
executed in connection with the issuance of any senior unsecured notes or
any subordinated notes, or (ii) any prepayments or redemptions of the
Senior Unsecured Notes or any other indebtedness, unless any such action is
approved by Majority Banks.
(t) Amendments to and Redemption of Preferred Stock or Other Equity.
---------------------------------------------------------------
Borrowers shall not (i) amend any outstanding equity issue after the
Effective Date without the consent of Majority Banks, or (ii) redeem any
preferred stock without the consent of the Majority Banks.
(u) Payment or Pre-Payment of Other Indebtedness. Except as
--------------------------------------------
otherwise provided for in this Agreement, at any time while the Bridge
Loan, or any part thereof, is outstanding, Borrowers shall not make any
unscheduled principal payments on or redeem any of their indebtedness
(other than indebtedness owed the Banks hereunder) or purchase or redeem
any of their equity unless such payment, pre-payment or redemption is
approved by 100% of the Banks.
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 Borrowers shall fail to pay when due or declared due the
principal of, and the interest on, the Notes, or any fee or any other
indebtedness of the Borrowers incurred pursuant to this Agreement or any
other Loan Document; or
(b) Any representation or warranty made by any Borrower under this
Agreement, or in any certificate or statement furnished or made to the
Banks 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 any Borrower 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
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<PAGE>
(c) Default shall be made in the due observance or performance of any
of the covenants or agreements of the Borrowers contained in the Loan
Documents, including this Agreement (excluding covenants contained in
Section 12(w), (x) and (y) and Section 13 of the Agreement for which there
is no cure period), and such default shall continue for more than thirty
(30) days; or
(d) Default shall be made in the due observance or performance of the
covenants of Borrowers contained in Section 12(w), (x) or (y) or Section 13
of this Agreement; or
(e) Default shall be made in respect of any obligation for borrowed
money, other than the Notes, for which any Borrower is 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 any Borrower or in
respect of any agreement relating to any such obligations unless such
Borrower is not liable for same (i.e., unless remedies or recourse for
failure to pay such obligations is limited to foreclosure of the collateral
security therefor), and if such default shall continue beyond the
applicable grace period, if any; or
(f) Any Borrower 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 any Borrower 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 any Borrower 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
$100,000 (or judgments or orders aggregating in excess of $100,000) shall
be rendered against any Borrower and such judgments or orders shall
continue unsatisfied and unstayed for a period of thirty (30) days; or
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(i) In the event the Total Outstandings shall at any time exceed the
Borrowing Base established for the Revolving Notes, and the Borrowers shall
fail to comply with the provisions of Section 9(b) hereof; or
(j) A Change of Control shall occur; or
(k) A Change of Management shall occur; or
(l) A default or event of default shall occur under the Indenture or
any other indenture or similar agreement executed by Borrowers, or any of
them, in connection with the issuance of additional debt as permitted by
Section 13(g)(vi) or (vii) hereof.
Upon occurrence of any Event of Default specified in Subsections 14(f) and
(g) hereof, the entire principal amount due under the Notes and all interest
then accrued thereon, and any other liabilities of the Borrowers 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
Borrowers. Upon the occurrence of any Event of Default specified in Section
12(x) hereof, the Agent may, or upon the request of any Co-Agent or the Majority
Banks shall, by notice to Borrowers 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 Borrowers hereby
expressly waive, anything contained herein or in the Notes to the contrary
notwithstanding. In any other Event of Default, the Agent, upon request of the
Banks holding 66-2/3% or more of the Commitments or, if the Commitments have
been terminated, Banks holding 66-2/3% or more of the principal amount of the
outstanding Loans, shall by notice to the Borrowers 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
Borrowers hereby expressly waive, anything contained herein or in the Note 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 any other 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 Borrowers (any such notice being expressly waived by the Borrowers), to set-
off and apply any and all deposits
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(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 Borrowers against any and all of the indebtedness of the
Borrowers 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 Borrowers pursuant to
this Agreement and the Notes. The Banks agree promptly to notify the Borrowers
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Banks may
have.
15. THE AGENT, THE CO-AGENTS AND THE BANKS.
(a) Appointment and Authorization. Each Bank hereby appoints 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 Borrowers 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 Borrowers
under the Loan Documents; (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 appoints the Co-Agents to carry out the duties and obligations
specifically provided for herein. Each Bank hereby authorizes Agent and Co-
Agents to take all actions and to exercise such powers under the Loan
Documents as are specifically delegated to such Agent or Co-Agents 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, Agent and Co-Agents and any successor Agent or Co-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 Agent or Co-Agent; and the term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include
Agent and Co-Agents and any successor Agent or Co-Agent in its capacity as
a Bank. Agent, Co-Agents and any successor Agent or Co-Agent and their
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with the
Borrowers, and any person which may do
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business with the Borrowers, all as if Agent or Co-Agents and any successor
Agent or Co-Agent were not Agent or Co-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 Agent or Co-Agents which may be or become security
for the obligations of the Borrowers 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
Borrowers 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
Borrowers 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 after receiving the consent of the Borrowers, Agent shall
obtain execution by the Borrowers of additional Notes in amounts
representing the Commitment of each such new Bank, up to an aggregate face
amount of all Revolving Notes not exceeding $160,000,000 and all such
Bridge Notes not exceeding $60,000,000. 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, Agent
may require that the Banks exchange their Notes for newly issued Notes to
better reflect the Commitments of the Banks. 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 Agent.
(c) Consultation with Counsel. Banks agree that Agent and Co-Agents
-------------------------
may consult with legal counsel selected by Agent and Co-Agents 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. Agent and Co-Agents 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
Agent and Co-Agents 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 Agent or Co-Agent. Subject to the
-------------------------------------------
appointment and acceptance of a successor Agent or Co-Agents as provided
below, Agent or Co-Agents may resign at any time by giving written notice
thereof to Banks and the Borrowers, and Agent may be removed at any time
with or without cause by Majority Banks. If no successor Agent or Co-Agent
has been so appointed by Majority Banks (and
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approved by the Borrowers) and has accepted such appointment within 30 days
after the retiring Agent's or Co-Agent's giving of notice of resignation or
removal of the retiring Agent, then the retiring Agent may, on behalf of
Banks, appoint a successor Agent or Co-Agent. Any successor Agent or Co-
Agent must be approved by Borrowers, which approval will not be
unreasonably withheld. Upon the acceptance of any appointment as Agent or
Co-Agent hereunder by a successor Agent or Co-Agent, such successor Agent
or Co-Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent or Co-Agent, and the retiring Agent
or Co-Agent, as the case may be, shall be discharged from its duties and
obligations hereunder. After any retiring Agent's or Co-Agent's
resignation or removal hereunder as Agent or Co-Agent, the provisions of
this Section 15 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 Agent or
Co-Agent. To be eligible to be an Agent or Co-Agent hereunder the party
serving, or to serve, in such capacity must own a Pro Rata Part of the
Commitments equal to the level of Commitment required to be held by any
Bank pursuant to Section 28 hereof.
(f) Responsibility of Agent or Co-Agent. It is expressly understood
-----------------------------------
and agreed that the obligations of Agent and the Co-Agents under the Loan
Documents are only those expressly set forth in the Loan Documents as to
each and that Agent or any Co-Agent, as the case may be, shall be entitled
to assume that no Default or Event of Default has occurred and is
continuing, unless Agent or any Co-Agent, as the case may be, has actual
knowledge of such fact or has received notice from a Bank or the Borrowers
that such Bank or the Borrowers consider that a Default or an Event of
Default has occurred and is continuing and specifying the nature thereof.
Neither Agent, any Co-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. Neither Agent nor any Co-
Agent shall incur 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.
Neither Agent nor any Co-Agent shall be responsible to Banks for any
of the Borrowers' 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 Borrowers to perform any of their obligations hereunder or
thereunder. Agent and any Co-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.
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The relationship between Agent, any Co-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 Agent or any
Co-Agent any duties or responsibilities other than those for which express
provision is therein made. In performing its duties and functions
hereunder, neither Agent nor any Co-Agent assumes 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 Borrowers or any of its beneficiaries or other creditors. As to any
matters not expressly provided for by the Loan Documents, neither Agent nor
any Co-Agent shall 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 neither Agent
nor any Co-Agent shall be required to take any action which is contrary to
the Loan Documents or applicable law.
Agent and any Co-Agent shall have the right to exercise or refrain
from exercising, without notice or liability to the Banks, any and all
rights afforded to Agent and such Co-Agent, as the case may be, by the Loan
Documents or which Agent or any Co-Agent may have as a matter of law;
provided, however, Agent shall not (i) except as provided in Section 7(b)
hereof, without the consent of 100% of the Banks designate the amount of
the Borrowing Base or the Monthly Commitment Reduction 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 Revolving
Commitment or the Bridge Loan Commitment amount of any Bank, (ii) would
reduce any fees hereunder, or the principal of, or the interest on, any
Bank's Note or Notes, (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 Agent's or any Co-Agent's obligations to any Bank
hereunder, (v) would release Borrowers from their obligation to pay any
Bank's Note or Notes, (vi) release any of the Collateral, (vii) would
change the definition of Majority Banks, (viii) would amend, modify or
change any provision of this Agreement requiring the consent of all the
Banks, (ix) would waive any of the conditions precedent to the Effective
Date or the making of any Loan or issuance of any Letter of Credit or (x)
would extend the Bridge Loan Maturity Date or the Revolving Maturity Date
or (xi) would amend this sentence or the previous sentence. Neither Agent
nor any
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Co-Agent shall have liability to Banks for failure or delay in exercising
any right or power possessed by Agent or Co-Agent pursuant to the Loan
Documents or otherwise unless such failure or delay is caused by the gross
negligence of the Agent or Co-Agent, in which case only the Agent or Co-
Agent responsible for such gross negligence shall have liability therefor
to the Banks.
(g) Independent Investigation. Each Bank severally represents and
-------------------------
warrants to Agent and the Co-Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of the
Borrowers in connection with the making and continuation of its
participation hereunder and has not relied exclusively on any information
provided to such Bank by Agent or the Co-Agent in connection herewith, and
each Bank represents, warrants and undertakes to Agent and Co-Agent that it
shall continue to make its own independent appraisal of the credit
worthiness of the Borrowers while the Notes are outstanding or its
commitments hereunder are in force. Neither Agent nor any Co-Agent shall be
required to keep itself informed as to the performance or observance by the
Borrowers of this Agreement or any other document referred to or provided
for herein or to inspect the properties or books of the Borrowers. Other
than as provided in this Agreement, neither Agent nor any Co-Agent shall
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 Borrowers which may come into the possession of Agent or
such Co-Agent, as the case may be.
(h) Indemnification. Banks agree to indemnify Agent and the Co-
---------------
Agents, ratably according to their respective Commitments on a Pro Rata
basis, 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 Agent or any Co-Agent in
any way relating to or arising out of the Loan Documents or any action
taken or omitted by Agent or any Co-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 from Agent's or any Co-Agent's gross
negligence or willful misconduct. Each Bank shall be entitled to be
reimbursed by the Agent or any Co-Agent for any amount such Bank paid to
Agent or any Co-Agent under this Section 15(h) to the extent the Agent or
such Co-Agent has been reimbursed for such payments by the Borrowers or any
other Person. THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO
APPLY TO AND PROTECT THE AGENT OR ANY CO-AGENT FROM THE CONSEQUENCES OF ANY
LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON
AGENT OR ANY CO-AGENT AS WELL AS FROM THE CONSEQUENCES OF THEIR OWN
NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING OR
CONCURRING CAUSE OF ANY SUCH LIABILITY.
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<PAGE>
(i) Benefit of Section 15. The agreements contained in this Section
---------------------
15 are solely for the benefit of Agent, the Co-Agents and the Banks and are
not for the benefit of, or to be relied upon by, the Borrowers, any
affiliate of the Borrowers or any other person.
(j) Pro Rata Treatment. Subject to the provisions of this Agreement,
------------------
each payment (including each prepayment) by the Borrowers 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 Borrowers
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 3
hereof and Agent or another Bank or Banks shall have made such Advance,
payment received by 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 Agent shall have received notice from the Borrowers prior to
the date on which any payment is due to Banks hereunder that the Borrowers
will not make such payment in full, Agent may, but shall not be required
to, assume that the Borrowers has made such payment in full to Agent on
such date and 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 Borrowers shall not have so
made such payment in full to Agent, each Bank shall repay to 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 Agent, at the
interest rate applicable to such portion of the Revolving 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
Borrowers (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 Borrowers 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 Borrowers 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.
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<PAGE>
(m) Interests of Banks. Nothing in this Agreement shall be construed
------------------
to create a partnership or joint venture between Banks for any purpose.
Agent, the Co-Agent, Banks and the Borrowers recognize that the respective
obligations of Banks under the Commitments shall be several and not joint
and that neither Agent, any Co-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
Agent under the Security Instruments, including, without limitation, liens
and security interests in any collateral, fees and payments of principal
and interest by the Borrowers under the Commitments 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 Agent in good faith determines that it is
-----------
uncertain about how to distribute to Banks any funds which it has received,
or whenever Agent in good faith determines that there is any dispute among
the Banks about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty
or dispute. If Agent in good faith believes that the uncertainty or dispute
will not be promptly resolved, or if Agent is otherwise required to invest
funds pending distribution to the Banks, Agent may invest such funds
pending distribution (at the risk of the Borrowers). 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 Agent for distribution to the Banks
(other than to the Person who is Agent in its separate capacity as a Bank)
shall be held by the Agent pending such distribution solely as Agent for
such Banks, and Agent shall have no equitable title to any portion thereof.
16. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Agent or 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 Agent and 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 Note 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.
17. 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
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directed at the address of such party as follows: (a) BORROWERS: c/o GOTHIC
ENERGY CORPORATION, 5727 South Lewis, Suite 700, Tulsa, Oklahoma 74105-7148,
Attention: Michael Paulk, President; (b) AGENT: BANK ONE, TEXAS, N.A., 1717 Main
Street, Dallas, Texas 75201, Facsimile No. 214-290-2627, Attention: Mynan C.
Feldman, Vice President; and (c) CO-AGENTS: CREDIT LYONNAIS, NEW YORK BRANCH,
1000 Louisiana, Suite 5360, Houston, Texas 77002, Facsimile No. 713-751-0307,
Attention: Tim DeSpain, Vice President and BANQUE PARIBAS, 1200 Smith Street,
Suite 3100, Houston, Texas 77002, Facsimile No. 713-659-6915, Attention: David
Dodd, Vice President. 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 17.
18. EXPENSES. The Borrowers shall pay (i) all reasonable and necessary
out-of-pocket expenses of the Banks, including reasonable fees and disbursements
of special counsel for the 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 the Agent, including
reasonable fees and disbursements of special counsel for the Agent in connection
with the preparation of any participation agreement for a participant or
participants requested by the Borrowers or any amendment thereof and (iii) if a
default or an Event of Default occurs, 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. The Borrowers 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. The obligations of this Section 18 shall survive
any termination of this Agreement, the expiration of the Loans and the payment
of all indebtedness of the Borrowers to the Banks hereunder and under the Notes.
19. INDEMNITY. The Borrowers agree to indemnify and hold harmless the
Banks and their 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 Borrowers or their
agents or arises in connection with
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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 Borrowers to the Banks hereunder or at common
law or otherwise, and shall survive any termination of this Agreement, the
expiration of the Loans and the payment of all indebtedness of the Borrowers to
the Banks hereunder and under the Notes, provided that the Borrowers shall have
no obligation under this Section to the Bank with respect to any of the
foregoing arising out of the gross negligence or willful misconduct of the Bank.
If any Claim is asserted against any Indemnified Party, the Indemnified Party
shall endeavor to notify the Borrowers 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 Borrowers' expense, counsel of the Indemnified Parties' choosing
and to control the defense of the Claim. The Borrowers may at their 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 ANY LIABILITY INCLUDING STRICT
LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON AGENT AS WELL AS FROM THE
CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE,
CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
20. 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.
21. 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.
22. 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
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<PAGE>
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 Borrowers result in
the Borrowers 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 Note is paid in
full, any remaining excess shall forthwith be paid to the Borrowers. All sums
paid or agreed 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 Borrowers 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; and (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 Note at
the Maximum Rate.
23. AMENDMENTS. 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.
24. 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.
25. 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.
26. 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.
27. 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 Borrowers may
not, without the prior written consent of all of the Banks, assign any rights,
powers, duties or obligations hereunder.
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<PAGE>
28. 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 Commitments 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 will consider the opinion and
recommendation of Borrowers, which opinion and recommendation shall in no
way be binding upon such Bank, and each such sale, assignment, or transfer
(other than to an Affiliate, a Bank or a Federal Reserve Bank), shall
require the consent of Agent, which consent 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,
Commitments 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 Commitments; 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 $5,000,000, (2) each remaining Bank shall at
all times maintain Commitments then outstanding in an aggregate principal
amount at least equal to $5,000,000; (3) each such sale, assignment or
transfer shall be of a Pro Rata portion of such Bank's Revolving Commitment
and its Bridge Loan Commitment, (4) no Bank may offer to sell its Note or
Notes, Commitments, rights and obligations or interests therein in
violation of any securities laws; and (5) no such assignments (other than
to a Federal Reserve Bank) shall become effective until the assigning Bank
and its assignees delivers to Agent and Borrowers an Assignment and
Acceptance and the Note or Notes subject to such assignment 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 or
the Federal Reserve Bank) will be payable to Agent by assignor or assignee.
Within five (5) Business Days after its receipt of copies of the Assignment
and Acceptance and the other documents relating thereto and the Note or
Notes, the Borrowers shall execute and deliver to Agent (for delivery to
the relevant assignee) a new Note or Notes evidencing such assignee's
assigned Commitments and if the assignor Bank has retained a portion of its
Commitments, a replacement Note in the principal amount of the Commitments
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
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<PAGE>
consent or action by Borrowers, Banks or the Agent shall be required to
release the transferor Bank with respect to its Commitments 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 Commitments 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 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 Agent, each Bank and each 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.
(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 Borrowers' properties
and operations which was provided to such Bank pursuant to this Agreement.
(d) Upon the reasonable request of either Agent or any 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.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND JURISDICTION. THE
OBLIGATIONS OF BORROWERS UNDER THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS
COUNTY, TEXAS. ANY SUIT, ACTION OR PROCEEDING
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<PAGE>
AGAINST THE BORROWERS 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
COUNTY, TEXAS AND THE BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE
BORROWERS HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS IN ANY SUIT, ACTION
OR PROCEEDING IN SAID COURT BY THE MAILING THEREOF BY BANK BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWERS, AS APPLICABLE, AT THE ADDRESS
FOR NOTICES AS PROVIDED IN SECTION 17. THE BORROWERS 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. WAIVER OF JURY TRIAL. THE BORROWERS HEREBY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
31. 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.
32. FINANCIAL TERMS. All accounting terms used in this Agreement which
are not specifically defined herein shall be construed in accordance with GAAP.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWERS:
GOTHIC ENERGY CORPORATION
a Delaware corporation
By: /s/ Michael Paulk
-----------------------------------
Michael Paulk
President
GOTHIC ENERGY OF TEXAS, INC.
an Oklahoma corporation
By: /s/ Michael Paulk
------------------------------------
Michael Paulk
President
GOTHIC GAS CORPORATION
an Oklahoma corporation
By: /s/ Michael Paulk
------------------------------------
Michael Paulk
President
BANKS:
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ Mynan C. Feldman
-------------------------------------
Mynan C. Feldman
Vice President
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<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BANQUE PARIBAS
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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<PAGE>
AGENT:
BANK ONE, TEXAS, N.A.,
a national banking association
By: /s/ Mynan C. Feldman
--------------------------------------
Mynan C. Feldman
Vice President
CO-AGENTS:
CREDIT LYONNAIS, NEW YORK BRANCH
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BANQUE PARIBAS
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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<PAGE>
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
DATED AS OF JANUARY 23, 1998
AMONG
GOTHIC ENERGY CORPORATION
AND
THE PURCHASERS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions
Section 1.1 Definitions............................................................. 4
Section 1.2 Accounting Terms; Financial Statements.................................. 8
ARTICLE II
Issue of Securities; Purchase and Sale of Securities; Rights of Holders of Securities
Section 2.1 Issue of Securities..................................................... 8
Section 2.2 Purchase and Sale of Securities......................................... 9
Section 2.3 Rights of Holders of Securities......................................... 9
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company........................... 10
Section 3.2 Representations and Warranties of the Purchasers........................ 17
ARTICLE IV
Conditions Precedent to Closing
Section 4.1 Conditions Precedent to Obligations of the Purchasers................... 18
Section 4.2 Conditions Precedent to Obligations of the Company...................... 20
ARTICLE V
Covenants
Section 5.1 Furnishing of Information............................................... 21
Section 5.2 Use of Proceeds......................................................... 21
Section 5.3 Treatment of Dividends for Income Tax Purposes.......................... 21
Section 5.4 Board Representation.................................................... 22
Section 5.5 Issuance of Additional Warrants......................................... 22
Section 5.6 Preferred Stock......................................................... 22
Section 5.7 Tax Matters............................................................. 22
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
Fees
Section 6.1 Delay Fees.............................................................. 23
Section 6.2 Commitment Fees......................................................... 23
ARTICLE VII
Indemnity
Section 7.1 Indemnity............................................................... 24
Section 7.2 Contribution............................................................ 26
Section 7.3 Registration Rights Agreement........................................... 26
ARTICLE VIII
Miscellaneous
Section 8.1 Home Office Payment..................................................... 26
Section 8.2 Survival of Provisions.................................................. 27
Section 8.3 Termination............................................................. 27
Section 8.4 No Waiver; Modifications in Writing..................................... 27
Section 8.5 [Reserved].............................................................. 28
Section 8.6 Communications.......................................................... 28
Section 8.7 Costs, Expenses and Taxes............................................... 28
Section 8.9 Execution in Counterparts............................................... 29
Section 8.10 Binding Effect; Assignment.............................................. 29
Section 8.11 Governing Law........................................................... 29
Section 8.12 Severability of Provisions.............................................. 29
Section 8.13 Headings................................................................ 29
Signature Page........................................................................ 30
</TABLE>
Schedule 3.1(d)(A) Subsidiaries
Schedule 3.1(d)(B) Options, Warrants, Convertible Securities, etc.
Exhibit 1 Certificate of Designation
Exhibit 2 Form of Preferred Stock Registration Rights Agreement
Exhibit 3 Form of Common Stock Warrant Agreement
Exhibit 4 Form of Common Stock Registration Rights Agreement
Exhibit 5 Form of Opinion of Company Counsel
-3-
<PAGE>
Securities Purchase Agreement, dated as January 23, 1998 (this "Agreement"),
among Gothic Energy Corporation, an Oklahoma corporation (the "Company"), and
the purchasers named on the signature pages hereto (each a "Purchaser" and,
collectively, the "Purchasers").
In consideration of the mutual covenants and agreements set forth herein and
for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission thereunder.
"Additional Warrant Shares" has the meeting provided therefor in Section 2.1
-------------------------
of this Agreement.
"Additional Warrants" has the meaning provided therefor in Section 2.1 of
-------------------
this Agreement.
"Affiliate" of any specified Person means any other Person which directly or
---------
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
controlling, "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that, beneficial ownership of at least 10% of the
-------- -------
voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same may be amended, supplemented
---------
or modified in accordance with the terms hereof and in effect.
"Basic Documents" means, collectively, the Certificate of Designation, the
---------------
Preferred Stock, the Preferred Stock Registration Rights Agreement, the Common
Stock Registration Rights Agreement, the Common Stock Warrant Agreement, the
Common Stock Warrants and this Agreement.
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<PAGE>
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
------------
which is not a day on which banking institutions in the City of New York are
authorized or obligated by law to close.
"Certificate of Designation" means the Certificate of Designation duly
--------------------------
adopted by the Board of Directors of the Company setting forth the rights,
preferences and priorities of the Preferred Stock and filed with, and accepted
for filing, so as to be effective, by the Secretary of the State of Oklahoma
prior to the Closing hereunder and which is in the form of Exhibit 1 hereto.
"Closing" has the meaning provided therefor in Section 2.2 of this
-------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission or any similar
----------
agency then having jurisdiction to enforce the Act.
"Common Stock" means the Common Stock of the Company, $.01 par value per
------------
share.
"Common Stock Registration Rights Agreement" means the Common Stock
------------------------------------------
Registration Rights Agreement substantially in the form of Exhibit 4 hereto.
"Common Stock Warrant Agent" has the meaning provided therefor in the
--------------------------
Common Stock Warrant Agreement.
"Common Stock Warrant Agreement" means Warrant Agreement under which the
------------------------------
Common Stock Warrants will be issued, substantially in the form of Exhibit 3
hereto.
"Common Stock Warrants" means the warrants to purchase shares of Common
---------------------
Stock of the Company.
"Company" has the meaning provided therefor in the introductory paragraph
-------
of this Agreement.
"Default" means any event, act or condition which, with notice or lapse of
-------
time or both, would constitute an Event of Default.
"ERISA" has the meaning provided therefor in Section 3.1 of this Agreement.
-----
"Event of Default" means any event defined as an Event of Default in the
----------------
Indenture.
-5-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the Commission thereunder.
"Exchange Act Filings" means the Company's filings on Form 10-KSB for the
--------------------
year ended December 31, 1996 and the Form 10-QSB for the quarter ended September
30, 1997 in each case filed under the Exchange Act.
"Indemnified Parties" has the meaning provided therefor in Section 7.1(b)
-------------------
of this Agreement.
"Indemnifying Parties" has the meaning provided therefor in Section 7.1(b)
--------------------
of this Agreement.
"Indenture" means the indenture under which the Notes were issued.
---------
"Information" shall have the meaning set forth in Section 2.1 of this
-----------
Agreement.
"Lien" means, with respect to any property or assets of any Person, any
----
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority or other security agreement or preferential, arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation (as defined in the
Indenture), conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Material Adverse Effect" means, with respect to the Company and its
-----------------------
Subsidiaries, a material adverse effect on the business, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole; provided that, with respect to the Company,
-------- ----
"Material Adverse Effect" shall also mean. a material adverse effect on the
ability of the Company to perform its obligations under this Agreement or any of
the other Basic Documents.
"Memorandum" means the Gothic Energy Corporation Confidential Private
----------
Placement Memorandum dated January 20,1998.
"Notes" means the existing 12 1/4% Senior Notes Due 2004 of the Company.
-----
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or other
legal entity.
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<PAGE>
"Preferred Stock" means the Senior Redeemable Preferred Stock, Series A, of
---------------
the Company, $.05 par value.
"Preferred Stock Registration Rights Agreement" means the Registration
---------------------------------------------
Rights Agreement relating to the Preferred Stock, substantially in the form of
Exhibit 2 hereto.
"Proceeding" has the meaning provided therefor in Section 7.1(b) of this
----------
Agreement.
"Purchaser" has the meaning provided therefor in the introductory paragraph
---------
of this Agreement.
"Securities" has the meaning provided therefor in Section 2.1 of this
----------
Agreement.
"State" means each of the states of the United States, the District of
-----
Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having jurisdiction to
----------------
enforce such State's securities laws.
"Subsidiaries" means of any specified Person, any corporation, partnership,
------------
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the capital stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (iii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
"Taxes" has the meaning provided therefor in Section 3.1(t) of this
-----
Agreement'.
"Time of Purchase" has the meaning provided therefor in Section 2.2 of this
----------------
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
-------------------
and the rules and regulations of the Commission thereunder.
"Warrant Shares" has the meaning provided therefor in Section 2.1 of this
--------------
Agreement.
-7-
<PAGE>
Section 1.2. Accounting Terms; Financial Statements. All accounting terms
--------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice, shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to generally accepted accounting principles in the `United
States applied on a consistent basis except for changes with which such
accountants concur. All determinations to which accounting principles apply
shall be made in accordance with sound accounting practice.
ARTICLE II
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES
-------------------------------------------
Section 2.1. Issue of Securities. The Company has authorized the issuance
-------------------
of up to $45,000,000 aggregate liquidation value of the Preferred Stock together
with detachable Common Stock Warrants to purchase shares of Common Stock
constituting up to 50.00% of the Company's fully diluted Common Stock (the
shares of Common Stock issuable upon exercise of the Common Stock Warrants are
referred to herein as the "Warrant Shares") The Preferred Stock will have the
rights and preferences set forth in the Certificate of Designation. The
aggregate liquidation value of the Preferred Stock will increase to the extent
of accrued dividends paid in additional shares of Preferred Stock. At the
Closing the Company will issue to the Purchasers up to 1,430,000 Common Stock
Warrants, exercisable at the lesser of (a) $2.75 per share or (b) the average
closing price for the Common Stock during the five Business Days prior to such
exercise (to be reset to a nominal amount in the event Preferred Stock remains
outstanding on March 31, 1998). Each Common Stock Warrant will be substantially
in the form as set out as Exhibit A to the Common Stock Warrant Agreement.
Additional Warrants ("Additional Warrants") may be issued and exercisable at a
nominal price for additional Warrant Shares ("Additional Warrant Shares") if the
Preferred Stock is outstanding on March 31, 1998 on the terms and conditions set
forth in Section 5.5 hereof. The Preferred Stock, the Common Stock Warrants and
the Warrant Shares are referred to herein collectively as the "Securities."
For purposes of the Code and the related Treasury regulations, the
Purchasers of the Preferred Stock agree with the Company that the issue price
will be allocated to the Preferred Stock to the extent of $974.58 and to the
Common Stock Warrants to the extent of $25.42 per $1,000 aggregate liquidation
value of the Preferred Stock and that there is a reasonable basis for such
allocation.
-8-
<PAGE>
The Securities, the Additional Warrants and the Additional Warrant Shares
will be offered without being registered under the Act, in reliance on
exemptions therefrom, including the exemption provided by Section 4(2) of the
Act.
In connection with the sale of the Securities, the Company has provided the
Purchasers with certain information including the Memorandum, the Exchange Act
Filings and a summary of the terms of the Preferred Stock (the "Information.")
Section 2.2. Purchase and Sale of Securities. Subject to the terms and
-------------------------------
conditions herein set forth, the Company agrees that it will sell to each
Purchaser, and each Purchaser agrees that it will purchase, severally and not
jointly, from the Company at the Time of Purchase, the aggregate liquidation
value of Preferred Stock and the number of Common Stock Warrants set forth next
to such Purchaser's name on the signature pages hereto.
The Securities shall have the terms set forth herein, in the
Certificate of Designation and the Common Stock Warrant Agreement, respectively.
The purchase and sale of $37,000,000 liquidation value of Preferred Stock
and Common Stock Warrants pursuant to this Agreement will take place at a
closing (the "Closing") at the offices of the Company, or at such other
location as the parties may agree, at 10:00 A.M., New York time, on January 23,
1998. The time at which the Closing is concluded is referred to herein. as the
"Time of Purchase."
Delivery of the Securities to be purchased by the Purchasers pursuant
to this Agreement shall be made at the Closing by the Company (A)(i) delivering
global certificates representing the Securities to The Depository Trust Company
("DTC") or its agent and (ii) causing the DTC participant account designated by
each Purchaser to be credited with the Securities purchased by such Purchaser or
(B) delivering definitive certificates representing the Securities to such
Purchaser, in either case, against payment therefor in immediately available
same day funds to an account previously specified by the Company in writing.
The Company will bear all expenses of shipping the Securities
(including, without limitation, insurance expenses) from New York City to such
other places within the United States of America or Canada as the Purchasers
shall specify. Any tax on the issuance of the Securities ,will be paid by the
Company at the Time of Purchase pursuant to Section 8.7.
Section 2.3. Rights of Holders of Securities. The holders of the
-------------------------------
Securities shall have such rights with respect to the registration thereof under
the Act as are set forth in the Preferred Stock Registration Rights Agreement
and the Common Stock Registration Rights Agreement.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1. Representations and Warranties of the Company . The Company
---------------------------------------------
represents and warrants to the Purchasers as follows:
(a) The Information provided to the Purchasers will not, at the Time of
Purchase, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The audited consolidated financial statements of the Company and its
Subsidiaries, together with related notes and schedules thereto, included in the
Exchange Act Filings fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the dates indicated and the
results of operations and cash flows for the periods therein specified in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved (except. as otherwise stated therein); and any
pro forma financial statements and the related notes thereto included in the
Memorandum or the Exchange Act Filings have been prepared using reasonable
assumptions and in accordance with the applicable requirements of the Act and
include all adjustments necessary to present fairly in all material respects the
pro forma financial information included in the Exchange Act Filings as at the
respective dates and for the respective periods indicated. Coopers & Lybrand,
which reported upon the audited financial statements and schedules included in
the Exchange Act Filings, is an independent public accounting firm as required
by the Act and the rules and regulations thereunder.
(c) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oklahoma. Each of the Company's
Subsidiaries is a corporation duly incorporated or organized, validly existing
and in good standing under the laws of their respective jurisdictions of
incorporation. Each of the Company and its Subsidiaries is duly qualified and
in good standing as a foreign corporation, and is authorized to do business, in
each jurisdiction in which the ownership or leasing of any property or the
nature of its business makes such qualification necessary and in which the
failure so to qualify would have a Material Adverse Effect.
(d) All of the issued and outstanding shares of capital stock of the
Company and its Subsidiaries are validly issued, fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights. The
Company has no Subsidiaries other than those 1isted on Schedule 3.1(d)(A). All
-----------------
of the capital stock of the Company's subsidiaries is owned by the
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<PAGE>
Company, free and clear of any Liens. Except as described on Schedule 3.1(d)
---------------
(B), there are no outstanding subscriptions, options, warrants, rights,
- ---
convertible securities or other binding agreements or commitments of any
character obligating the Company or its Subsidiaries to issue any securities
other than the Common Stock Warrants and the Additional Warrants. Except as
described in the Information, no Person other than the Purchasers have any
rights to the registration of capital stock or other securities of the Company,
under the Act or otherwise. Except as disclosed in the Information, there is no
agreement, understanding or arrangement among the Company or its Subsidiaries
and its respective stockholders or any other person relating to the ownership or
disposition of any capital stock in the Company or any of its Subsidiaries, the
election of directors of the Company or any of its Subsidiaries or the
governance of the Company's or any such Subsidiary's affairs; and no such
agreements, arrangements or understandings will be breached or violated as a
result of the execution and delivery of, or the consummation of the transactions
contemplated by, this Agreement or the other Basic Documents. The Company has
reserved for issuance upon exercise of the Common Stock Warrants and the
Additional Warrants, as the case may be, shares of Common Stock sufficient in
number for exercise of all of the Common Stock Warrants and the Additional
Warrants, as the case may be, at the initial exercise price, and the Warrant
Shares and Additional Warrant Shares will, upon issuance, be fully paid,
nonassessable and free of preemptive rights and will not be subject to any
restrictions on the transfer thereof except for such restrictions set forth
herein and in the Warrant Agreement and under the Act.
(e) The Certificate of Designation has been duly authorized by the
Company, its board of directors and all required stockholder action and when
executed and delivered by the Company and filed with the Secretary of State of
the State of Oklahoma will constitute a valid and legally binding agreement of
the Company, enforceable against it in accordance with its terms except that the
enforcement thereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws now or hereafter in effect
relating to creditors' rights and remedies generality and general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought. The Restated Certificate of Incorporation of the Company, by virtue
of the Certificate of Designation, sets forth the rights, preferences and
priorities of the Preferred stock.
(f) The Common Stock Warrant Agreement has been duly authorized by the
Company and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Common Stock Warrant Agent (as
defined in the Common Stock Warrant Agreement)), will constitute a valid and
legally binding agreement of the Company, enforceable against it in accordance
with its terns, except as such enforceability may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors, rights and remedies generally
and (ii) general equitable principles, whether asserted in any action at law or
in equity, and that such
-11-
<PAGE>
enforceability may be subject to the discretion of the court before which any
proceedings therefor may be brought.
(g) Each of this Agreement and the Preferred Stock Registration Rights
Agreement has been duly authorized by the Company and, when executed and
delivered by the Company (assuming the due authorization, execution and delivery
by the Purchasers), will constitute a valid and legally binding agreement of the
Company, enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights and remedies generally and (ii) general
equitable principles whether asserted in an action at law or in equity, and that
such enforceability may be subject to the discretion of the court before which
any proceedings therefor may be brought.
(h) The Common Stock Registration Rights Agreement has been duly authorized
by the Company and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Purchasers), will constitute a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally and (ii) general equitable principles, whether
asserted in an action at law or in equity, and that such enforceability may be
subject to the discretion of the court before which any proceedings therefor may
be brought.
(i) The Common Stock Warrants and the Additional Warrants, as the case may
be, have each been duly authorized by the Company and, when the Common Stock
Warrants and the Additional Warrants, as the case may be, are executed by the
Company and countersigned by the Common Stock Warrant Agent in accordance with
the provisions of the Common Stock Warrant Agreement and issued by the Company
to the Purchasers in accordance with the terms of this Agreement, the Common
Stock Warrants and the Additional Warrants, as the case may be, will be entitled
to the benefits of the Common Stock Warrant Agreement and will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors, rights and remedies generally
and (ii) general equitable principles, whether asserted in an action at law or
in equity, and that such enforceability may be subject to the discretion of the
court before which any proceedings therefor may be brought.
(j) The Company has all requisite corporate power and authority to (i)
execute, deliver and perform its obligations under this Agreement and each of
the other Basic Documents, (ii) execute, deliver and perform its obligations
under all other agreements and instruments
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<PAGE>
executed and delivered by the Company pursuant to or in connection with this
Agreement and each of the other Basic Documents and (iii) issue the Securities,
the Additional Warrants and the Additional Warrant Shares pursuant hereto in the
manner and for the purpose contemplated by this Agreement. The execution and
delivery by the Company of this Agreement and each of the other Basic Documents,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Company.
(k) Except as set forth in the Memorandum, subsequent to the date as of
which information is given in the Exchange Act Filings and immediately prior to
the Time of Purchase, there has not been (i) any event or condition that has had
or that would reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, (ii) any transaction entered
into by the Company or any Subsidiary, other than in the ordinary course of
business, that is material to the Company and its Subsidiaries, taken as a
whole, or any dividend or distribution of any kind declared, paid or made by the
Company on its Common Stock that has not been approved by the Purchasers in
writing.
(l) There is no action, suit, investigation or proceeding, governmental or
otherwise, pending or, to the best knowledge of the Company, threatened to which
the Company or any of its Subsidiaries is or would be a party or of which the
properties of the Company or its Subsidiaries are or may be subject, that (i)
seeks to restrain, enjoin, prevent the consummation- of or otherwise challenge
the issuance and sale of the Securities by the Company or any of the other
transactions contemplated hereby, (ii) questions the legality or validity of any
such transactions or seeks to recover damages or obtain other relief in
connection with any such transactions or (iii) would have a Material Adverse
Effect.
(m) The execution, delivery and performance by the Company of this
Agreement and the other Basic Documents, and the issuance and sale by the
Company of the Securities, the Additional Warrants and the Additional Warrant
Shares and the execution, delivery and performance by the Company of all other
agreements and instruments to be executed and delivered by the Company pursuant
hereto or thereto or in connection herewith or therewith, and compliance by the
Company with the terms and provisions hereof and thereof, do not and will not
(i) violate any provision of any law, rule or regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, decree, determination or award presently
in effect or in effect at the Time of Purchase having applicability to the
Company or any of its Subsidiaries, (ii) conflict with or result in a breach of
or constitute a default under the certificate of incorporation or by-laws of the
Company or any of the Subsidiaries, or, as of the Time of Purchase, any
indenture or loan or credit agreement, or any other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of their respective properties may be bound or
affected, or except as contemplated by this Agreement and the other
-13-
<PAGE>
Basic Documents, result in, or require the creation or imposition of, any Lien
upon or with respect to any of the properties now owned or hereafter acquired by
the Company or any of the Subsidiaries, except, in the case of (i), (ii) or
(iii), where such violation, conflict, default or creation or imposition of any
Lien would not (individually or in the aggregate) have a material Adverse
Effect.
(n) Each agreement or instrument executed and delivered by the Company in
connection with this Agreement (other than the Securities and the other Basic
Documents) has been duly and validly authorized, executed and delivered by the
Company and constitutes or will constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors, rights and remedies generally and
(ii) general equitable principles, whether asserted in an action at law or in
equity, and that such enforceability may be subject to the discretion of the
court before which any proceedings therefor may be brought.
(o) Immediately after giving effect to the consummation of the transactions
contemplated by this Agreement, neither the Company nor any of its Subsidiaries
(i) will be in violation of its respective certificate of incorporation or by-
laws, (ii) will be in default (nor will an event occur which with notice or
passage of time or both would constitute such a default) under or in violation
of any indenture or 1oan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its properties may be
bound or affected, will be in violation of any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters or (iv) will have violated or be in violation of
any such statute, rule or regulation of any governmental authority, which
default or violation (individually or in the aggregate) would (x) affect the
legality, validity or enforceability of this Agreement or any of the other Basic
Documents or (y) have a Material Adverse Effect.
(p) No authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with, any court,
governmental agency or regulatory authority or any securities exchange is
required (other than any filing seeking consent which may be, under certain
circumstances, required upon the exercise of the Warrants) in connection with
the execution, delivery or performance by the Company or any of its Subsidiaries
(to the extent they are a party thereto) of this Agreement or any of the other
Basic Documents, except (i) as may be required under state securities or "blue
sky" laws or the laws of any foreign jurisdiction in connection with the offer
and sale of the Securities, the Additional Warrants or the Additional Warrant
Shares or (ii) as would not (individually or in the aggregate) have a Material
Adverse Effect. All such authorizations, consents, approvals, licenses,
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<PAGE>
qualifications, exemptions, filings, declarations and registrations which are
required to have been obtained or made as of the Time of Purchase have been
obtained or made, as the case may be, and are in full force and effect and not
the subject of any pending or, to the knowledge of the Company, threatened
attack by appeal or direct proceeding or otherwise.
(q) The Company is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, and the Company will not be immediately after the Time of
Purchase an "investment company" within the meaning or such Act,
(r) The execution and delivery of this Agreement and the other Basic
Documents and the sale of the Securities, the Additional Warrants and the
Additional Warrant Shares to the Purchasers will not involve any non-exempt
prohibited transaction within the meaning of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Code on the part of the Company or any of its Subsidiaries. The
preceding representation is made in reliance upon, and subject to the accuracy
of, the representation made in Section 3.2(b) as to the Purchasers. The
Company does not and, at and as of the Time of Purchase, the Company will not
reasonably expect to have any liability for any prohibited transaction or
funding deficiency or any complete or partial withdrawal liability with respect
to any pension, profit sharing or other plan which is subject to ERISA and
which is required to be funded, to which the Company makes or ever has made a
contribution and in which any employee of the Company is or has ever been a
Participant with respect to such plans, the Company is and, at and as of the
Time of Purchase, the Company will be in compliance in all material respects
with all applicable provisions of ERISA.
(s) The Company and each of its Subsidiaries have good and valid title to,
or valid and enforceable leasehold interests in, all properties and assets
identified in the Memorandum or the Exchange Act Filings as owned by each of
them which are material to the business of the Company and its subsidiaries,
taken as a whole, free and clear of all Liens, except (i) such "Liens as are
described in the Memorandum or the Exchange Act Filings or (ii) Liens created in
the ordinary course of business which are Permitted Liens (as defined in the
Indenture). All of the leases material to the business of the Company and the
Subsidiaries, taken as a whole, and under which the Company or any Subsidiary
holds properties described in the Memorandum or the Exchange Act Filings, are
valid and binding as leased by them, with such exceptions as are not material
and do not materially interfere with the use made and proposed to be made of
such properties by the Company and its Subsidiaries.
(t) All tax returns required to be filed by the Company or any of its
Subsidiaries in any jurisdiction (including foreign jurisdictions) have been so
filed and all taxes, assessments, fees and other charges including, without
limitation, withholding taxes, penalties, and interest
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<PAGE>
("Taxes") due or claimed to be due have been paid, other than those Taxes being
contested in good faith and those Taxes for which adequate reserves or accruals
have been established in accordance with generally accepted accounting
principles, except where the failure to file such returns or to pay such Taxes
is not reasonably likely to have, singly or in the aggregate, a Material Adverse
Effect. The Company knows of no actual or proposed additional tax assessments
for any fiscal period against the Company or any of its Subsidiaries that,
individually or in the aggregate, would have a Material Adverse Effect.
(u) The Company and its Subsidiaries are the sole and exclusive owners or
licensees of all trade names, unregistered trademarks and service marks, brand
names, patents, registered and unregistered copyrights, registered trademarks
and service marks, and all applications for any of the foregoing, and all
permits, grants and licenses or other rights with respect thereto, the absence
of which would have a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has been charged with any material infringement of any
intangible property of the character described above or been notified or advised
of any material claim of any other Person relating to any of the intangible
property which infringements or claims (individually or in the aggregate) would
have a Material Adverse Effect.
(v) The Company and its Subsidiaries comply with all laws, rules and
regulations applicable to the Company, and each such Subsidiary, and the Company
and its Subsidiaries own or possess and are operating in compliance in all
material respects with the terms, provisions, conditions, restrictions and
limitations contained in all licenses, franchises, approvals, certificates and
permits. from all Federal, state, territorial, foreign and local governmental
and regulatory authorities which are necessary to own or lease their respective
properties and assets and to the conduct of their respective businesses, except
where the failure to comply with any of the foregoing would not have a Material
Adverse Effect. There are no citations or notices of forfeiture or other
proceedings pending or, to the best knowledge of the Company, threatened or any
basis therefor, which would lead to the revocation, termination, suspension or
non-renewal of any such license, franchise, approval, certificate or permit the
result of which would have a Material Adverse Effect. There are no restrictions
or limitations contained in any applicable license, franchise, approval
certificate or permit, or, to the best knowledge of the Company, threatened or
proposed in any pending or contemplated hearing, proceeding or procedure, that
would have a Material Adverse Effect.
(w) Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D under the Act) has directly, or through any agent, (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be integrated
with the sale of the Securities in a manner that would require the registration
under the Act of the Securities or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the
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<PAGE>
offering of the Preferred Stock or the Common Stock Warrants or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(x) Assuming the accuracy of the Purchasers' representations and
warranties set forth in Section 3.2 hereof and the due performance by the
Purchasers of the covenants and agreements set forth in Section 3.2 hereof, the
sale of the Securities to the Purchasers in the manner contemplated by this
Agreement does not require registration under the Act.
Section 3.2. Representations and Warranties of the Purchasers. (a)
------------------------------------------------
Each Purchaser represents and warrants to, and covenants and agrees with, the
Company that: (1) the Securities, any Additional Warrants and any Additional
Warrant Shares to be acquired by it hereunder are being acquired for its own
account or an account with respect to which it exercises sole investment
discretion and it or any such account is a qualified institutional buyer" as
defined in Rule 144A of the Act ("QIB") or an "Accredited Investor" as defined
under Regulation D under the Act and has no intention of distributing or
reselling such Securities, Additional Warrants or Additional Warrant Shares or
any part thereof in any transaction which would be in violation of the
securities laws of the United States of America or any state; (2) it
acknowledges that the Securities, Additional Warrants and Additional Warrant
Shares have not been or will not be registered under the Act and that none of
the Securities, Additional Warrants or Additional Warrant Shares may be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as set forth below; (3) it shall not resell, or otherwise
transfer any of such Securities, Additional Warrants or Additional Warrant
Shares within two years after the original issuance of the Securities,
Additional Warrants or Additional Warrant Shares except (A) to the Company or
any of its Subsidiaries, (B) inside the United States to a QIB in compliance
with Rule 144A, (C) inside the United States to an "Accredited Investor" that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Company and/or the Common Stock Warrant Agent a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities, (D) outside the United States in
compliance with Rule 904 under the Act, (E) pursuant to any other exemption from
registration provided under the Act (if available) including Rule 144 thereunder
or (F) pursuant to an effective registration statement under the Act, and (4) it
will gave to each person to whom it transfers the Securities, Additional
Warrants or
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<PAGE>
Additional Warrant Shares, as the case may be, notice of
any restrictions on transfer of such Securities, Additional Warrants or
Additional Warrant Shares, as the case may be; and subject, nevertheless, to the
disposition of such Purchaser's property being at all times within its control.
If any Purchaser should in the future decide to dispose of any of the
Securities, Additional Warrants or Additional Warrant Shares, as the case may
be, such Purchaser understands and agrees that it may do so only in compliance
with the Act, as then in effect, and that stop-transfer instructions to that
effect will be in effect with respect to the Securities, Additional Warrants and
the Additional Warrant Shares. If any Purchaser should decide to transfer or
otherwise dispose of the Securities, Additional Warrants or Additional Warrant
Shares, as the case may be, such Purchaser shall comply with the requirements
set forth in the relevant Basic Documents. Each Purchaser agrees to the
imprinting, so long as required by the terms of the relevant Basic Document, of
the applicable legends contained in the Common Stock Warrant Agreement on each
certificate representing Common Stock Warrants, Warrant Shares, Additional
Warrants or Additional Warrant Shares.
(b) If the Purchaser is an insurance company it also represents that
no part of the funds to be used to Purchase the securities to be purchased by it
constitutes or is deemed to constitute assets from an employee benefit plan (as
such term is defined below). If the Purchaser is not an insurance company it
also represents that no part of the funds to be used to Purchase the Securities
to be purchased by the Purchaser constitutes assets of any employee
--
benefit plan, except as otherwise disclosed in writing to the Company on or
prior to the Closing Date. As used in this Section 3.2(b), the term "employee
benefit plan" shall have the meaning assigned to such term in Section 3 of
ERISA.
(c) The Purchaser also represents and warrants to the Company that
(i) it has received and reviewed the Information; (ii) it has authorized the
purchase of the Securities; and (iii) the purchase of Securities does not
violate its charter, by-laws, or other organizational documents or any law or
regulation to which it is subject.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 4.1. Conditions Precedent to Obligations of the Purchaser The
-----------------------------------------------------
obligation of each Purchaser to purchase the Securities to be purchased by it
hereunder is subject, at the Time of Purchase, to the satisfaction of the
Following conditions:
(a) The Purchasers shall have received an opinion, addressed to them
in form and substance reasonably satisfactory to the Purchasers and dated
the Time of Purchase, of William S. Clarke, P.A., counsel to the Company,
substantially in the form of Exhibit 5 hereto.
In rendering such opinion in accordance with Sections 4.1(a), such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the Company and representations of the
Purchasers and by government officials, and upon such other documents as such
counsel deems appropriate as a basis for its opinion. Such counsel may specify
the jurisdictions in which it is admitted to practice and that it is not
admitted to practice in any other jurisdiction and is not an expert in the law
of any other jurisdiction to the
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<PAGE>
extent such opinion concerns the laws of any other such jurisdiction such
counsel may rely upon the opinion of counsel (reasonably satisfactory to the
Purchasers) admitted to practice in such jurisdiction. Any opinion relied upon
by such counsel as aforesaid shall be delivered to the Purchasers together with
the opinion of such counsel, which opinion shall state that such counsel
believes that it and the Purchasers' reliance thereon is justified.
(c) The representations and warranties made by the Company herein shall be
true and correct in all material respects (except for changes expressly provided
for in this Agreement) on and as of the Time of Purchase, with the same effect
as though such representations and warranties had been made on and as of the
Time of Purchase, and the Company shall have complied in all material respects
with all agreements as set forth in or contemplated hereunder and in the other
Basic Documents required to be performed by it at or prior to the Time of
Purchase.
(d) Except as set forth in the Memorandum, subsequent to the date of the
Exchange Act Filings, (i) there shall not have been any change, or any
development involving a prospective change, which has affected or may affect
materially and adversely the businesses, properties or prospects or the
financial condition or the results of operations of the Company and its
Subsidiaries, taken as a whole; and (ii) the Company and its Subsidiaries shall
have conducted their respective businesses only in the ordinary course.
(e) At the Time of Purchase and after giving effect to the consummation of
the transactions contemplated by this Agreement and the other Basic Documents,
there shall exist no Default or Event of Default.
(f) As to each Purchaser, the purchase of and payment for the Securities,
the Additional Warrants and the Additional Warrant Shares by such Purchaser
hereunder or under the Warrant Agreement (i) shall not be prohibited or enjoined
(temporarily or permanently by any applicable law or governmental regulation
(including, without limitation, Regulation G, T, U or X of the Board of
Governors of such Federal Reserve System), (ii) shall not subject such Purchaser
to any penalty, or in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation (provided, however,
that such regulation, law or onerous condition was not in effect at the date of
this Agreement), and (iii) shall be permitted by the laws and regulations of the
jurisdictions to which it is subject.
(g) At the Time of Purchase, the Purchasers shall have received a
certificate, dated the Time of Purchase, from the Company stating that the
conditions specified in sections 4.1(c), (d) and (e) have been satisfied or
duly waived at the Time of Purchase.
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<PAGE>
(h) Each of the Basic Documents shall be substantially in the form attached
hereto and the Basic Documents shall have been executed and delivered by all the
respective parties thereto and shall be in full force and effect.
(i) The Time of Purchase shall not be later than 5:00 P.M., New York City
time, on January 23, 1998, subject to extension if the Purchasers agree to
extend the Time of Purchase upon request to do so by the Company.
(j) All proceedings taken in connection with the issuance of the
Securities, the Additional Warrants and the Additional Warrant Shares and the
transactions contemplated by this Agreement and the other Basic Documents and
all documents and papers relating thereto shall be reasonably satisfactory to
the Purchasers. The Purchasers shall have received copies of such papers and
documents an they may reasonably request in connection therewith, all in form
and substance reasonably satisfactory to them.
(k) All costs and any delay fees due and owing and expenses (including,
without limitation, legal fees and expenses) required to be paid to or on behalf
of the Purchasers on or prior to the Time of Purchase pursuant to this Agreement
shall have been paid.
(1) The Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Oklahoma.
(m) On or before the Time of Purchase, the Purchasers shall have received
such further documents, opinions, certificates and schedules or other instrument
relating to the business, corporate, legal and financial affairs of the Company
and its Subsidiaries as they may reasonably request.
Section 4.2. Conditions Precedent to Obligations of the Company. The
--------------------------------------------------
obligations of the Company to issue and sell the securities, the Additional
Warrants and the Additional Warrant Shares pursuant to this Agreement are
subject, at the Time of Purchase, to the satisfaction of the following
conditions
(a) The representations and warranties made by the Purchasers herein
shall be true and correct in all material respects at and as of the Time of
Purchase, with the same effect as though such representations and
warranties had been made on and as of the Time of Purchase.
(b) The issuance or sale of the Securities, the Additional Warrants
and the Additional Warrant Shares by the Company shall not be enjoined
under the laws of any
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<PAGE>
jurisdiction to which the Company is subject (temporarily or permanently)
at the Time of Purchase.
(c) Each of the Basic Documents shall be satisfactory in form and
substance to the Company and shall have been executed and delivered by all
respective parties thereto and shall be in full force and effect and
counsel to the Company shall have received a copy of each of such documents
duly executed by such parties.
ARTICLE V
COVENANTS
---------
Section 5.1. Furnishing of Information. The Company will furnish to each
-------------------------
Purchaser, as long as such Purchaser owns any Preferred Stock or Common Stock
Warrants, the information required by the Certificate of Designation or the
Common Stock Warrant Agreement, as the came may be.
Section 5.2. Use of Proceeds. The Company wi11 use the proceeds from the
---------------
issuance and sale of the Securities, together with borrowings under the
Company's bank credit facility, to consummate the Amoco Acquisition (as defined
in the Memorandum) and to pay fees and expenses related thereto, and to the
issuance of the Securities.
Section 5.3. Treatment of Dividends for Income Tax Purposes. The Company
----------------------------------------------
covenants and agrees for the benefit of the Purchasers of Preferred Stock and
for the benefit of each subsequent holder of Preferred Stock that the Company
(i) will not claim as an expense reducing taxable income any dividends paid on
the Preferred Stock in any federal income tax return, claim for refund, or other
statement, report or submission, except to the extent that there may be no
reasonable basis in law to do otherwise; and (ii) will make any election (or
take any other action) which may become necessary to comply with clause (i). At
the reasonable request of any Purchaser or subsequent holder of Preferred Stock
(and at the expense of such Purchaser or subsequent holder), the Company will
join in the submission to the Internal Revenue Service of a request for a ruling
that the dividends paid on the Preferred Stock will be eligible for the
dividends received deduction under Section 243(a)(1) of the Code. In addition,
the Company will cooperate with any Purchaser or subsequent holder of Preferred
Stock in any litigation, appeal, or other proceeding relating to the eligibility
for the dividends received deduction under Section 243(a)(1) of the Code of any
dividends (within the meaning of Section 316(a) of the Code) paid on the
Preferred Stock, provided that such Purchaser or subsequent holder shall
reimburse the Company for its reasonable out-of-pocket expenses in connection
with such proceeding. To the extent possible, the principles of this Section 5.3
shall also apply with respect to state and local
-21-
<PAGE>
taxes. The Company will use its best efforts to ensure that distributions made
with respect to the Preferred Stock are treated as dividends within the meaning
of Section 316(a) of the Code consistent with the operations of its business in
the ordinary course and with the accounting method and principles then in use.
The obligations of the Company hereunder shall survive the payment, redemption
or exchange of the Preferred Stock, the transfer of the Preferred Stock, and the
termination of this Agreement or any of the other Basic Documents.
Section 5.4. Board Representation. If the Preferred Stock continues to
---------------------
be outstanding on and after September 30, 1998, holders of the Preferred Stock
shall be entitled to elect members to the Board of Directors as provided in the
Certificate of Designation.
Section 5.5. Issuance of Additional Warrants. If the Preferred Stock
-------------------------------
continues to be outstanding on the dates set forth below, the Company will issue
on such dates Additional Warrants (identical to the Common Stock Warrants) under
the Common Stock Warrant Agreement exercisable for Additional Warrant Shares so
that, cumulatively, the Common Stock Warrants and the Additional Warrants wil1
be exercisable for the percentage of the Company's fully diluted equity set
forth below:
March 31, 1998 10.0%
June 30, 1998 20.0%
September 30, 1998 30.0%
December 31, 1998 40.0%
March 31, 1999 50.0%
All Additional Warrants will be issued on a pro rata basis to the holders of
outstanding Preferred Stock based on the liquidation value of the Preferred
Stock held by each such holder. In no event shall Additional Warrants be issued
which will be exercisable for Warrant Shares constituting more than 50% of the
Company's fully diluted Common Stock (including the Common Stock Warrants to be
issued to the Purchasers at the Time of Purchase).
Section 5.6. Preferred Stock. To the extent reasonably permitted by
---------------
applicable law the Company will treat the Preferred Stock as "stock" for the
purposes of the Code.
Section 5.7. Tax Matters. (a) The Company will make applicable
-----------
information return filings with respect to the Securities with the Internal
Revenue Service and other governmental authorities, and will provide relevant
taxpayer copies to the holder of such Securities.
(b) The Company will for federal income tax purposes withhold 31% (or
such other rate as appropriate under applicable law) for payments and other
distributions to holders of the Securities who are or appear to be United States
persons (as defined in Section 7701(a)(30) of
-22-
<PAGE>
the Code), in respect of payments or distributions treated as dividends or
interest, unless the Company receives a properly completed Form W-9 or other
applicable form, certificate or document prescribed by the Internal Revenue
Service prior to a given payment or distribution, certifying as to such holder's
entitlement to an exemption from any such withholding requirements.
(c) The Company will for federal income tax purposes withhold from
payments or other distributions to holders of Securities who are not or appear
not to be United States persons 30% (or such other rate as generally
appropriate under applicable law) in respect of payments or other distributions
treated as dividends or interest, unless the holder provides the Company with
Form W-8, Form 4224, Form 1001 or other applicable form, certificate or
document prescribed by the Internal Revenue Service (which has not expired or
become obsolete without the furnishing of an appropriate current replacement)
properly completed and certifying as to such holder's entitlement under an
applicable income tax treaty, to an exemption from any such withholding
requirements or to a reduced note of withholding.
(d) Neither Section 5.7(b) nor Section 5.7(c) hereof shall require
the Company to apply an exemption or reduced rate of withholding during any
period when it shall have received notice or has knowledge that the residence or
other information previously provided on any applicable form, certificate or
document is incorrect and no corrected form, certificate or document as
applicable has been provided to the Company.
ARTICLE VI
FEES
----
Section 6.1. Delay Fees. If the Closing shall not actually occur on
----------
any date on which the Closing is scheduled to occur, and the Company shall have
failed to notify the Purchasers prior to 1:00 P.M., New York time, on the date
of such scheduled Closing that such Closing has been postponed, the Company
shall pay to the Purchasers (as compensation for the Purchasers' loss of funds
and administrative costs) an amount of immediately available funds equal to
interest on the purchase price for the Securities to have been purchased by the
Purchasers on such scheduled date at such Closing at the rate per annum on the
Securities which the Purchasers have agreed to purchase as if the Securities had
been issued on the scheduled date of Closing, for each day from and including
such scheduled date of Closing to but not including the earlier of the date on
which such Closing actually occurs or the date on which the amount to be paid by
the Purchasers as said purchase price is available to the Purchasers for
reinvestment, but in any case not less than one day's interest; provided,
---------
however, that the Company shall not owe any Purchaser anything under this
- -------
Section 6.1 if the Company has fulfilled all of its obligation under this
Agreement and such Purchaser is not willing or able to fulfill its obligations
on the scheduled date of Closing.
-23-
<PAGE>
Section 6.2. Commitment Fee. The Company shall pay to each Purchaser
--------------
a commitment fee of up to 5% of the liquidation value of the shares of Preferred
Stock purchased, of which 2.5% shall be paid upon execution of this Agreement
and, provided Preferred Stock with an aggregate liquidation value of $32 million
is issued, the remaining 2.5% shall be paid upon the closing of the Amoco
Acquisition (as defined in the Memorandum). In the event the Amoco Acquisition
is consummated without the issuance of any shares of Preferred Stock, the
Company shall in any event pay the remaining 2.5% commitment fee upon the
closing of the Amoco Acquisition.
ARTICLE VII
INDEMNITY
---------
Section 7.1. Indemnity.
---------
(a) Indemnification by the Company. The Company agrees and covenants to
------------------------------
hold harmless and indemnify each Purchaser and each person, if any, who controls
each Purchaser within the meaning of Section 20 of the Exchange Act from and
against any losses, claims, damages, liabilities and expenses (including
expenses of investigation) to which such Purchaser or such controlling person
may become subject (i) arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in the Information and
any amendments or supplements thereto or any documents filed with the Commission
or any State Commission or arising out of or based upon the omission or alleged
omission to state in the Information a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
arising out of, based upon or in any way related or attributed to claims,
actions or proceedings relating to this Agreement or the subject matter of this
Agreement or (iii) arising in any manner out of or in connection with any Person
being a Purchaser of the Securities and relating to any action taken or omitted
to be taken by the Company provided, however, that the Company shall not be
-------- -------
liable under this paragraph (a) for any amount paid in settlement of claims
without its written consent, which consent shall not be unreasonably withheld,
or to the extent that it is finally judicially determined that such losses,
claims, damages or liabilities arose primarily out of the gross negligence,
willful misconduct or bad faith of such Purchaser. The Company further agrees to
reimburse each Purchaser for any reasonable legal and other expenses as they are
incurred by it in connection with investigating, preparing to defend or
defending any lawsuits, claims or other proceedings or investigations arising in
any manner out of or in connection with such Person being a Purchaser; provided
--------
that if the Company reimburses any Purchaser hereunder for any expenses incurred
in connection with a lawsuit, claim or other proceeding for which
indemnification is sought, such Purchaser hereby agrees to refund such
reimbursement of expenses to the extent it is finally judicially determined that
the losses, claims,
-24-
<PAGE>
damages or liabilities arising out of or in connection with such lawsuit, claim
or other proceedings arose primarily out of the gross negligence, willful
misconduct or bad faith of such Purchaser or from a violation by such Purchaser
of legal requirements applicable to such Purchaser solely because of its
character as a particular type of regulated institution. The Company further
agrees that the indemnification, contribution and reimbursement commitments set
forth in this Article VII shall apply whether or not any Purchaser is a formal
party to any such lawsuits, claims or other proceedings. Notwithstanding the
foregoing, the Company shall not be liable to a party seeking indemnification
under the foregoing provisions of this paragraph (a) to the extent that any such
losses, claims, damages, liabilities or expenses arise out of or are based upon
an untrue statement or omission made in any of the documents referred to in this
paragraph (a) in reliance upon and in conformity with the information relating
to the party seeking indemnification furnished in writing by such party for
inclusion therein. The indemnity, contribution and expense reimbursement
obligations of the Company under this Article VII shall be in addition to any
liability the Company may otherwise have.
(b) Procedure. If any Person shall be entitled to indemnity hereunder
---------
(the "Indemnified Parties"), such Indemnified Party shall give prompt notice
confirmed in writing to the party or parties from which such indemnity is sought
(the "Indemnifying Parties") of the commencement of any proceeding (a
"Proceeding") with respect to which such Indemnified Party seeks indemnification
or contribution pursuant hereto; provided, however, that the failure so to
-------- -------
notify the Indemnifying Parties shall not relieve the Indemnifying Parties from,
any obligation or liability except to the extent that the Indemnifying Parties
have been prejudiced materially by such failure. The Indemnifying Parties shall
have the right, exercisable by giving written notice to an Indemnified Party
promptly after the receipt of written notice from such Indemnified Party of such
Proceeding, to assume, at the Indemnifying Parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that an Indemnified Party or Parties (if more than one such
- -------- -------
Indemnified Party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or parties unless: (1) the Indemnifying Parties agree
to pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified Party or parties and the Indemnifying Party or an Affiliate of the
Indemnifying Party and such Indemnified Parties, and the Indemnifying Parties
shall have been advised in writing by counsel that there may be one or more
material defenses available to such Indemnified Party or parties that are
different from or additional to those available to the Indemnifying Parties, in
which case, if such Indemnified Party or parties notifies the Indemnifying
Parties in writing that it elects to employ separate counsel at the expense of
the Indemnifying Parties, the Indemnifying Parties shall not have the right to
assume the defense
-25-
<PAGE>
thereof and such counsel shall be at the expense of the Indemnifying Parties, it
being understood, however, that, unless there exists a conflict among
Indemnified Parties, the Indemnifying Parties shall not in connection with any
one such Proceeding or separate but substantially similar or related 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, if any) at any time
for such Indemnified Party or parties, or for fees and expenses that are not
reasonable. No Indemnified Party or parties will settle any Proceedings without
the written consent of the Indemnifying Party or parties (but such consent will
not be unreasonably withheld).
Section 7.2. Contribution If for any reason the indemnification
------------
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
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 or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying and Indemnified Parties
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 Indemnifying or
Indemnified Parties and each such party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include any reasonable
legal or other fees or expenses incurred by such party in connection with
investigating or defending any such claim.
The Company and each Purchaser agree that it would not be just and
equitable if contribution pursuant to the immediately preceding paragraph were
determined by any method of allocation which does not take into account the
equitable considerations referred to in such paragraph. No person guilty of
fraudulent misrepresentation shall be entitled to contribution from any Person.
Section 7.3. Registration Rights Agreement. Notwithstanding anything
------------------------------
to the contrary in this Article VII, the indemnification and contribution
provisions of the Preferred Stock Registration Rights Agreement and the Common
Stock Registration Rights Agreement shall govern any claim with respect thereto.
-26-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Home Office Payment. Subject to the Provisions of the
-------------------
Basic Documents, the Company agrees that, so long as any original Purchaser
hereunder shall own Securities purchased by it hereunder, the Company will make
any payments to such Purchaser of principal, premium or interest due on any
Security not represented by a Global Certificate (and any liquidated damages
payments relating thereto pursuant to the Preferred Stock Registration Rights
Agreement) by wire transfer in Immediately available funds by 2:00 P.M., local
time at the location in the United States of the Purchaser's account, on the
date of payment to such account as shall have been specified by separate Written
notice to the Company by such Purchaser (providing sufficient information with
such wire transfer to identify the source and application of the funds and
requesting the bank to send a credit advice thereof to such Purchaser), or to
such other account or in such other similar manner as such Purchaser may
designate to the Company, in writing.
Section 8.2. Survival of Provisions. The representations, warranties
-----------------------
and covenants of the Company and the Purchasers made herein, the indemnity and
contribution agreements contained herein and each of the provisions of Articles
V, VII and VIII shall remain operative and in full force and effect regardless
of (a) any investigation made by or on behalf of the Company, the Purchasers or
any Indemnified Party, (b) acceptance of any of the Securities and payment
therefor or (c) disposition of the Securities by any Purchaser whether by
redemption, exchange, sale or otherwise. The respective agreements, covenants,
indemnities and other statements set forth in Article VII and Section 8.7 shall
remain in full force and effect regardless of any termination or cancellation of
this Agreement.
Section 8.3. Termination. This Agreement may be terminated (as to the
-----------
party electing to so terminate it) an any time prior to the Time of Purchase:
(a) by the Company if any of the conditions specified in Section 4.2
of this Agreement have not been met or waived by the Company pursuant to
the terms of this Agreement;
(b) by the Purchasers if any of the conditions specified in Section
4.1 of this Agreement have not been met or waived pursuant to the terms of
this Agreement.
Section 8.4. No Waiver; Modifications in Writing. (a) No failure or
-----------------------------------
delay on the part of the Company or any Purchaser in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or
-27-
<PAGE>
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
-
and are not exclusive of any remedies that may be available to the Company or
the Purchasers at law or in equity or otherwise. No waiver of or consent to any
departure by the Company from any provision of this Agreement shall be effective
unless signed in writing by the party entitled to the benefit thereof, provided
that notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of a majority of the Purchasers. Any amendment,
supplement or modification of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Company from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement, no notice
to or demand on the Company in any case shall entitle the Company to any other
or further notice or demand in similar or other circumstances.
(b) Except pursuant to Article VI hereof, the Company has not paid or
shall not pay, or has not caused or shall not cause to be paid, directly or
indirectly, any remuneration, whether by way of interest, fee or otherwise, to
any holder of any Securities as consideration for or as an inducement to the
purchase by any holder of the Securities.
Section 8.5. [Reserved.]
Section 8.6. Communications. Unless otherwise provided herein, any
--------------
notice or other communications herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by mail and
shall be deemed to have been given when delivered in person upon receipt of
telecopy or telex against receipt of answer back or four Business Days after
depositing it in the mail registered or certified, with postage prepaid and
properly addressed; provided, however, that notices shall not be effective
-------- -------
until received. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in this Section 8.6)
shall be set forth under each party's name on the signature pages hereto-
Section 8.7. Costs, Expenses and Taxes. The Company agrees to pay
-------------------------
all costs and expenses in connection with the negotiation, preparation,
printing, typing, reproduction, execution and delivery of this Agreement and
each of the other Basic Documents, any amendment or supplement to or
modification of any of the foregoing and any and all other documents furnished
pursuant hereto or thereto or in connection herewith or therewith, and, except
as limited by Article VII, all costs and expenses (including, without
limitation, reasonable attorneys fees and expenses of Company counsel), if any,
in connection with the
-28-
<PAGE>
enforcement of this Agreement, the Securities, the Additional Warrants or the
Additional' Warrant Shares or any other agreement furnished pursuant hereto or
thereto or in connection herewith or therewith. in addition, the Company shall
pay any and all stamp, transfer and other similar taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement or
any other Basic Document or the issuance of the Securities, the Additional
Warrants or the Additional Warrant Shares, and shall save and hold the
Purchasers harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
Section 8.8. Determinations. All determinations to be made by the
--------------
Company or any Purchaser hereunder in its opinion or judgment or with its
approval or otherwise shall be made by it in its sole discretion.
Section 8.9. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when. so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.10. Binding Effect; Assignment. The rights and obligations
--------------------------
of any Purchaser under this Agreement may not be assigned to any other Person
except with the prior consent of the Company. Except as expressly provided in
this Agreement, this Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement, and their
respective successors and assigns. This Agreement shall be binding upon the
Company and the Purchasers, and their successors and assigns.
Section 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A
--------------
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCPLES OF CONFLICTS OF LAW.
Section 8.12. Severability of Provisions.. Any provision of this
---------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceabiIity without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.13. Headings. The Article and Section headings and Table of
--------
Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
GOTHIC ENERGY CORPORATION
By: /s/ Michael Paulk
------------------
Name: Michael Paulk
Title. President
Notice Address:
5727 South Lewis Avenue, Suite 700
Tulsa, Oklahoma 74105
Attention: Michael Paulk
Telephone: (918) 749-5666
Telecopy: (918) 749-5882
PURCHASER:
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Liquidation Value of
Preferred Stock:
------------------
Number of Common Stock
Warrants:
---------------------------
Notice Address:
Telephone:
Telecopy:
-30-
<PAGE>
EXHIBIT 10.3
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
SENIOR REDEEMABLE PREFERRED STOCK, SERIES A
(par value $.05 per share)
OF
GOTHIC ENERGY CORPORATION
____________________
Pursuant to Section 1032G of the
Oklahoma General Corporation Act
____________________
GOTHIC ENERGY CORPORATION, a corporation organized and existing under
the Oklahoma General Corporation Act (the "Corporation"), does hereby certify
that, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to the provisions
of Section 1032G of the Oklahoma General Corporation Act, said Board of
Directors duly adopted a resolution on January 22, 1998, which approved the
filing of this Certificate of Designation and which resolution remains in full
force and effect as of the date hereof.
Pursuant to such resolution and the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation, there is
hereby created a series of preferred stock of the Corporation, which series
shall have the following powers, preferences, and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in the Certificate of
Incorporation of the Corporation:
1. Certain Definitions. As used herein, the following terms shall
-------------------
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
"Agent Member" has the meaning specified in Section 16.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in the State of New York are not required to be
open.
<PAGE>
"Change of Control" shall have the meaning provided in the Indenture
as in effect on the date hereof.
"Common Stock" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Corporation" means Gothic Energy Corporation, an Oklahoma
corporation.
"Depositary" has the meaning specified in Section 16.
"Dividend Payment Date" means April 1, July 1, October 1 and January
1, commencing April 1, 1998, unless such day is not a Business Day, in which
case the Dividend Payment Date shall be the immediately succeeding Business Day.
"Dividend Rate" has the meaning specified in Section 3 hereof.
"Dividend Record Date" means a day fifteen (15) days preceding the
Dividend Payment Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Global Series A Preferred Stock" has the meaning specified in Section
16 hereof.
"Holder" means a registered holder of shares of Series A Preferred
Stock.
"Indenture" means the Indenture dated as of September 9, 1997 between
the Corporation, certain Guarantors and The Bank of New York, as Trustee,
relating to the Notes, attached hereto as Exhibit A.
"Liquidation Preference" means $1,000 per share of Series A Preferred
Stock plus, for purposes of Section 8 hereof, whether such share is issued or
accrued, in each case, accrued and unpaid dividends, whether or not declared, if
any, thereon through the date such Liquidation Preference is paid.
"Notes" means the securities that are issued under the Indenture and
called the 12 1/4% Senior Subordinated Notes due 2004.
2
<PAGE>
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other legal entity.
"Physical Series A Preferred Stock" has the meaning specified in
Section 16 hereof.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Redemption Date" when used with respect to any shares of Series A
Preferred Stock means the date fixed for such redemption of such shares of
Series A Preferred Stock pursuant to Section 6 hereof.
"Redemption Notice" has the meaning specified in Section 6(C) hereof.
"Required Filing Date" has the meaning specified in Section 7(A)
hereof.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Senior Redeemable Preferred
Stock, Series A, par value $.05 per share, of the Corporation.
2. Designation. The series of preferred stock established hereby
-----------
shall be designated the "Senior Redeemable Preferred Stock, Series A" (and shall
be referred to herein as the `Series A Preferred Stock") and the authorized
number of shares of Series A Preferred Stock shall be 90,000 shares.
3. Dividends. On and prior to April 1, 1998, Holders will be
---------
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, dividends payable at a rate per annum (the
'Dividend Rate') of 14% of the aggregate Liquidation Preference of the Series A
Preferred Stock payable in additional shares of Series A Preferred Stock having
an aggregate Liquidation Preference equal to the amount of such dividends due on
any Dividend Payment Date. In addition, after April 1, 1998, the Dividend Rate
on each share of Series A Preferred Stock will increase, for each 90-day period
that the Series A Preferred Stock remains outstanding, by 1% per annum;
provided, however, that at no
- -------- -------
3
<PAGE>
time will the dividend rate on the Series A Preferred Stock exceed 20.00%,
excluding increases in Dividend Rates or any penalty resulting from the exercise
of various options by the Corporation referred to herein and a failure to comply
with the Preferred Stock Registration Rights Agreement dated as of January 22,
1998. Dividends will be cumulative and will accrue from the date of issuance and
be payable quarterly in arrears as provided in the immediately preceding
sentence on each Dividend Payment Date, commencing on April 1, 1998. Dividends,
whether or not declared, will cumulate until declared and paid, when declaration
and payment may be for all or part of the then-accumulated dividends. Each
dividend shall be payable to Holders of record as they appear on the stock books
of the Corporation on each Dividend Record Date. Accrued and unpaid dividends,
if any, shall not bear interest; provided, however, that accrued and unpaid
-------- -------
dividends payable in Series A Stock will accrue dividends from the relevant
Dividend Payment Date and be payable quarterly to the same extent as issued
shares of Series A Preferred Stock. Dividends shall cease to accrue in respect
of the Series A Preferred Stock on any Redemption Date with respect to Series A
Preferred Stock redeemed on any such date.
4. Ranking. The Series A Preferred Stock shall, with respect to
-------
dividend rights and rights on liquidation, winding-up and dissolution, rank
senior to all classes of Common Stock of the Corporation and to any other class
or series of any class of Preferred Stock of the Corporation, whether now
outstanding or issued hereafter. The Corporation shall not create any class or
series of Preferred Stock ranking pari passu with or senior to the Series A
----------
Preferred Stock with respect to dividends rights and rights on liquidation,
winding-up and dissolution without the approval of Holders of a majority of the
outstanding shares of Series A Preferred Stock.
5. Voting Rights.
-------------
(A) Except as required by the Oklahoma General Corporation Act or as
set forth herein, the Holders shall not be entitled to vote on any matter
submitted to a vote of stockholders of the Corporation. On any matters on which
the Holders shall be so entitled to vote, they shall be entitled to one vote for
each share held.
(B) In the event any Series A Preferred Stock remains outstanding on
and subsequent to September 30, 1998, then during the period commencing with the
occurrence of such a circumstance and ending with the time when no Series A
Preferred Stock is outstanding (the "Voting Period"), the Holders, voting as a
class, shall be entitled to elect two members of the board of directors of the
Corporation if any Series A Preferred Stock remains outstanding on September 30,
1998, three members of the Board of Directors if any Series A Preferred Stock
remains outstanding on December 31, 1998 and four members of the Board of
Directors if any
4
<PAGE>
Series A Preferred Stock remains outstanding on March 31, 1999, as provided in
Sections 5(C) and 5(D).
(C) During the Voting Period, the number of directors constituting the
Board of Directors shall, on the applicable dates, without further action, be
increased by the number of members of the Board of Directors which the Holders
are entitled to elect and the Holders shall have, in addition to the other
voting rights set forth herein or otherwise provided by law, the exclusive
right, voting separately as a class (the "Class"), to elect such number of
directors, the remaining directors to be elected by the other series or classes
of stock entitled to vote therefor, at each meeting of stockholders held for the
purpose of electing directors. If at the time of any such election the Board of
Directors shall be divided into two or more classes, the director or directors
elected by the Class shall be allocated as evenly as possible among such classes
and shall, subject to Section 5(F), serve for the term of office of the relevant
class.
(D) The voting right of the holders may be exercised, with respect to
each increase in the Board, initially at a special meeting called pursuant to
this Section 5(D) (and subsequently, pursuant to Section 5(F)) or at an annual
meeting and, thereafter, at annual meetings of the stockholders. At any time
during the Voting Period, a proper officer of the Corporation shall, upon the
written request of Holders of record of 25% of the shares of Series A Preferred
Stock then outstanding, addressed to the Secretary of the Corporation, call a
special meeting of the Holders for the purpose of electing two or more directors
as provided in Section 5(B). Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Secretary of the Corporation. If such meeting
shall not be called by the proper officers of the Corporation within 30 days
after the personal service of such written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the United States,
by registered mail, addressed to the Secretary of the Corporation at its
principal office, then the Holders of record of 25% of the shares of Series A
Preferred Stock then outstanding may designate in writing a Holder to call such
meeting at the expense of the Corporation, and such meeting may be called by
such person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided in
this Section 5(D). Any Holder shall have access to the stock books of the
Corporation for the purpose of causing a meeting of Holders to be called
pursuant to the provisions of this Section 5(D). Notwithstanding the other
provisions of this Section 5(D), however, no such special meeting shall be
called within 60 days before the date fixed by the Board of Directors for the
next annual meeting of stockholders or, if no such date has been so fixed, the
date for such meeting provided for in the Corporation's By-Laws.
(E) At any meeting held for the purpose of electing directors at which
the Holders shall have the right to elect directors as provided herein, the
presence in person or by
5
<PAGE>
proxy of the holders of Series A Preferred Stock entitled, pursuant to Section
5(B), to cast at least 33-1/3% of the votes entitled to be cast by the Holders
of outstanding shares of Series A Preferred Stock and shall be required and be
sufficient to constitute a quorum of the Class for the election of one or more
directors by the Class. At any such meeting or adjournment thereof (i) the
absence of a quorum of the Holders shall not prevent the election of directors
other than directors to be elected by the Holders and the absence of a quorum or
quorums of the holders of capital stock entitled to elect other directors shall
not prevent the election of the directors to be elected by the Holders, and (ii)
in the absence of a quorum of the holders of any class of stock entitled to vote
for the election of directors, the holders of a majority of the shares of such
class present in person or by proxy shall have the power to adjourn the meeting
for the election of directors which the holders of such class are entitled to
elect, from time to time without notice (except as required by law) other than
announcement at the meeting, until a quorum shall be present.
(F) Each director elected by the Holders shall continue in office
until his or her successor shall have been elected by the Holders or until the
termination of the Voting Period.
Any director elected by the Holders who dies, resigns or otherwise
ceases to be a director shall be replaced by the remaining director or
directors, if any, elected by the Holders or in any other manner in which such
director could have been elected in accordance with this Section 5. Upon
termination of the Voting Period, the Holders shall be automatically divested of
all voting power vested in them under this Section 5. Upon termination of the
Voting Period, the term of each director elected pursuant to the provisions of
this Section 5 shall in all events thereupon expire (whether or not such term
shall have otherwise expired under the Corporation's Certificate of
Incorporation or By-Laws) and the number of directors constituting the Board of
Directors shall, without further action, be reduced by such number of directors
elected pursuant to Section 5(C).
6. Redemption.
----------
(A) Optional Redemption. The Series A Preferred Stock may be redeemed
-------------------
(subject to contractual and other restrictions with respect thereto and the
legal availability of funds therefor) at the option of the Corporation in whole
or, from time to time, in part, in the manner provided in Section 6(C) hereof at
any time at 101 % of the Liquidation Preference of the Series A Preferred Stock
so redeemed, payable in cash, plus accrued and unpaid dividends (whether or not
declared), which shall also be paid in cash to the Redemption Date; provided,
--------
that, at any time there is a Change of Control and the Corporation does not
exercise its option to redeem the Series A Preferred Stock in whole pursuant to
this Section 6(A), the Dividend Rate then in effect shall be increased to 18%
per annum for the period that the Corporation shall not
6
<PAGE>
exercise such redemption option; provided, further, that, at any time the
-------- -------
Corporation consummates a public or private sale of common equity, preferred
equity, subordinated notes or senior subordinated notes, and the Corporation
does not use the proceeds from such sale, after the payment of expenses, to
redeem Series A Preferred Stock pursuant to this Section 6A, the Dividend Rate
then in effect shall be increased to 18% per annum for the period that the
Corporation shall not exercise such redemption option.
(B) Mandatory Redemption. The Corporation shall be obligated to
--------------------
redeem all outstanding shares of Series A Preferred Stock on December 31, 2004
at a redemption price equal to the Liquidation Preference thereof, payable in
cash, plus accrued and unpaid dividends (whether or not declared), which shall
also be paid in cash (whether or not otherwise payable in cash) to the
Redemption Date.
(C) Procedure for Redemption.
------------------------
(i) In the event of a redemption of less than all of the Series A
Preferred Stock, the shares so redeemed will be determined by the Corporation
pro rata according to the number of shares held by each Holder.
- --- ----
(ii) The Corporation shall send a written notice of redemption (the
"Redemption Notice") by first-class mail, postage prepaid, not fewer than
fifteen (15) days nor more than sixty (60) days prior to the applicable
Redemption Date to each Holder as of the record date fixed for such redemption
of Series A Preferred Stock at such Holder's address as the same appears on the
stock books of the Corporation; provided, however, that no failure to give such
-----------------
notice to any Holder or Holders nor any deficiency therein shall affect the
validity of the procedure for the redemption of any shares of Series A Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Corporation
has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:
(A) whether all or less than all the outstanding shares of Series A
Preferred Stock are to be redeemed and the total number of shares of Series
A Preferred Stock being redeemed;
(B) the number of shares of Series A Preferred Stock held of record
by that specific Holder that the Corporation intends to redeem;
(C) the applicable Redemption Date;
7
<PAGE>
(D) the manner and place or places at which payment for the shares
called for redemption will, upon presentation and surrender to the
Corporation of the Series A Preferred Stock Certificates evidencing the
shares being redeemed, be made; and
(E) that dividends on the shares of Series A Preferred Stock being
redeemed shall cease to accrue on the applicable Redemption Date.
(iii) On the applicable Redemption Date, the full applicable
redemption price shall become payable for the shares of Series A Preferred Stock
being redeemed on the applicable Redemption Date. As a condition of payment of
the applicable redemption price, each Holder of Series A Preferred Stock must
surrender a Series A Preferred Stock Certificate or Certificates representing
the shares of Series A Preferred Stock being redeemed by the Corporation in the
manner and at the place designated in the applicable Redemption Notice. The
full applicable redemption price for such shares properly tendered for payment
shall be paid to the person whose name appears on such certificate or
certificates as the owner thereof, on and after the applicable Redemption Date
when and as certificates for the shares being redeemed are properly tendered for
payment. Each surrendered Series A Preferred Stock Certificate shall be
cancelled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iv) On the applicable Redemption Date, unless the Corporation
defaults in the payment of the applicable redemption price, dividends will cease
to accrue with respect to the shares of Series A Preferred Stock called for
redemption. All rights of Holders of such redeemed shares will terminate except
for the right to receive the applicable redemption price.
7. Covenants.
---------
(A) SEC Reports.
-----------
So long as any of the Series A Preferred Stock remains outstanding,
whether or not the Corporation is subject to Section 13(a) or 15(d) of the
Exchange Act, the Corporation shall file with the SEC, to the extent permitted,
the annual reports, quarterly reports and other documents which the Corporation
would have been required to file with the SEC pursuant to such Sections 13(a)
and 15(d) if the Corporation were so subject, such documents to be filed with
the SEC on or prior to the respective dates (the `Required Filing Dates') by
which the Corporation would have been required so to file such documents if the
Corporation were so subject. The Corporation shall also in any event (x) within
15 days of each Required Filing Date transmit by mail to all Holders, as their
names and addresses appear on the stock books of the Corporation, without cost
to such Holders copies of the annual reports, quarterly reports and other
documents which the Corporation would have been required to file with the SEC
pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Corporation were
subject to such Sections
8
<PAGE>
and (y) if filing such documents by the Corporation with the SEC is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any Holder.
(B) Additional Covenants.
--------------------
(i) The Corporation will not amend or waive, or solicit the consent
of any person in connection with the amendment or waiver of any provision of
Sections 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.18 and 5.01 of the
Indenture or any related definitions (the "Covenants") without the prior written
consent of the holders of a majority of the aggregate Liquidation Preference of
the Series A Preferred Stock.
(ii) The Corporation will not redeem the Notes in whole without (a)
the prior written consent of the holders of a majority of the aggregate
Liquidation Preference of the Series A Preferred Stock or (b) entering into a
written agreement with the holders of the Series A Preferred Stock that provides
substantially the same benefits and protections that the Covenants afforded the
holders of the Notes.
(iii) The Corporation will not permit an Event of Default (as defined
in the Indenture) to occur under the Indenture; provided that in the event an
--------
Event of Default (as defined in the Indenture) occurs, the Dividend Rate then in
effect shall be increased to a rate per annum of 18% for the period during the
continuation of such Event of Default (as defined in the Indenture).
8. Payment on Liquidation.
----------------------
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, Holders of Series A Preferred Stock will be
entitled to receive an amount in cash equal to the Liquidation Preference,
before any distribution is made on any Common Stock or other Preferred Stock of
the Corporation. After payment of the full amount of the Liquidation
Preferences to which they are entitled, Holders of Series A Preferred Stock will
not be entitled to any further participation in any distribution of assets of
the Corporation.
(B) For the purposes of this Section 8, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation or merger of the Corporation with one or more
corporations shall be deemed a voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, unless such sale, conveyance,
exchange or transfer shall be in connection with a dissolution or winding-up of
the business of the Corporation.
9
<PAGE>
9. Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
the Oklahoma General Corporation Act, shares of the Series A Preferred Stock
shall not have any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this Certificate of
Designation (as such Certificate may be amended from time to time) and in the
Corporation's Certificate of Incorporation, as amended. No shares of Series A
Preferred Stock shall have any preemptive or subscription rights whatsoever as
to any securities of the Corporation.
10. Reissuance of Preferred Stock. Shares of Series A Preferred
-----------------------------
Stock that have been issued and reacquired by the Corporation in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of the Oklahoma General Corporation Act) have the status
of authorized and unissued shares of preferred stock undesignated as to series
and may be redesignated and reissued as part of any series of preferred stock.
11. Business Day. If any payment or redemption shall be required by
------------
the terms hereof to be made on a day that is not a Business Day, such payment,
redemption or exchange shall be made on the immediately succeeding Business
Day.
12. Headings of Subdivisions. The headings of the various
------------------------
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any right, preference or
--------------------------
limitation of the Series A Preferred Stock set forth in this Certificate of
Designation (as may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy, all
other rights, preferences and limitations set forth in this Certificate of
Designation (as so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
14. Notice. All notices and other communications provided for or
------
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices (currently located at 5727 South Lewis
Avenue, Suite 700, Tulsa Oklahoma 74105).
15. Amendments. This Certificate of Designation may be amended
----------
without notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency provided that such amendment does not adversely affect the rights
of any Holder. Any provisions of this
10
<PAGE>
Certificate of Designation may be amended by the Corporation, or waived by the
Holders, in each case with the written consent of Holders representing a
majority of the outstanding shares of Series A Preferred Stock.
16. Book-Entry Provisions for Series A Preferred Stock. (a) Series A
--------------------------------------------------
Preferred Stock registered in global form ("Global Series A Preferred Stock")
will (i) be registered in the name of The Depository Trust Company (the
"Depositary") or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear customary legends as
required by the Depositary.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights hereunder with respect to any Global Series A Preferred Stock
held on their behalf by the Depositary or its custodian, or under the Global
Series A Preferred Stock, and the Depositary may be treated by the Corporation
and any agent of the Corporation as the absolute owner of the Global Series A
Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Corporation or any agent of the Corporation
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Series A Preferred Stock.
(b) Transfers of Global Series A Preferred Stock shall be limited to
transfer in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in the Global Series A
Preferred Stock may be transferred or exchanged for physical Series A Preferred
Stock (the "Physical Series A Preferred Stock") in accordance with the rules and
procedures of the Depositary. In addition, Physical Series A Preferred Stock
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Series A Preferred Stock if the Depositary notifies the
Corporation that it is unwilling or unable to continue as Depositary for any
Global Series A Preferred Stock and a successor depositary is not appointed by
the Corporation within 90 days of such notice.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Series A Preferred Stock to beneficial owners
pursuant to paragraph (b), the Corporation shall (if one or more Physical Series
A Preferred Stock Certificates are to be issued) reflect on its books and
records the date and a decrease in the amount of shares of the Global Series A
Preferred Stock in an amount equal to the amount of shares of the beneficial
interest in the Global Series A Preferred Stock to be transferred, and the
Corporation shall execute one or more Physical Series A Preferred Stock
Certificates of like tenor and amount.
(d) In connection with the transfer of Global Series A Preferred Stock
as an entirety to beneficial owners pursuant to paragraph (b), the Global Series
A Preferred Stock shall be deemed to be surrendered to the Corporation for
cancellation, and the Corporation shall
11
<PAGE>
execute and deliver to each beneficial owner identified by the Depositary in
writing in exchange for its beneficial interest in the Global Series A Preferred
Stock an equal aggregate amount of shares of Physical Series A Preferred Stock
of authorized denominations.
(e) Any Physical Series A Preferred Stock delivered in exchange for an
interest in Global Series A Preferred Stock pursuant to paragraph (b), (c) or
(d) shall, except as otherwise provided herein, bear an appropriate legend, if
required.
(f) The Holder of any Global Series A Preferred Stock may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take hereunder.
(g) Notwithstanding anything to the contrary herein, all transfers of
interests in Global Series A Preferred Stock must be made to a `qualified
institutional buyer' as such term is defined in Rule 144A promulgated under the
Securities Act.
The Corporation will, so long as any shares of Series A Preferred
Stock are outstanding, maintain an office or agency where such shares may be
presented for registration or transfer and where such shares may be presented
for redemption.
IN WITNESS WHEREOF, Gothic Energy Corporation has caused this
Certificate of Designation of Preferences and Rights of its Series A Preferred
Stock to be signed and attested by its duly authorized officers, this 23d day of
January, 1998.
GOTHIC ENERGY CORPORATION
By: /s/ Michael Paulk
-----------------
Name: Michael Paulk
Title: President
ATTEST:
By: /s/ John Rainwater
-------------------
Name: John Rainwater
Title: Secretary
12
<PAGE>
EXHIBIT 10.4
WARRANT AGREEMENT
BETWEEN
GOTHIC ENERGY CORPORATION
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
AS WARRANT AGENT
DATED AS OF JANUARY 23, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. Appointment of Warrant Agent...................................... 1
2. Warrant Certificates.............................................. 1
3. Execution of Warrant Certificates................................. 2
4. Registration and Countersignature................................. 2
5. Transfer and Exchange of Warrants................................. 3
6. Registration of Transfers and Exchanges........................... 4
7. Terms of Warrants; Exercise of Warrants........................... 8
8. Payment of Taxes.................................................. 10
9. Mutilated or Missing Warrant Certificates......................... 10
10. Reservation of Warrants Shares.................................... 11
11. Public Equity Offering of Common Stock; Obtaining Stock Exchange
Listings................................................ 11
12. Adjustment of Number of Warrant Shares Issuable................... 12
13. Fractional Interests.............................................. 20
14. Notices to Warrant Holders........................................ 20
15. Notices to the Company and Warrant Agent.......................... 22
16. Supplements and Amendments........................................ 22
17. Concerning the Warrant Agent...................................... 23
18. Change of Warrant Agent........................................... 25
19. Identity of Transfer Agent........................................ 26
20. Registration Rights............................................... 26
21. Successors........................................................ 26
22. Termination....................................................... 26
23. Governing Law..................................................... 26
24. Benefits of This Agreement........................................ 27
25. Counterparts...................................................... 27
26. Headings.......................................................... 27
Exhibit A Form of Warrant Certificate
Exhibit B Certificate
Exhibit C Legends
Exhibit D Transferee Letter
<PAGE>
Warrant Agreement (the "Agreement"), dated as of January 23, 1998,
between Gothic Energy Corporation, an Oklahoma corporation (together with any
successors and assigns (the "Company") and American Stock Transfer & Trust
Company, a New York corporation, as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue and sell pursuant to a
Securities Purchase Agreement (the "Purchase Agreement'), dated as of January
23, 1998, among the Company and the Purchasers named therein (the "Purchasers"),
up to $45,000,000 in aggregate liquidation value of its Senior Redeemable
Preferred Stock, Series A, par value $.05 per share (the "Preferred Stock"),
along with warrants (each a "Warrant," and collectively, the "Warrants") for the
purchase of up to 1,430,000 shares of its Common Stock, par value $.01 per share
(the "Common Stock," and the shares of Common Stock issuable upon exercise of
the Warrants being referred to herein as the "Warrant Shares") and Additional
Warrants (as hereinafter defined), constituting up to 50% of the Company's fully
diluted Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company and the Warrant Agent is willing to act in connection with the issuance,
transfer, exchange and exercise of Warrants as provided herein; and
WHEREAS, the holders of Warrants and Warrant Shares shall, from time to
time, have certain rights and obligations with respect thereto as set forth in
the Common Stock Registration Rights Agreement, dated as of January 23, 1998,
among the Company and the Purchasers.
NOW, THEREFORE, in consideration of the premises and mutual agreements herein,
the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
----------------------------
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 2. Warrant Certificates. The Warrants will initially be
--------------------
issued either in global form (the "Global Warrants"), substantially in the form
of Exhibit A hereto (including the footnote thereto), or in registered form as
definitive warrant certificates (the "Definitive Warrants"). Any certificates
(the "Warrant Certificates") evidencing the Global Warrants or the Definitive
Warrants to be delivered pursuant to this Agreement shall be substantially in
the form set forth in Exhibit A hereto. Such Global Warrants shall represent
such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Warrants
from time to time endorsed thereon and that the aggregate amount of outstanding
Warrants represented thereby may from time to time be reduced or increased, as
appropriate, provided that the issuance of Additional Warrants (as defined in
the Purchase Agreement) on each date set forth in Section 5.5 of the Purchase
Agreement shall require the issuance of a new Global Warrant or Definitive
Warrant with respect to the
<PAGE>
Additional Warrants issued on such date. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with instructions given by the holder thereof.
The Depository Trust Company shall act as the Depositary with respect to the
Global Warrants until a successor shall be appointed by the Company. Upon
written request, a Warrant holder may receive from the Depositary and Warrant
Agent Definitive Warrants as set forth in Section 6 below.
Section 3. Execution of Warrant Certificates. Warrant Certificates
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board or its
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer or a Vice President and by its Secretary or an Assistant Secretary under
its corporate seal. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, a Vice President, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be countersigned and delivered or disposed of such person
shall have ceased to hold such office. The seal of the Company may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
Section 4. Registration and Countersignature. The Warrants shall be
---------------------------------
numbered and shall be registered on the books of the Company maintained at the
principal office of the Warrant Agent in the Borough of Manhattan, City of New
York (the "Warrant Register") as they are issued.
-2-
<PAGE>
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board, the
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, a Vice President, the Secretary or an Assistant Secretary of the
Company, initially countersign and deliver Warrants entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to
above in the first recital hereof and shall thereafter countersign and deliver
Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered
holders (the "Holders") of the Warrant Certificates as the absolute owners
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone) for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
Section 5. Transfer and Exchange of Warrants. The Warrant Agent shall
---------------------------------
from time to time, subject to the limitations of Section 6, register the
transfer of any outstanding Warrants upon the records to be maintained by it for
that purpose, upon surrender thereof duly endorsed or accompanied (if so
required by it) by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, duly executed by the registered Holder or
Holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Subject to the terms of this Agreement, each Warrant
Certificate may be exchanged for another certificate or certificates entitling
the Holder thereof to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitle each Holder to purchase.
Any Holder desiring to exchange a Warrant Certificate or Warrant Certificates
shall make such request in writing delivered to the Warrant Agent, and shall
surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by
a written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, the Warrant Certificate or Warrant Certificates to be so
exchanged.
Upon registration of transfer, the Warrant Agent shall countersign and
deliver by certified or first class mail a new Warrant Certificate or Warrant
Certificates to the persons entitled thereto. The Warrant Certificates may be
exchanged at the option of the Holder thereof, when surrendered at the office or
agency of the Company maintained for such purpose, which initially will be the
corporate trust office of the Warrant Agent in New York, New York for another
Warrant Certificate, or other Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares.
No service charge shall be made for any exchange or registration of
transfer of Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any
-3-
<PAGE>
stamp or other tax or other governmental charge that is imposed in connection
with any such exchange or registration of transfer.
Section 6. Registration of Transfer and Exchanges.
--------------------------------------
(a) Transfer and Exchange of Definitive Warrants. When
--------------------------------------------
Definitive Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants;
or
(ii) to exchange such Definitive Warrants for an equal
number of Definitive Warrants of other authorized denominations, the Warrant
Agent shall register the transfer or make the exchange as requested if its
requirements under this Agreement are met; provided, however, that the
-------- -------
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Warrant Agent, duly executed
by the Holder thereof or by such Holder's attorney, duly authorized in writing;
and
(y) in the case of Warrants (the "Restricted
Warrants") which constitute Restricted Securities (as such term is defined in
Rule 144(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act")), such Warrants shall be accompanied, in the reasonable discretion of the
Company, by the following additional information and documents, as applicable,
however, it being understood that the Warrant Agent need not determine which
clause (A) through (C) below is applicable:
(A) if such Restricted Warrant is being delivered to
the Warrant Agent by a Holder for registration in the name of such Holder,
without transfer, a certification from such holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Restricted Warrant is being transferred to
a qualified institutional buyer (as defined in Rule 144A under the Act, a "QIB")
in accordance with Rule 144A under the Act or pursuant to an exemption from
registration in accordance with Rule 144 under the Securities Act or Regulation
S under the Securities Act or pursuant to an effective registration statement
under the Securities Act, a certification to that effect (in substantially the
form of Exhibit B hereto) and, with respect to transfers pursuant to Rule 144 or
Regulation S, an opinion of counsel reasonably acceptable to the Company and the
Warrant Agent to the effect that such transfer does not require registration
under the Securities Act; or
-4-
<PAGE>
(C) if such Restricted Warrant is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the form of
Exhibit B hereto) and an opinion of counsel reasonably acceptable to the Company
and to the Warrant Agent to the effect that such transfer does not require
registration under the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a
------------------------------------------------------
Beneficial Interest in a Global Warrant. A Definitive Warrant may not be
- ---------------------------------------
exchanged for a beneficial interest in a Global Warrant except upon satisfaction
of the requirements set forth below. Upon receipt by the Warrant Agent of a
Definitive Warrant, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Warrant Agent, together with:
(A) if such Definitive Warrant constitutes a Restricted
Warrant, certification, substantially in the form of Exhibit B hereto, that such
Definitive Warrant is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(B) written instructions directing the Warrant Agent to make,
or to direct the Depositary to make, an endorsement on the Global Warrant to
reflect an increase in the aggregate amount of the Warrants represented by the
Global Warrant, then the Warrant Agent shall cancel such Definitive Warrant and
cause, or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Warrant
Agent, the number of Warrant Shares represented by the Global Warrant to be
increased accordingly. If no Global Warrant is then outstanding, the Company
shall issue and the Warrant Agent shall countersign a new Global Warrant in the
appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
----------------------------------------
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial interest in a Global Warrant for a
-----------------------------------------------------------
Definitive Warrant.
- ------------------
(i) Any person having a beneficial interest in a Global Warrant
may upon request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such other form of
instructions as is customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest in a Global Warrant
and upon receipt by the Warrant Agent of
-5-
<PAGE>
a written order or such other form of instructions as is customary for the
Depositary or the person designated by the Depositary as having such a
beneficial interest containing registration instructions and, in the case of a
beneficial interest in Restricted Warrants, the following additional information
and documents, however, it being understood that the Warrant Agent need not
determine which clause (A) through (C) below is applicable;
(A) if such beneficial interest is being transferred to the
person designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the form of
Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S under
the Securities Act or pursuant to an effective registration statement under the
Securities Act, a certification to that effect from the transferee or transferor
(in substantially the form of Exhibit B hereto) and, with respect to transfers
pursuant to Rule 144 or Regulation S, an opinion of counsel reasonably
acceptable to the Company and the Warrant Agent to the effect that such transfer
does not require registration under the Securities Act, or
(C) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferee or transferor
(in substantially the form of Exhibit B hereto) and an opinion of counsel from
the transferee or transferor reasonably acceptable to the Company and to the
Warrant Agent to the effect that such transfer does not require registration
under the Securities Act,
then the Warrant Agent will cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of an authentication order
in the form of an officers' certificate signed by the Chief Executive Officer,
the President or any Vice President and the Chief Financial Officer, the
Treasurer, the Secretary or any Assistant Secretary of the Company (an
"Officers' Certificate"), the Warrant Agent will countersign and deliver to the
transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 6(d) shall be registered
in such names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Warrant Agent in writing, provided such designation is in
accordance with this Section 6(d). The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names such Definitive Warrants are
registered.
-6-
<PAGE>
(e) Restrictions on Transfer and Exchange of Global Warrants.
--------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 6), a Global Warrant may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
--------------------------------------------------------------
If at any time:
(i) the Depositary for the Global Warrants notifies the Company
that the Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
Officers' Certificate requesting the countersignature and delivery of Definitive
Warrants, will countersign and deliver Definitive Warrants, in an aggregate
number equal to the aggregate number of Warrants represented by the Global
Warrant, in exchange for such Global Warrant.
(g) Legends.
-------
(i) Except as permitted by the following paragraph (ii), each
Warrant Certificate evidencing the Global Warrants and the Definitive Warrants
(and all warrants issued in exchange therefor or substitution thereof) shall
bear a legend substantially as set forth in Exhibit C.
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144
under the Securities Act or an effective registration statement under the
Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant,
the Warrant Agent shall permit the Holder thereof to exchange such Restricted
Warrant for a Definitive Warrant that does not bear the legend set forth in
Exhibit C and rescind any related restriction on the transfer of such Warrant;
and
(B) any such warrant represented by a Global Warrant shall
not be subject to the provisions set forth in (i) above (such sales or transfers
-7-
<PAGE>
being subject only to the provisions of Section 6(c) hereof); provided, however,
-------- -------
that with respect to any request for an exchange of a Warrant that is
represented by a Global Warrant for a Definitive Warrant that does not bear the
legend set forth in Exhibit C, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the Warrant Agent that such
request is being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto) and shall obtain an opinion of
counsel, reasonably acceptable to the Company and the Warrant Agent, to the
effect that such transfer does not require registration under the Securities
Act.
(h) Cancellation and/or Adjustment of a Global Warrant. At such
--------------------------------------------------
time as all beneficial interests in a Global Warrant have either been exchanged
for Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number
of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant by the Warrant Agent to reflect
such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Definitive Warrants.
- -------------------
(i) To permit registrations of transfers and exchanges in
accordance with the terms of this Agreement, the Company shall execute, and the
Warrant Agent shall countersign, Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon
any registration, transfer or exchange of Definitive Warrants or Global Warrants
shall be the valid obligations of the Company, entitled to the same benefits
under this Warrant Agreement as the Definitive Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such Warrant, and
neither the Warrant Agent nor the Company shall be affected by notice to the
contrary.
Section 7. Terms of Warrants; Exercise Warrants. Subject to the terms of
------------------------------------
this Agreement, each Warrant Holder shall have the right, which may be exercised
commencing on or after the Exercisability Date (as defined below) and until 5:00
P.M., New York City time, on the fifth anniversary of the date of original
issuance of a Warrant or Additional Warrant (with respect to any Warrant or
Additional Warrant, respectively, the "Expiration Date"), to receive
-8-
<PAGE>
from the Company the number of fully paid and non-assessable Warrant Shares
which the Holder may at the time be entitled to receive on exercise of such
Warrants and payment of the Exercise Price (as defined below) then in effect for
such Warrant Shares. Each Warrant not exercised prior to the Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
under this Agreement shall cease as of such time. No adjustments as to dividends
will be made upon exercise of the Warrants.
"Exercisability Date" shall mean January 23, 1998.
The initial price per share at which Warrant Shares shall be
purchasable upon exercise of Warrants (the `Exercise Price") shall be the lesser
of (a) $2.75 per share or (b) the average of the daily closing bid prices (as
defined in Section 12(d)) for each Business Day during the period commencing 5
Business Days before the date of exercise and ending on the date one day prior
to such date, to be reset to $.01 on March 31, 1998, as provided in Section 2.1
of the Purchase Agreement, in the event the Preferred Stock remains outstanding
on that date, in each case subject to adjustment as provided herein. A Warrant
may be exercised upon surrender at the office or agency of the Company
maintained for such purpose, which initially will be the corporate trust office
of the Warrant Agent in New York, New York, of the certificate or certificates
evidencing the Warrants to be exercised with the form of election to purchase on
the reverse thereof duly filled in and signed, which signature shall be
guaranteed by a participant in a recognized Signature Guarantee Medallion
Program, and upon payment to the Company of the Exercise Price, as adjusted as
herein provided, for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by certified or official bank check to the order of the Company
in New York Clearing House Funds.
Subject to the provisions of Section 6 hereof, upon such surrender of
Warrants and payment of the Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
Holder and in such name or names as the Warrant Holder may designate a
certificate or certificates for the number of Warrant Shares issuable upon the
exercise of such Warrants together with cash as provided in Section 13;
provided, however, that if any consolidation, merger or lease or sale of assets
is proposed to be effected by the Company as described in subsection (j) of
Section 12 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Warrants and payment
of the Exercise Price as aforesaid, the Company shall, as soon as possible, but
in any event not later than three days, other than a Saturday or Sunday or a day
on which banking institutions in the State of New York are not open for business
("Business Day") thereafter, issue and cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence together with cash as provided in Section 13. Such
certificate or certificates shall be deemed to have been issued and any person
so named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
-9-
<PAGE>
The Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrant Certificate or
Warrant Certificates pursuant to the provisions of this Section 7 and of Section
3 hereof, and the Company, whenever required by the Warrant Agent, will promptly
supply the Warrant Agent with Warrant Certificates duly executed on behalf of
the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner consistent with the Warrant
Agent's customary procedure for such disposal and in a manner reasonably
satisfactory to the Company.
The Warrant Agent shall keep copies of this Agreement available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
Section 8. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 9. Mutilated or Missing Warrant Certificates. In case any
-----------------------------------------
of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
-10-
<PAGE>
Section 10. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent the stock certificates required to
honor outstanding Warrants upon exercise thereof in accordance with the terms of
this Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 13. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto transmitted to each Holder pursuant to Section 14 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price therefor and
issue, be validly authorized and issued, fully paid, non-assessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issuance thereof. The Company will take no action to
increase the par value of the Common Stock to an amount in excess of the
Exercise Price, and the Company will not enter into any agreements inconsistent
in any material respect with the rights of Holders hereunder. The Company will
use its reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Agreement.
Section 11. Public Equity Offering of Common Stock; Obtaining Stock
-------------------------------------------------------
Exchange Listings. The Company covenants and agrees with the Warrant Agent, for
- -----------------
the benefit of each Warrant Holder, that at any time while the Warrants are
outstanding, the Company will not make
-11-
<PAGE>
a Public Equity offering (as defined below) of any class of its common stock
other than the Common Stock. In the event that, at any time during the period in
which the Warrants are exercisable, the Common Stock is not listed on any
principal securities exchanges or markets within the United States of America,
the Company will use its best efforts to permit the Warrant Shares to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the National Association of Securities Dealers, Inc. relating to
trading in the Private Offerings, Resales and Trading through Automated Linkages
market.
"Public Equity Offering' means a public offering by the Company of
shares of its common stock pursuant to an effective registration statement filed
with the Securities and Exchange Commission (other than a public offering on a
registration statement on Form S-4 or S-8 or similar form).
Section 12. Adjustment of Number of Warrant Shares Issuable. The
-----------------------------------------------
number of shares of Common Stock issuable upon the exercise of each Warrant (the
"Exercise Rate") is subject to adjustment from time to time upon the occurrence
of the events enumerated in this Section 12.
(a) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock or other capital stock of the Company; or
(2) subdivides, combines or reclassifies its outstanding
shares of Common Stock;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which such Holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution (the "Time of Determination") and
immediately after the effective date in the case of a subdivision, combination
or reclassification.
If after an adjustment a Holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the board
of directors of the Company shall determine the allocation of the adjusted
Exercise Price between the classes of capital stock. After such allocation, the
exercise privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 12.
-12-
<PAGE>
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Certain Issuances of Common Stock. If the
------------------------------------------------
Company issues or sells shares of its Common Stock or distributes any rights,
options or warrants to any Person entitling them to purchase shares of Common
Stock, or securities convertible into or exchangeable for Common Stock, at a
price per share less than the Current Market Value at the Time of Determination,
the Exercise Rate shall be adjusted in accordance with the formula:
E' = E x O + N
---------
O + N x P
---------
M
where:
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of Determination
for any such issuance, sale or distribution.
O = the number of Fully Diluted Shares (as defined below) outstanding
immediately prior to the Time of Determination for any such issuance,
sale or distribution.
N = the number of additional shares of Common Stock issued, sold or
issuable upon exercise of such rights, options or warrants.
P = the price received in the case of any issuance or sale of Common
Stock or rights, options or warrants inclusive of the exercise price per
share of Common Stock upon exercise of such rights, options or warrants.
M = the Current Market Value per share of Common Stock on the Time of
Determination for any such issuance, sale or distribution.
-13-
<PAGE>
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. Notwithstanding the foregoing, the Exercise Rate
shall not be subject to adjustment in connection with (i) the issuance of any
shares of Common Stock upon exercise of any such rights, options, warrants or
convertible securities which have previously been the subject of an adjustment
under this Agreement for which the required adjustment has been made and (ii)
the exercise of the Warrants or any rights, options or warrants outstanding on
the date hereof and described in the Memorandum (as defined in the Purchase
Agreement). If at the end of the period during which any such rights, options,
warrants or convertible securities are exercisable, not all rights, options,
warrants or convertible securities shall have been exercised, the Warrant shall
be immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
(c) Adjustment for Other Distribution. If the Company distributes
---------------------------------
to all holders of its Common Stock (i) any evidences of indebtedness of the
Company or any of its subsidiaries, (ii) any assets of the Company or any of its
subsidiaries (other than cash dividends or other cash distributions or
distributions from current or retained earnings other than any Extraordinary
Cash Dividend), or (iii) any rights, options or warrants to acquire any of the
foregoing or to acquire any other securities of the Company, the Exercise Rate
shall be adjusted in accordance with the formula:
E' = E x M
-------
M - F
where:
E' the adjusted Exercise Rate.
E the current Exercise Rate on the record date mentioned below.
M the Current Market Value per share of Common Stock on the record
date mentioned below.
F the fair market value on the record date mentioned below of the
indebtedness, assets, rights, options or warrants distributable in respect
of one share of Common Stock.
-14-
<PAGE>
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If an adjustment is made pursuant to clause (iii) above of this subsection (c)
as a result of the issuance of rights, options or warrants and at the end of the
period during which any such rights, options or warrants are exercisable, not
all such rights, options or warrants shall have been exercised, the Warrant
shall be immediately readjusted as if "F" in the above formula was the fair
market value on the record date of the indebtedness or assets actually
distributed upon exercise of such rights, options or warrants divided by the
number of shares of Common Stock outstanding on the record date.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 12.
(d) Current Market Value; Extraordinary Cash Dividend. "Current
-------------------------------------------------
Market Value" per share of Common Stock or of any other security (herein
collectively referred to as a "Security") at any date shall be:
(1) if the security is not registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (i) the value of the
Security determined in good faith by the board of directors of the Company and
certified in a board resolution, based on the most recently completed arm's
length transaction between the Company and a person other than an Affiliate of
the Company and the closing of which occurs on such date or shall have occurred
within the six months preceding such date or (ii) if no such transaction shall
have occurred on such date or within such six-month period, the value of the
Security most recently determined as of a date within the six months preceding
such date by the board of directors of the Company if the transaction is for
less than $500,000 and is not with an Affiliate and by an independent Financial
Expert in all other instances, or
(2) if the Security is registered under the Exchange Act, the
average of the daily closing bid prices (as defined below) for each Business Day
during the period commencing 15 Business Days before such date and ending on the
date one day prior to such date or, if the Security has been registered under
the Exchange Act for less than 15 consecutive Business Days before such date,
then the average of the daily closing bid prices for all of the Business Days
before such date for which daily closing bid prices are available. If the
closing bid price is not determinable for at least 10 Business Days in such
period, the Current Market Value of the Security shall be determined as if the
Security was not registered under the Exchange Act.
-15-
<PAGE>
The "closing bid price" for any Security on each Business Day means:
(A) if such Security is listed or admitted to trading on any securities exchange
or market the closing price, regular way, on such day on the principal exchange
or market on which such Security is traded, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (a) if such
Security is not then listed or admitted to trading on any securities exchange or
market, the last reported sale price on such day, or if there is no such last
reported sale price on such day, the average of the closing bid and the asked
prices on such day, as reported by a reputable quotation source designated by
the Company or (C) if neither clause (A) nor (B) is applicable, the average of
the reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, City of New York, customarily published on each Business
Day, designated by the Company. If there are no such prices on a Business Day,
then the market price shall not be determinable for such Business Day.
"Independent Financial Expert" shall mean (a) CIBC Oppenheimer Corp.
(or any successor) or (b) another nationally recognized investment banking firm
reasonably acceptable to the Warrant Agent (i) that does not (and whose
directors, officers, employees and Affiliates do not) have a direct or indirect
material financial interest in the Company, (ii) that has not been, and, at the
----
time it is called upon to serve as an Independent Financial Expert under this
Agreement is not (and none of whose directors, officers, employees or Affiliates
is) a promoter, director or officer of the Company, (iii) that has not been
retained by the Company for any purpose, other than to perform an equity
valuation, within the preceding twelve months and (iv) that, in the reasonable
judgment of the board of directors of the Company (certified by a board
resolution), is otherwise qualified to serve as an independent financial
advisor. Any such person may receive customary compensation and indemnification
by the Company for opinions or services it provides as an Independent Financial
Expert.
"Affiliate" of any specified person means any other person which
directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified person. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that beneficial ownership of at least 10% of the
-------- -------
voting securities of a person shall be deemed to be control.
-16-
<PAGE>
"Extraordinary Cash Dividend" means any cash dividends with respect
to the Common Stock the aggregate amount of which prior to the Exercisability
Date in any fiscal year exceeds the greater of (i) 20% of the net income of the
Company and its subsidiaries for the fiscal year immediately preceding the
payment of such dividend or (ii) $250,000.
(e) When De Minimis Adjustment May Be Deferred. No adjustment in the
------------------------------------------
Exercise Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Rate. Notwithstanding the foregoing,
any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment, provided that no such adjustment shall be
deferred beyond the date on which a Warrant is exercised.
All calculations under this Section 12 shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(f) When No Adjustment Required. If an adjustment is made upon the
---------------------------
establishment of a record date for a distribution subject to subsections (a),
(b) or (c) hereof and such distribution is subsequently canceled, the Exercise
Rate then in effect shall be readjusted, effective as of the date when the board
of directors determines to cancel such distribution, to that which would have
been in effect if such record date had not been fixed. If an adjustment would
be required under two or more of subsections (a), (b) and (c), such adjustments
will be determined without duplication.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the amount of cash into which such
Warrants are exercisable. Interest wall not accrue on the cash.
(g) Notice of Adjustment. Whenever the Exercise Rate is adjusted, the
--------------------
Company shall provide the notices required by Section 14 hereof.
(h) Voluntary Reduction. The Company from time to time may increase
-------------------
the Exercise Rate by any amount for any period of time (including, without
limitation, permanently) if the period is at least 20 Business Days.
An increase of the Exercise Rate under this subsection (h) (other
than a permanent increase) does not change or adjust the Exercise Rate otherwise
in effect for purposes of subsections (a), (b) or (c) of this Section 12.
(i) When Issuance or Payment May Be Deferred. In any case in which
----------------------------------------
this Section 12 shall require that an adjustment in the Exercise Rate be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event
-17-
<PAGE>
(i) issuing to the Holder of any Warrant exercised after such record date the
Warrant Shares and other capital Stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Rate
prior to such adjustment, and (ii) paying to such Holder any amount in cash in
lieu of a fractional share pursuant to Section 13; provided, however, that the
-------- -------
Company shall deliver to the Warrant Agent and shall cause the Warrant Agent, on
behalf of and at the expense of the Company, to deliver to such Holder a due
bill or other appropriate instrument evidencing such Holder's right to receive
such additional Warrant Shares, other capital stock and cash upon the occurrence
of the event requiring such adjustment.
(j) Reorganizations. In case of any capital reorganization, other than
---------------
in the cases referred to in Sections 12(a), (b) or (c) hereof, or the
consolidation or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the continuing
corporation and which does not result in any reclassification of the outstanding
shares of Common Stock into shares of other stock or other securities or
property), or the sale of the property of the Company as an entirety or
substantially as an entirety (collectively such actions being hereinafter
referred to as "Reorganizations"), there shall thereafter be deliverable upon
exercise of any Warrant (in lieu of the number of shares of Common Stock
theretofore deliverable) the number of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock that would
otherwise have been deliverable upon the exercise of such Warrant would have
been entitled upon such Reorganization if such Warrant had been exercised in
full immediately prior to such Reorganization. In case of any Reorganization,
appropriate adjustment, as determined in good faith by the board of directors of
the Company, whose determination shall be described in a duly adopted resolution
certified by the Company's Secretary or Assistant Secretary, shall be made in
the application of the provisions herein set forth with respect to the rights
and interests of Holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any such shares
or other securities or property thereafter deliverable upon exercise of
Warrants.
The Company shall not effect any such Reorganization unless prior
to or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall (i) expressly assume, by a supplement to the Warrant Agreement or other
acknowledgment executed and delivered to the Warrant Agent the obligation to
deliver to the Warrant Agent and to cause the Warrant Agent to deliver to each
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase, and the due
and punctual performance and observance of each and every covenant, condition,
obligation and liability under this Agreement to be performed and observed by
the Company in the manner prescribed herein and (ii) enter into an agreement
providing to the Holders rights and benefits substantially similar to those
enjoyed by the Holders under the Common Stock Registration Rights Agreement of
even date herewith.
-18-
<PAGE>
The foregoing provisions of this Section 12(j) shall apply to
successive Reorganization transactions.
(k) Form of Warrants. Irrespective of any adjustments in the number or
----------------
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(1) Warrant Agent's Disclaimer. The Warrant Agent has no duty to
--------------------------
determine when an adjustment under this Section 12 should be made, how it should
be made or what it should be. The Warrant Agent has no duty to determine
whether any provisions of a supplemental Warrant Agreement under subsection (j)
of this Section 12 are correct. The Warrant Agent makes no representation as to
the validity or value of any securities or assets issued upon exercise of
Warrants. The Warrant Agent shall not be responsible for the Company's failure
to comply with this Section 12.
(m) Miscellaneous. For purpose of this Section 12, the term "shares of
-------------
Common Stock" shall mean (i) shares of the class of stock designated as the
Common Stock, par value $.0l per share, of the Company as of the date of this
Agreement, and (ii) shares of any other class of stock resulting from successive
changes or reclassification of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
For purposes of this Section 12 the term "Fully Diluted Shares" shall mean (i)
the shares of Common Stock outstanding as of a specified date, and (ii) the
shares of Common Stock into or for which rights, options, warrants or other
securities outstanding as of such date are exercisable or convertible (other
than the Warrants). For purposes of this Section 12, "Common Stock Equivalents"
means (without duplication with any other Common Stock or Common Stock
Equivalents) rights, warrants, options, convertible securities or convertible
indebtedness, exchangeable securities or exchangeable indebtedness, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock, whether at the time or upon the occurrence of some
future event. In the event that at any time, as a result of an adjustment made
pursuant to this Section 12, the Holders of Warrants shall become entitled to
purchase any securities of the Company other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each 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 Warrant Shares contained in subsections (a)
through (m) of this Section 12, inclusive, and the provisions of Sections 6, 7,
8, 10 and 13 with respect to the Warrant Shares or the Common Stock shall apply
on like terms to any such other securities.
-19-
<PAGE>
Section 13. Fractional Interests. The Company shall not be required to
--------------------
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the excess of the value (as
determined by the Board of Directors in good faith) of a Warrant Share over the
Exercise Price on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.
Section 14. Notices to Warrant Holders. Upon any adjustment pursuant
--------------------------
to Section 12 hereof, the Company shall give prompt written notice of such
adjustment to the Warrant Agent and shall cause the Warrant Agent, on behalf of
and at the expense of the Company, within 10 days after notification is received
by the Warrant Agent of such adjustment, to mail by first class mail, postage
prepaid, to each Holder a notice of such adjustments) and shall deliver to the
Warrant Agent a certificate of the Chief Financial Officer of the Company,
accompanied by the report thereon by a firm of independent public accountants
selected by the board of directors of the Company (who may be the regular
accountants for the Company), setting forth in reasonable detail (i) the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Exercise
Price of such Warrant after such adjustment(s), (ii) a brief statement of the
facts requiring such adjustment(s) and (iii) the computation by which such
adjustment(s) was made. Where appropriate, such notice may be given in advance
and included as a part of the notice required under the other provisions of this
Section 14.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets; or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification
-20-
<PAGE>
or change of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender offer or
exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Exercise Rate pursuant to Section 12;
then the Company shall give prompt written notice to the Warrant Agent and shall
cause the Warrant Agent, on behalf of and at the expense of the Company to give
to each of the registered holders of the Warrant Certificates at his or its
address appearing on the Warrant Register, at least 20 days (or 10 days in any
case specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or the date of the event in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure by the Company or
the Warrant Agent to give such notice or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up, or the
vote upon any action.
The Company shall give prompt written notice to the Warrant Agent and
shall cause the Warrant Agent, on behalf of and at the expense of the Company to
give to each Holder written notice of any determination to make a distribution
or dividend to the holders of its Common Stock of any assets (including cash),
debt securities, preferred stock, or any rights or warrants to purchase debt
securities, preferred stock, assets or other securities (other than Common
Stock, or rights, options, or warrants to purchase Common Stock) of the Company,
which notice shall state the nature and amount of such planned dividend or
distribution and the record date therefor, and shall be received by the Holders
at least 30 days prior to such record date therefor.
-21-
<PAGE>
Nothing contained in this Agreement or in any Warrant Certificate shall
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as shareholders in respect of the meetings of shareholders or
the election of directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company.
Section 15. Notices to the Company and Warrant Agent. Any notice or
----------------------------------------
demand authorized by this Agreement to be given or made by the Warrant Agent or
by any Holder to or on the Company shall be sufficiently given or made when
received at the office of the Company expressly designated by the Company as its
office for purposes of this Agreement (until the Warrant Agent is otherwise
notified in accordance with this Section 15 by the Company), as follows:
If to the Company:
Gothic Energy Corporation
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
Attention: Michael Paulk, President
With a copy to:
William S. Clarke, P.A.
457 North Harrison Street - Suite 103
Princeton, New Jersey 08540
Attention: William S. Clarke, Esquire
Any notice pursuant to this Agreement to be given by the Company or by
any Holder(s) to the Warrant Agent shall be sufficiently given when received by
the Warrant Agent at the address appearing below (until the Company is otherwise
notified in accordance with this Section by the Warrant Agent).
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Michael Karfunkel
Facsimile Number: (718) 236-4588
Section 16. Supplements and Amendments. The Company and the Warrant
--------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any
-22-
<PAGE>
other provisions in regard to matters or questions arising hereunder which
the Company and the Warrant Agent may deem necessary or desirable and which
shall not in any way adversely affect the interests of any holder of Warrants.
Any amendment or supplement to this Agreement that has a material adverse effect
on the interests of holders shall require the written consent of registered
holders of a majority of the then outstanding warrants. The consent of each
holder of a Warrant affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (not including
adjustments contemplated hereunder). The Warrant Agent shall be entitled to
receive and shall be fully protected in relying upon an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Company in accordance
with its terms.
Section 17. Concerning the Warrant Agent. The Warrant Agent
----------------------------
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the Holders, by
their acceptance of Warrants, shall be bound:
(a) The statements contained herein and in the Warrant
Certificate shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or any action taken by it. The Warrant Agent assumes
no responsibility with respect to the distribution of the Warrants except as
herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
(c) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
(through its employees) or by or through its attorneys or agents (which shall
not include its employees) and shall not be responsible for the misconduct of
any agent appointed with due care.
(d) The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company), and the Warrant
Agent shall incur no liability or responsibility to the Company or to any Holder
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the advice of such counsel.
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<PAGE>
(e) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless such evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
Chief Financial Officer, one of the Vice Presidents, the Treasurer or the
Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(f) The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the performance
of its duties under this Agreement upon receipt of satisfactory evidence
thereof, to reimburse the Warrant Agent for all reasonable expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent (including reasonable fees and expenses of the Warrant Agent's
counsel and agents) in the performance of its duties under this Agreement, and
to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the performance of its duties under this
Agreement, except as a result of the Warrant Agent's negligence or bad faith.
(g) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more Holders shall furnish the Warrant
Agent with reasonable security and indemnity satisfactory to the Warrant Agent
for any costs and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as the Warrant Agent
may consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment shall be for
the ratable benefit of the Holders, as their respective rights or interests may
appear.
(h) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transactions in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement or such director, officer or employee.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity including, without
limitation, acting as Transfer Agent or as a lender to the Company or an
affiliate thereof.
-24-
<PAGE>
(i) The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own negligence or bad faith.
(j) The Warrant Agent will not incur any liability or responsibility
to the Company or to any Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties,
(k) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant (except its countersignature thereof), nor shall the
Warrant Agent by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Warrant Shares (or other
stock) to be issued pursuant to this Agreement or any Warrant, or as to whether
any Warrant Shares (or other stock) will, when issued, be validly issued, fully
paid and non-assessable, or as to the Exercise Price or the number or amount of
Warrant Shares or other securities or other property issuable upon exercise of
any Warrant.
(l) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President or the Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and shall not be liable for any action taken or suffered to be
taken by it in good faith and without negligence in accordance with instructions
of any such officer or officers.
Section 18. Change of Warrant Agent. The Warrant Agent may resign at
-----------------------
any time and be discharged from its duties under this Agreement by giving to the
Company 30 days' notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent, If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with such notice submit
his Warrant for inspection by the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor Warrant Agent, either by the
Company or by such court, the duties of the Warrant Agent shall be carried out
by the Company. Any successor Warrant Agent, whether appointed by the Company or
such a court, shall be a bank or trust company in good standing, incorporated
under the laws of the
-25-
<PAGE>
United States of America or any State thereof; or the District of Columbia and
having at the time of its appointment as warrant agent a combined capital and
surplus of at least $10,000,000. After appointment, the successor warrant agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent without further act or deed; but
the former Warrant Agent shall deliver and transfer to the successor warrant
agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for such purpose. Failure
to file any notice provided for in this Section 18, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent, as the
case may be. In the event of such resignation or removal, the Company or the
successor warrant agent shall mail by first class mail, postage prepaid, to each
Holder, written notice of such removal or resignation and the name and address
of such successor warrant agent.
Section 19. Identity of Transfer Agent. Forthwith upon the appointment
--------------------------
of any new Transfer Agent for the Common Stock, or any other shares of the
Company's capital stock issuable upon the exercise of the Warrants, the Company
shall promptly file with the Warrant Agent a statement setting forth the name
and address of such Transfer Agent.
Section 20. Registration Rights. The Holder shall be entitled to all
-------------------
of the benefits of that certain Common Stock Registration Rights Agreement among
the Company and the Purchasers dated as January 23, 1998, in connection with the
Common Stock to be issued in connection with the exercise of the Warrants.
Section 21. Successors. All the covenants an provisions of this
----------
Agreement by or for the benefit of the Company, the Warrant Agent or any holder
of Warrants shall bind and inure to the benefit of their respective successors
and assigns hereunder .
Section 22. Termination. This Agreement shall terminate at 5:00 p.m.
-----------
New York City time on January 23, 2003. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been exercised
pursuant to this Agreement.
Section 23. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
-------------
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
-26-
<PAGE>
Section 24. Benefits of This Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the registered Holders of the Warrant Certificates any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent and the registered Holders of the Warrant Certificates.
Section 25. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 26. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
Gothic Energy Corporation
By: /s/Michael Paulk
----------------
Michael Paulk, President
American Stock Transfer & Trust Company,
as Warrant Agent
By: /s/Herbert Lemmer
-----------------
Name: Herbert Lemmer
Title: Vice President
-28-
<PAGE>
EXHIBIT "A"
FORM OF WARRANT CERTIFICATE
(FACE)
(THIS SECURITY IS A GLOBAL CERTIFICATE AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT DATED AS OF JANUARY 23, 1998 BETWEEN THE
COMPANY AND THE WARRANT AGENT (THE "WARRANT AGREEMENT"), AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW
YORK CORPORATION) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS TS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.)
This paragraph is to be included only if the Warrant is in global form.
<PAGE>
EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE
AND ON OR BEFORE JANUARY 23, 2003
No. __________ __________ Warrants
WARRANT CERTIFICATE
GOTHIC ENERGY CORPORATION
This Warrant Certificate certifies that _______ or registered assigns,
is the registered holder of Warrants expiring January 23, 2003 (the "Warrants")
to purchase _______ shares of Common Stock (the "Common Stock") of Gothic Energy
Corporation, an Oklahoma corporation (the "Company"). Each Warrant entitles the
holder upon exercise to receive from the Company on or after the Exercisability
Date and on or before 5:00 p.m., New York City time, on January 23, 2003, one
fully paid and non-assessable share of Common Stock (a "Warrant Share") at the
initial exercise price (the "Exercise Price") of the lesser of (a) $2.75 per
share or (b) the average of the daily closing bid prices (as defined in Section
12(d)) for each Business Day during the period commencing 5 Business Days before
the date of exercise and ending on the date one day prior to such date, to be
reset to $.01 on March 31, 1998, as provided in Section 2.1 of the Purchase
Agreement, in the event the Preferred Stock remains outstanding on that date,
payable in lawful money of the United States of America upon surrender of this
Warrant Certificate and payment of the Exercise Price at the office or agency of
the Warrant Agent, subject only to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment. upon the occurrence of certain events as set forth in the Warrant
Agreement.
No Warrant may be exercised before the Exercisability Date or after
5:00 p.m., New York City time, on January 23, 2003 and to the extent not
exercised by such time such warrants shall become void.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, Gothic Energy Corporation has caused this Warrant
Certificate to be signed by its President and by its Secretary, each by a
facsimile of his signature, and has caused a facsimile of its corporate seal to
be affixed hereunto or imprinted hereon.
Dated:
Gothic Energy Corporation
By: ____________________________________
Michael Paulk, President
By: ____________________________________
John Rainwater, Secretary
Countersigned:
American Stock Transfer & Trust Company,
as Warrant Agent
By: _________________________________________
Authorized Signature
-3-
<PAGE>
FORM OF WARRANT CERTIFICATE
(REVERSE)
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring January 23, 2003, entitling the holder on
exercise to receive shares of Common Stock of the Company (the "Common Stock"),
$.01 par value, and are issued or to be issued pursuant to a Warrant Agreement
dated as of January 23, 1998 (the "Warrant Agreement"), duly executed and
delivered by the Company to American Stock Transfer & Trust Company, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or after the "Exercisability
Date" and on or before January 23, 2003, subject to extension as provided in the
Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in cash at the office of the Warrant Agent.
In the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon exercise of
this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrants set forth on the face hereof may, subject to
certain conditions, be adjusted. No fractions of a share of Common Stock will
be issued upon the exercise of any Warrant, but the Company will pay the cash
value thereof determined as provided in the warrant Agreement.
The holders of the Warrants are entitled to certain, registration
rights with respect to the Common Stock purchasable upon exercise thereof. Such
registration rights are set forth in the Common Stock Registration Rights
Agreement, dated as of January 23, 1998, among the Company and the parties named
therein.
-4-
<PAGE>
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
-5-
<PAGE>
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ shares of Common
Stock and herewith tenders payment for such shares to the order of Gothic Energy
Corporation in the amount of $__________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in the
name of _________________________, whose address is _________________________,
and that such shares be delivered to _________________________, whose address is
_________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of _________________________, whose address is
_________________________, and that such Warrant Certificate be delivered to
_________________________, whose address is _________________________.
Signature:
Date: __________________________________________
Signature Guaranteed:
__________________________________________
-6-
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Amount of AMOUNT OF WARRANTS
DECREASE INCREASE of this Global SIGNATURE OF
IN NUMBER OF IN NUMBER OF WARRANT FOLLOWING AUTHORIZED
WARRANTS OF THIS WARRANTS OF THIS SUCH DECREASE OFFICER
DATE OF EXCHANGE GLOBAL WARRANT GLOBAL WARRANT (OR INCREASE) OF WARRANT AGENT
- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
This is to be included only if the Warrant is in global form.
-7-
<PAGE>
EXHIBIT "B"
CERTIFICATE TO BE DELIVERED UPON
EXCHANGE OR REGISTRATION OF RESTRICTED SECURITIES
Re: Warrants to Purchase Common Stock, par value $.01 per share (the
"Warrants"), of Gothic Energy Corporation
This Certificate relates to __________ Warrants held in book-entry or
definitive form by _________________________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Global Certificate held by the
Depositary a Warrant or Warrants in definitive registered form equal to its
beneficial interest in Warrants represented by such Global Certificate (or the
portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request, the Transferor does hereby certify that
Transferor is familiar with the Warrant Agreement (the "Agreement") relating to
the Warrants and the restrictions on transfers thereof as provided in Section 6
of such Agreement, and that the transfer of this Warrant requested hereby does
not require registration under the Securities Act (as defined below) because:
[ ] Such Warrants is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 6(a)(y)(A) of the Agreement).
[ ] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")), in reliance on Rule 144A or in accordance with Regulation S
under the Securities Act. If such transfer is in accordance with Regulation S,
an opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.
-8-
<PAGE>
[ ] Such Warrant is being transferred in accordance with Rule 144 under
the Securities Act. An opinion of counsel to the effect that such transfer does
not require registration under the Securities Act accompanies this Certificate.
[ ] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A or Rule 144 or Regulation S under the Securities Act. An
opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.
[Insert Name of Transferor]
Date: By:
------------------------------------
-9-
<PAGE>
EXHIBIT "C"
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a) UNDER THE ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE OR TRANSFER AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE WARRANT
AGENT FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR OR SUCH TRANSFER IS MADE IN
ACCORDANCE WITH CLAUSES (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WARRANT AGENT AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATTON REQUIREMENTS OF THE ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
-10-
<PAGE>
EXHIBIT "D"
TRANSFEREE LETTER OF REPRESENTATION
Gothic Energy Corporation
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
Ladies and Gentlemen:
In connection with our proposed purchase of Warrants to purchase
Common Stock (the "Securities") of Gothic Energy Corporation (the "Company"), we
confirm that:
1. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Warrant
Agreement dated as of January 23, 1998 relating to the Securities and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Securities have not been registered under
the Securities Act, and that the Securities may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell any Securities within two years after the original issuance of the
Securities, we will do so only (A) to the Company or any subsidiary thereof, (B)
inside the United States to a "qualified institutional buyer" in compliance with
Rule 144A under the Securities Act, (C) inside the United States to an
"accredited investor" (as defined below) that, prior to such transfer, furnishes
to you a signed letter substantially in the form of this Letter, (D) outside the
United states to a foreign person in compliance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F) pursuant to
an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the securities from us a notice
advising such purchaser that resales of the Securities are restricted as stated
herein.
-11-
<PAGE>
3. We understand that, on any proposed resale of any Securities, we will be
required to furnish to the Company such certifications, legal opinions and other
information as the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule 501(a) under the
Securities Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our investment in
the Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our own account or
for one or more accounts (each of which is an "accredited investor") as to each
of which we exercise sole investment discretion.
The Company is entitled to rely upon this letter and is irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
__________________________________________
(Name of Purchaser)
Date: By: __________________________________________
-12-
<PAGE>
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name: ________________________________________________________________________
Address: __________________________________________________________________
Taxpayer ID Number:
_____________________________________________________________
-13-
<PAGE>
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 23, 1998
AMONG
GOTHIC ENERGY CORPORATION
AND
THE PURCHASERS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions....................................... 1
2. Exchange Offer.................................... 4
3. Shelf Registration................................ 7
4. Additional Dividends.............................. 8
5. Registration Procedures........................... 9
6. Registration Expenses............................. 17
7. Indemnification................................... 18
8. Rules 144 and 144A................................ 21
9. Underwritten Registrations........................ 21
10. Miscellaneous..................................... 22
a. Remedies.................................... 22
b. No Inconsistent Agreements.................. 22
c. Adjustments Affecting Registrable Shares.... 22
d. Amendments and Waivers...................... 22
e. Notices..................................... 22
f. Successors and Assigns...................... 23
g. Counterparts................................ 23
h. Headings.................................... 23
i. Governing Law............................... 23
j. Severability................................ 23
k. Entire Agreement............................ 24
l. Shares Held by the Company or Its Affiliates 24
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
January 23, 1998, by and among Gothic Energy Corporation, an Oklahoma
corporation (the "Company" and the purchasers named on the signature pages
hereto (the "Purchasers").
This Agreement is entered into in connection with the Securities Purchase
Agreement, dated as of January 23, 1998, among the Company and the Purchasers
(the "Purchase Agreement") relating to the sale by the Company to the Purchasers
of up to $45,000,000 aggregate liquidation value of the Company's Senior
Redeemable Preferred Stock, Series A, par value $.05 per share (together with
any dividends paid in the form of additional shares of Preferred Stock,
including the Additional Dividends, the "Preferred Shares"), along with warrants
("Warrants") for the purchase of shares of the Common Stock, par value $.0l per
share, of the Company ("Common Stock") constituting up to 50% of the Company's
fully diluted common stock. In order to induce the Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement for the benefit of the Purchasers and their direct
and indirect transferees. The execution and delivery of this Agreement is a
condition to the Purchasers' obligations to purchase the Preferred Shares and
the Warrants under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Dividends: See Section 4.
--------------------
Advice: See Section 5.
------
Applicable Period: See Section 2.
-----------------
Certificate of Designation: The Certificate of Designation duly
--------------------------
adopted by the Board of Directors of the Company setting forth the rights,
preferences and priorities of the Preferred Shares and filed with, and accepted
for filing, so as to be effective, by the Secretary of State of the State of
Oklahoma prior to the Closing hereunder and which is substantially in the form
of Exhibit 1 to the Purchase Agreement.
Change of Control: See the meaning ascribed to such term in the
-----------------
Certificate of Designation.
<PAGE>
Company: See the introductory paragraph to this Agreement.
-------
Effectiveness Date: The earlier of June 30, 1998 and the 30th day
------------------
after a Change of Control.
Effectiveness Period: See Section 3.
--------------------
Event Date: See Section 4.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2.
--------------
Exchange Registration Statement: See Section 2.
-------------------------------
Exchange Shares: See Section 2.
---------------
Filing Date: The 60th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Share or Registrable Shares.
------
Indemnified Person: See Section 7.
------------------
Indemnifying Person: See Section 7.
-------------------
Initial Shelf Registration: See Section 3.
--------------------------
Inspectors: See Section 5.
----------
Issue Date: the date Preferred Shares were issued pursuant to the
----------
Purchase Agreement.
NASD: See Section 5.
----
Participant: See Section 7.
-----------
Participating Broker-Dealer: See Section 2.
---------------------------
2
<PAGE>
Person: An individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization or other
legal entity.
Preferred Shares: See the introductory paragraphs to this Agreement.
----------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Shares covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
------------------
Agreement.
Purchasers: See the introductory paragraphs to this Agreement.
----------
Records: See Section 5.
-------
Registrable Shares: The Preferred Shares upon original issuance of the
------------------
Preferred Shares and at all times subsequent thereto and until (i) a
Registration Statement covering such Preferred Shares has been declared
effective by the SEC and such Preferred Shares have been disposed of in
accordance with such effective Registration Statement, (ii) such Preferred
Shares are sold in compliance with Rule 144, (iii) in the case of any Preferred
Share, such Preferred Share has been exchanged for an Exchange Share or Exchange
Shares pursuant to an Exchange Offer or (iv) such Preferred Shares cease to be
outstanding.
Registration Default: See Section 4.
--------------------
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Shares pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
--------
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers
3
<PAGE>
and sales by subsequent holders that are not affiliates of an issuer of such
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
---------
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
--------
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2.
------------
Shelf Registration: See Section 3.
------------------
Subsequent Shelf Registration: See Section 3.
-----------------------------
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter(s) for reoffering to
the public.
2. Exchange Offer
--------------
(a) The Company agrees to use its best efforts to file with the SEC as
soon as practicable after the Issue Date, but in no event later than the Filing
Date, an offer to exchange (the "Exchange Offer") any and all of the Registrable
Shares for a like aggregate liquidation value of preferred equity securities of
the Company which are substantially identical to the Preferred Shares (the
"Exchange Shares") (and which are entitled to the benefits of the Certificate of
Designation), except that the Exchange Shares shall have been registered
pursuant to an effective Registration Statement under the Securities Act. The
Exchange Offer will be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company agrees to
use its best efforts to (x) cause the Exchange Registration Statement to become
effective under the Securities Act on or before the Effectiveness Date; (y) keep
the Exchange Offer open for at least 30 days (or longer if required
4
<PAGE>
by applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 60th day
following the date on which the Exchange Registration Statement is declared
effective. Each Holder who participates in the Exchange Offer will be required
to represent that any Exchange Shares received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Shares, and that such
Holder is not an affiliate of the Company within the meaning of Rule 405 under
the Securities Act or if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable. Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Exchange Shares held by Participating
- ------- --------
Broker-Dealers (as defined below), and the Company shall have no further
obligation to register Registrable Shares pursuant to Section 3 of this
Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Purchasers, which shall contain a summary statement
of the positions taken or policies made by the Staff of the SEC with respect to
the potential "underwriter" status of any broker-dealer that is the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Shares
received by such broker-dealer in the Exchange Offer (a "Participating Broker-
Dealer"), whether such positions or policies have been publicly disseminated by
the Staff of the SEC or such positions or policies, in the reasonable judgment
of the Purchaser, represent the prevailing views of the Staff of the SEC. Such
"Plan of Distribution" section shall also allow the use of the prospectus by all
persons subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange Shares.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Shares; provided that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) (the "Applicable Period").
Dividends on the Exchange Shares will accrue from the last
dividend payment date on which dividends were paid on the Preferred Shares
surrendered in exchange therefor or, if no dividends have been paid on the
Preferred Shares, from the date of original issue.
5
<PAGE>
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Preferred Shares at any
time prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer the
Company shall:
(i) accept for exchange all Preferred Shares properly tendered and not
validly withdrawn pursuant to the Exchange Offer; and
(ii) issue and deliver promptly to each Holder of Preferred Shares,
Exchange Shares equal in liquidation value to the Preferred Shares of such
Holder so accepted for exchange.
The Exchange Shares shall be issued pursuant to the Certificate of
Designation, will vote and consent together on all matters with the Preferred
Shares as one class to the extent the Preferred Shares have voting rights
pursuant to the Certificate of Designation or as provided by applicable law, and
will not have the right to vote or consent as a class separate from the
Preferred Shares on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the Company or
Holders of at least a majority in aggregate liquidation value of the Registrable
Shares reasonably determine in good faith that (i) the Exchange Shares would
not, upon receipt, be tradeable by such Holders which are not affiliates (within
the meaning of the Securities Act) of the Company without restriction under the
Securities Act and without restrictions under applicable state securities laws,
(ii) the interests of the Holders under this Agreement would be adversely
affected by the consummation of the Exchange Offer or (iii) after conferring
with counsel, the SEC is unlikely to permit the consummation of the Exchange
Offer prior to the Effectiveness Date or (2) the Exchange Offer is commenced and
not consummated within 180 days of the Issue Date, then the Company shall
promptly deliver to the Holders written notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3. Following the
delivery of a Shelf
6
<PAGE>
Notice to the Holders of Registrable Shares, the Company shall not have any
further obligation to conduct the Exchange Offer under this Section 2.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Company shall prepare and file
--------------------------
with the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Shares (the "Initial
Shelf Registration"). If the Company shall have not yet filed an Exchange
Registration Statement, the Company shall use its best efforts to file with the
SEC the Initial Shelf Registration on or prior to the Filing Date. In any other
instance, the Company shall use its best efforts to file with the SEC the
Initial Shelf Registration within 30 days of the delivery of the Shelf Notice.
The Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Shares for resale by such Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Company shall not permit any securities other
than the Registrable Shares to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration (as defined below), except pursuant to the
Warrant to purchase Common Stock of the Company expiring on November 24, 2002
held by Amoco Corporation (the "Amoco Warrant"). The Company shall use its best
efforts to cause the Initial Shelf Registration to be declared effective under
the Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is 36 months from the date on which such Initial Shelf Registration
is declared effective (subject to extension pursuant to the last paragraph of
Section 5 hereof) (the "Effectiveness Period"), or such shorter period ending
when (i) all Registrable Shares covered by the Initial Shelf Registration have
been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Shares has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the securities registered thereunder), the Company shall use its best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 45 days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Shares (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and
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<PAGE>
to keep such Registration Statement continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate number of days
during which the Initial Shelf Registration or any Subsequent Shelf Registration
was previously continuously effective. As used herein the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if requested by the Holders
of a majority in aggregate liquidation value of the Registrable Shares covered
by such Registration Statement or by any underwriter(s) of such Registrable
Shares.
4. Additional Dividends
--------------------
(a) The Company and the Purchasers agree that the Holders of
Registrable Shares will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional dividends on the Preferred Shares
("Additional Dividends") under the circumstances set forth below:
(i) if the Exchange Offer Registration Statement or the Initial
Shelf Registration has not been filed on or prior to the Filing Date;
(ii) if the Exchange Offer Registration Statement or the Initial
Shelf Registration has not been declared effective on or prior to the
Effectiveness Date; and
(iii) if either (A) the Company has not exchanged the Exchange
Shares for all Preferred Shares validly tendered in accordance with the terms of
the Exchange Offer on or prior to 60 days after the date on which the Exchange
Offer Registration Statement was declared effective or (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the time that
the Exchange Offer is consummated or (C) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration Statement
ceases to be effective at any time during the Effectiveness Period; (each such
event referred to in clauses (i) through (iii) above is a "Registration
Default"), the sole remedy available to holders of the Preferred Shares will be
the immediate accrual of Additional Dividends as follows: the per annum dividend
rate on the Preferred Shares will increase by 100 basis points; and the per
annum dividend rate will increase by an additional 25 basis points for each
subsequent 90-day period during which the Registration Default remains uncurred,
up to a maximum additional dividend rate of 150 basis points per annum;
provided, however, that (1) upon the filing of the Exchange Registration
Statement or the Initial Shelf Registration (in the case of (i) above), (2) upon
the
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<PAGE>
effectiveness of the Exchange Registration Statement or a Shelf Registration (in
the case of (ii) above) or (3) upon the exchange of Exchange Shares for all
Preferred Shares tendered (in the case of (iii)(A) above), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of (iii)(B) above), or upon the effectiveness of the
Shelf Registration which had ceased to remain effective (in the case of (iii)(C)
above), any Additional Dividends on the Preferred Shares as a result of such
clause (i), (ii) or (iii) (or the relevant subclause thereof), as the case may
be, shall cease to accrue and the dividend rate on the Preferred Shares will
revert to the dividend rate originally borne by the Preferred Shares.
(b) The Company shall notify the Holders within one business day after
each and every date on which an event occurs in respect of which any Additional
Dividend is required to be paid (an "Event Date"). Any amounts of Additional
Dividends due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of this Section 4
will be payable in additional Preferred Shares as contemplated by the
Certificate of Designation quarterly on each April 1, July 1, October 1 and
January 1 to the Holders of record on the fifteenth day immediately preceding
such dates, commencing with the first such date occurring after any such
Additional Dividend commences to accrue. The amount of an Additional Dividend
will be determined by multiplying the applicable Additional Dividend rate by the
liquidation value of the Registrable Shares, multiplied by a fraction, the
numerator of which is the number of days such Additional Dividend rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Shares pursuant
to Section 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and to use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided that, if (1)
such filing is pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Shares during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall, if requested, furnish to and afford the Holders of the
Registrable Shares and each such Participating Broker-Dealer, as the case may
be, covered by such Registration Statement, their counsel and the managing
underwriter(s), if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be
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<PAGE>
incorporated by reference therein and all exhibits thereto) proposed to be filed
(at least 5 business days prior to such filing). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded an opportunity to review prior to
the filing of such document, if the Holders of a majority in aggregate
liquidation value of the Registrable Shares covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriter(s), if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period, as
the case may be; cause the related Prospectus to be supplemented by any
Prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to them with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus; the
Company shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes any
action that would result in selling Holders of the Registrable Shares covered
thereby or Participating Broker-Dealers seeking to sell Exchange Shares not
being able to sell such Registrable Shares or such Exchange Shares during that
period unless such action is required by applicable law or unless the Company
complies with this Agreement, including, without limitation, the provisions of
clause 5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, notify the selling Holders of Registrable Shares, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, promptly (but in any event within two business
days), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment thereto has been filed, and,
with respect to a Registration Statement or any post-effective amendment
thereto, when the same has become effective (including in such notice a written
statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
thereto including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
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<PAGE>
prospectus or the initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Shares the representations and
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Shares or the Exchange Shares to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in, or
amendments or supplements to, such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any 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 that in the case of the Prospectus, it will not contain any
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, in light of
the circumstances under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Shares or the
Exchange Shares to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter(s), if any, or the Holders of a majority
in aggregate liquidation value of the Registrable Shares being sold in
connection with an underwritten offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment thereto such information as
the managing underwriter(s), if any, or such Holders or counsel reasonably
request to be included therein, (ii) make all required filings of such
Prospectus supplement or such post-effective amendment thereto as soon as
practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment thereto
and (iii) supplement or make amendments to such Registration Statement.
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<PAGE>
(f) If (1) a Shelf Registration is filed pursuant to section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, furnish to each selling Holder of Registrable Shares and to
each such Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, deliver to each selling Holder of Registrable Shares, or each
such Participating Broker-Dealer, as the case may be, their counsel, and the
managing underwriter or underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses (including each form of preliminary prospectus)
and each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject to the
last paragraph of this Section 5, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Shares or each such Participating Broker-Dealer, as the
case may be, and the managing underwriter or underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the Registrable
Shares covered by or the sale by Participating Broker-Dealers of the Exchange
Shares pursuant to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Shares or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Shares or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Shares for offer and sale under the state
securities or "blue sky" laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably request in writing; provided that where
--------
Exchange Shares held by Participating Broker-Dealers or Registrable Shares are
offered other than through an underwritten offering, the Company agrees to cause
its counsel to perform 'blue sky' investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during the
period such Registration Statement
12
<PAGE>
is required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Shares held by Participating Broker-Dealers or the
Registrable Shares covered by the applicable Registration Statement; provided
--------
that the Company shall not be required to (A) qualify generally to do business
in any jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Shares and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold, which certificates
shall not bear any restrictive legends and, if requested by the selling Holders,
shall be in a form eligible for deposit with The Depository Trust Company; and
enable such Registrable Shares to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use its best efforts to cause the Registrable Shares covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof or the managing underwriter or underwriters, if any, to
consummate the disposition of such Registrable Shares, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable prepare and
(subject to Section 5(a) above) file with the SEC, at the expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Shares being
sold thereunder or to the purchasers of the Exchange Shares to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an 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.
13
<PAGE>
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Shares, (i) provide the Holders with printed
certificates for the Registrable Shares in a form eligible for deposit with The
Depository Trust Company if the Holders so request and (ii) provide a CUSIP
number for the Registrable Shares.
(m) In connection with an underwritten offering of Registrable Shares
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of preferred equity securities similar to
the Preferred Shares and take all such other actions as are reasonably requested
by the managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Shares and, in such
connection, (i) make such representations and warranties to the managing
underwriter or underwriters on behalf of any underwriters, with respect to the
business of the Company and its subsidiaries and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of preferred equity securities, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters, addressed to the managing underwriter or
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings of preferred equity securities and such other matters as
may be reasonably requested by underwriters; (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to the
managing underwriter or underwriters on behalf of any underwriters, such letters
to be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of preferred
equity securities and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate liquidation value of
Registrable Shares covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Shares during the
Applicable Period, make available for inspection by any selling
14
<PAGE>
Holder of such Registrable Shares being sold, or each such Participating Broker-
Dealer, as the case may be, the managing underwriter or underwriters
participating in any such disposition of Registrable Shares, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, 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 any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such Registration
Statement. Records which the Company determines, in good faith, to be
confidential and any Records which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a material misstatement or material
omission in such Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public. Each selling Holder of such Registrable Shares and each
such Participating Broker-Dealer or underwriter and each Inspector will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
subsidiaries or for any other purpose other than to fulfill their due diligence
responsibilities unless and until such is made generally available to the
public. Each selling Holder of such Registrable Shares and each such
Participating Broker-Dealer and each Inspector will be required to further agree
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 to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at its expense.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Shares are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(p) Upon consummation of an Exchange Offer, obtain an opinion of
counsel to the Company in a form customary for underwritten offerings of
preferred equity securities similar to the Preferred Shares, addressed to the
Holders of Registrable Shares participating in the Exchange Offer and which
includes an opinion that the Exchange Shares are duly authorized,
15
<PAGE>
validly issued and fully paid and each of the Exchange Shares constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (with customary exceptions).
(q) If an Exchange Offer is to be consummated, upon delivery of the
Registrable Shares by Holders to the Company (or to such other Person as
directed by the Company) in exchange for the Exchange Shares, the Company shall
mark, or cause to be marked, on such Registrable Shares that such Registrable
Shares are being cancelled in exchange for the Exchange Shares.
(r) Cooperate with each seller of Registrable Shares covered by any
Registration Statement and the managing underwriter(s), if any, participating in
the disposition of such Registrable Shares and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD").
(s) Use its best efforts to take all other steps necessary to effect
the registration of the Registrable Shares covered by a Registration Statement
contemplated hereby.
The Company may require each seller of Registrable Shares or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company in writing such information and agreements regarding such
seller or Participating Broker-Dealer and the distribution of such Registrable
Shares or Exchange Shares to be sold by such Participating Broker-Dealer, as the
case may be, as the Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable Shares of any seller
or Participating Broker-Dealer who unreasonably fails to furnish such
information or agreement within a reasonable time after receiving such request.
Each Holder of Registrable Shares and each Participating Broker-Dealer
agrees by acquisition of such Registrable Shares or Exchange Shares to be sold
by such Participating Broker-Dealer, as the case may be, that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in section 5(c)(ii), 5(c)(iii), 5(c)(iv), 5(c)(v) or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Shares covered by such
Registration Statement or Prospectus or Exchange Shares to be sold by such
Holder or Participating Broker-Dealer, as the case may be, until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(k), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and has received
copies of any amendments or supplements thereto. In the event the Company shall
give any such notice, each of the Effectiveness Period and the Applicable Period
shall be extended by the number of days during such periods from and including
the date of the giving of such notice to and including the date when each seller
of Registrable Shares covered by
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<PAGE>
such Registration Statement or Exchange Shares to be sold by such Holder or
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k) or
(y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or "blue sky" laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with
`blue sky' qualifications of the Registrable Shares or Exchange Shares and
determination of the eligibility of the Registrable Shares or Exchange Shares
for investment under the laws of such jurisdictions (x) where the holders of
Registrable Shares are located, in the case of the Exchange Shares, or (y) as
provided in Section 5(h), in the case of Registrable Shares or Exchange Shares
to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Shares or Exchange Shares in a form eligible for
deposit with The Depository Trust Company and of printing prospectuses if the
printing of prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Shares or Exchange Shares to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate liquidation value of the Registrable Shares
included in any Registration Statement or of such Exchange Shares, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Shares (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(m)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) Securities Act liability insurance, if the Company
desires such insurance, (vii) fees and expenses of all other Persons retained by
the Company, (viii) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the Company
performing legal or accounting duties), (ix) the expense of any annual or
special audit, (x) the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange or market, (xi)
the fees and disbursements of underwriters, if any, customarily paid by issuers
or sellers of securities, and (xii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements and any other documents necessary in
order to comply with this Agreement.
17
<PAGE>
(b) In connection with the Exchange Offer and any Shelf Registration
hereunder, the Company shall reimburse the Holders of the Registrable Shares
being registered in such registration for the fees and disbursements, not to
exceed $25,000, of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate liquidation value of
the Registrable Shares to be included in such Registration Statement and other
reasonable out-of-pocket expenses of the Holders of Registrable Shares incurred
in connection with the registration of the Registrable Shares.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Shares and each Participating Broker-Dealer selling Exchange Shares
during the Applicable Period, the officers and directors of each such person,
and each person, if any, who controls any such person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "Participant"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, 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, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Company in writing by such
Participant expressly for use therein; provided that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit of any
Participant (or to the benefit of any person controlling such Participant) from
whom the person asserting any such losses, claims, damages or liabilities
purchased Registrable Shares or Exchange Shares if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
prospectus is completely eliminated or remedied in the related Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall have been furnished to such Participant at or prior to the
sale of such Registrable or Exchange Shares, as the case may be, to such person,
and such Holder failed to send or deliver a copy of the Prospectus with or prior
to the delivery of written confirmation of the sale of Registrable Shares.
18
<PAGE>
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors and officers
and each person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Shares giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the `Indemnified Person')
shall promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding. In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representations of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, including situations in which one or
more legal defenses may be available to such Indemnified Person that are
different from or additional to those available to the Indemnifying Person. It
is understood that, unless there is a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate law firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Participants and such control
persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Shares sold by all such Participants and
any such separate firm for the Company, its directors, officers and such control
persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such
19
<PAGE>
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; provided, however, that the Indemnifying Person shall not be liable
for any settlement effected without its consent pursuant to this sentence if the
Indemnifying Person is contesting, in good faith, the request for reimbursement.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Participants 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 or by the Participants and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no
20
<PAGE>
event shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of Registrable
Shares or Exchange Shares exceeds the amount of any damages that such
Participant 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.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Shares, make publicly available other information of a
like nature so long as necessary to permit sales pursuant to Rule 144 or Rule
144A under the Securities Act. The Company further covenants that so long as
any Registrable Shares remain outstanding to make available to any Holder of
Registrable Shares in connection with any sale thereof, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Shares pursuant to (a) such Rule 144A, or (b) any similar rule or
regulation hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Shares covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate liquidation value of such Registrable
Shares included in such offering and reasonably acceptable to the Company.
No Holder of Registrable Shares may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
21
<PAGE>
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company of any of its
--------
obligations under this Agreement, other than the occurrence of an event which
requires payment of Additional Dividends, each Holder of Registrable Shares, in
addition to being entitled to exercise all rights provided herein or, in the
case of a Purchaser, in the Purchase Agreement or granted by law, including
recovery of damages, will be entitled to a specific performance of its rights
under this Agreement.
(b) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent in all
material respects with the rights granted to the Holders of Registrable Shares
in this Agreement or otherwise conflicts with the provisions hereof in all
material respects. The Company has not entered and will not enter into any
agreement (except the Amoco Warrant) with respect to any of its securities which
will grant to any Person piggyback rights with respect to a Registration
Statement.
(c) Adjustments Affecting Registrable Shares. The Company shall not,
----------------------------------------
directly or indirectly, take any action with respect to the Registrable Shares
as a class that would adversely affect, in any material respect, the ability of
the Holders of Registrable Shares to include such Registrable Shares in a
registration undertaken pursuant to this Agreement.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate liquidation value of
Registrable Shares. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Shares whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Shares may be given by Holders of at least a majority in aggregate
liquidation value of the Registrable Shares being sold by such Holders pursuant
to such Registration Statement; provided that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
22
<PAGE>
(i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 10(e), which address initially is, with respect to each Purchaser,
the address set forth in the Purchase Agreement; and
(ii) if to the Company, to Gothic Energy Corporation, 5727 South Lewis
Avenue, Suite 700, Tulsa, Oklahoma 74105, Attention: Michael Paulk, President.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Shares.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve
23
<PAGE>
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(1) Shares Held by the Company or Its Affiliates. Whenever the
--------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Shares
is required hereunder, Registrable Shares held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Gothic Energy Corporation
By: /s/ Michael Paulk
-----------------
Michael Paulk, President
Purchaser
By:
_____________________________
Name:
Title:
25
<PAGE>
EXHIBIT 10.6
COMMON STOCK REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 23, 1998
AMONG
GOTHIC ENERGY CORPORATION
AND
THE PURCHASERS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions........................................................ 1
2. Registration Rights................................................ 4
3. Transfers of Warrant Shares........................................ 9
4. Registration Procedures............................................ 15
5. Indemnification and Contribution................................... 18
6. Miscellaneous...................................................... 21
a. No Inconsistent Agreements................................... 21
b. Amendments and Waivers....................................... 21
c. Notices...................................................... 22
d. Successors and Assigns....................................... 22
e. Rules 144 and 144A........................................... 22
f. Counterparts................................................. 23
g. Headings..................................................... 23
h. Governing Law................................................ 23
i. Severability................................................. 23
j. Entire Agreement............................................. 23
Exhibit A
<PAGE>
This Common Stock Registration Rights Agreement (this "Agreement") is made
and entered into as of January 23, 1998, among Gothic Energy Corporation, an
Oklahoma corporation (the "Company"), and the Purchasers named on the signature
pages hereto (the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of January 23, 1998, among the Company and the Purchasers (the "Purchase
Agreement"), relating to the sale by the Company to the Purchasers of up to
$45,000,000 in aggregate liquidation value of its Senior Redeemable Preferred
Stock, Series A, par value $.05 per share (the "Preferred Stock"), along with
warrants (the "Warrants") for the purchase of shares of its Common Stock, par
value $0.01 per share ("Common Stock"), constituting up to 50.00% of the
Company's fully diluted Common Stock. In order to induce the Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide to the
Purchasers and their direct and indirect transferees (the "Holders") the
registration rights for the Common Stock set forth in this Agreement. The
execution of this Agreement is a condition to the obligations of the Purchasers
to purchase the Preferred Stock and Warrants under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
-----------
defined terms shall have the following meanings:
"Business Day" shall mean a day that is not a Legal Holiday.
-------------
"Closing Date" shall mean the date of Closing, as that term is defined
------------
in the Purchase Agreement.
"Common Stock" shall mean the Common Stock, par value $.0l per share,
------------
of the Company.
"Company" shall have the meaning set forth in the preamble and shall
-------
also include the Company's successors.
"Definitive Certificate" shall mean a certificate representing Warrant
----------------------
Shares in definitive registered form, other than a Global Certificate.
"Demand Registration" shall have the meaning set forth in Section 2.1.
-------------------
"Depositary" shall mean, with respect to Shares represented by one or
----------
more Global Certificates, The Depository Trust Company or another person
designated as Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Global Certificate" shall mean a certificate representing all or part
------------------
of the Warrant Shares issued to the Depositary and bearing the legend set forth
in Section 3.4(g)(iii).
"Holders" shall mean the Purchasers, for so long as the Purchasers own
-------
any Common Stock, and each of their successors, assigns and direct and indirect
transferees who become registered owners of Common Stock.
"Included Shares" shall have the meaning set forth in Section 2.1(a).
---------------
"Indemnified Party" shall have the meaning set forth in Section 5(c).
-----------------
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
------------------
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
-------------
banking institutions in New York, New York are required by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday, payment
may be made on the next succeeding day that is not a Legal Holiday.
"Person" shall mean an individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, unincorporated organization,
or other legal entity.
"Piggy-Back Registration" shall have the meaning set forth in Section
-----------------------
2.2.
"Preferred Stock" shall have the meaning set forth in the preamble.
---------------
"Prospectus" means a prospectus which meets the requirements of
----------
Section 10 of the Securities Act.
"Purchase Agreement" shall have the meaning set forth in the preamble.
------------------
"Purchasers" shall have the meaning set forth in the preamble.
----------
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
-2-
<PAGE>
"Registrable Securities" shall mean the shares of Common Stock
----------------------
issuable upon exercise of the Warrants. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of pursuant to such Registration Statement, (ii) such securities have been sold
to the public pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act, (iii) such securities shall have
been otherwise transferred by such Holder and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (iv) such securities
shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
---------------------
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), rating agency fees,
printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of counsel for the Company and all independent certified public
accountants (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Holders of such Registrable Securities).
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any of the Warrant Shares pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
in such Registration Statement.
"Regulation S" shall mean Regulation S under the Securities Act.
------------
"Requisite Shares" shall mean a number of Registrable Securities equal
----------------
to not less than 25% of the Registrable Securities held in the aggregate by all
Holders.
"Restricted Security" shall have the meaning set forth in Rule
-------------------
144(a)(3) under the Securities Act.
"Rule 144" shall mean Rule 144 under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith
-3-
<PAGE>
resulting in offers and sales by subsequent holders that are not affiliates of
an issuer of such securities being free of the registration and prospectus
delivery requirements of the Securities Act.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Selling Holder" shall mean a Holder who is selling Warrant Shares in
--------------
accordance with the provisions of Section 2.1 or 2.2 hereof.
"Transfer" shall have the meaning set forth in Section 3.2.
--------
"Transfer Agent" means any transfer agent or registrar appointed by
--------------
the Company for the Common Stock.
"Warrant Shares" means the shares of Common Stock issued and issuable
--------------
upon exercise of the Warrants.
"Warrants" shall have the meaning set forth in the preamble.
--------
"Withdrawal Election" shall have the meaning set forth in Section 2.3.
-------------------
2. Registration Rights.
-------------------
2.1 Demand Registration.
-------------------
(a) Request for Registration. At any time on or after the
------------------------
Closing Date, Holders owning, individually or in the aggregate, at least the
Requisite Shares may make a written request for registration under the
Securities Act of their Registrable Securities (a "Demand Registration"). Any
such request will specify the number of Registrable Securities proposed to be
sold and will also specify the intended method of disposition thereof. Upon a
demand, the Company prepare, file and use its best efforts to cause to be
effective within 90 days
-4-
<PAGE>
of such demand a Registration Statement. The Company shall give written notice
of such registration request within 10 days after the receipt thereof to all
other Holders. Within 20 days after receipt of such notice by any Holder, such
Holder may request in writing that Registrable Securities be included in such
registration and the Company shall include in the Demand Registration the
Registrable Securities of any such Selling Holder requested to be so included
(the "Included Shares"). Each such request by such other Selling Holders shall
specify the number of Included Shares proposed to be sold and the intended
method of disposition thereof. Subject to Section 2.1(b), in no event shall the
Company be required to register Registrable Securities pursuant to this Section
2.1 on more than one occasion
(b) Effective Registration. A registration will not be deemed
----------------------
to have been effected as a Demand Registration unless it has been declared
effective by the SEC and the Company has complied in all material respects with
its obligations under this Agreement with respect thereto; provided that if,
--------
after it has become effective, the offering of Registrable Securities pursuant
to such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the SEC or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
Registrable Securities pursuant to the registration (for any reason other than
the act or omissions of the Selling Holders), such registration will be deemed
not to have been effected unless the Company uses its best efforts to lift or
remove such limitation, such limitation is removed within 90 days and the 180-
day period referred to in the following sentence is extended by the number of
days the registration was suspended. If (i) a registration requested pursuant to
this Section 2.1 is deemed not to have been effected or (ii) the registration
requested pursuant to this Section 2.1 does not remain effective for a period of
at least 180 days beyond the effective date thereof or until the consummation of
the distribution by the Selling Holders of the Included Shares, then the Company
shall continue to be obligated to effect an additional registration pursuant to
this Section 2.1. The Selling Holders of Registrable Securities shall be
permitted to withdraw all or any part of the Included Shares from a Demand
Registration at any time prior to the effective date of such Demand
Registration. If at any time a Registration Statement is filed pursuant to a
Demand Registration, and subsequently a sufficient number of Included Shares are
withdrawn from the Demand Registration so that such Registration Statement does
not cover at least 25% of the Registrable Securities held by all Holders, the
Selling Holders who have not withdrawn their Included Shares shall have the
opportunity to include an additional number of Registrable Securities in the
Demand Registration so that such Registration Statement covers at least 25% of
the Registrable Securities held by all Holders. If an additional number of
Registrable Securities is not so included so that such Registration Statement
does not cover at least 25% of the Registrable Securities held by all Holders,
the Company may withdraw the Registration Statement. In the event that a
Registration Statement has been filed and the Company withdraws the Registration
Statement solely due to the occurrence of the events specified in the prior two
sentences, such withdrawn Registration Statement will count as a Demand
Registration; otherwise such
5
<PAGE>
withdrawn Registration Statement will not count as a Demand Registration and the
Company shall continue to be obligated to effect a registration pursuant to this
Section 2.1.
(c) Priority in Demand Registrations Pursuant to Section 2.1. If
--------------------------------------------------------
a Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the managing underwriter advises the Company in writing that, in
its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering, the Company
will not include any securities of the Company which are not Registrable
Securities and will include in such registration only the number of Registrable
Securities requested by the managing underwriter(s) to be included in such
registration. In the event that the number of Registrable Securities requested
to be included in such registration exceeds the number which, in the opinion of
such managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata among
all requesting Holders on the basis of the relative number of shares of
Registrable Securities then held by each such Holder (provided that any shares
thereby allocated to any such Holder that exceed such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the event
that the number of Registrable Securities requested to be included in such
registration is less than the number which, in the opinion of the managing
underwriter, can be sold, the Company may include in such registration the
securities the Company proposes to sell up to the number of securities that, in
the opinion of the managing underwriter, can be sold.
(d) Selection of Underwriter. If the Selling Holders so elect,
------------------------
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Selling Holders making
such Demand Registration shall select one or more nationally recognized firms of
investment bankers, who shall be reasonably acceptable to the Company, to act as
the managing underwriter or underwriters in connection with such offering and
shall select any additional investment banker(s) and manager(s) to be used in
connection with the offering.
(e) Expenses. The Company will pay all Registration Expenses in
--------
connection with the registrations requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to a registration statement requested pursuant to this
Section 2.1.
2.2 Piggy-Back Registration. If at any time the Company proposes to
-----------------------
file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of its
respective securityholders of any class of its common equity securities (other
than (i) a Registration Statement on Form S-4 or S-8 (or any
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<PAGE>
substitute form that may be adopted by the SEC), (ii) a Registration Statement
filed in connection with an offer or offering of securities solely to the
Company's existing securityholders or (iii) any Registration Statement filed by
the Company relating to an offering of shares of Common Stock, the proceeds of
which will be used to refinance or redeem indebtedness or preferred stock
incurred or issued by the Company to consummate the Amoco Acquisition (as
defined in the Purchase Agreement), then the Company shall give written notice
of such proposed filing to the Holders of Registrable Securities as soon as
practicable (but in no event less than 20 Business Days before the anticipated
filing date), and such notice shall offer such Holders the opportunity to
register such number of shares of Registrable Securities as each such Holder may
request (which request shall specify the Registrable Securities intended to be
disposed of by such Selling Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration"). The Company shall use its best efforts
to cause the managing underwriter or underwriters of such proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company or any other securityholder included therein
and to permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof except as otherwise
provided in Section 2.3. Any Selling Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 2.2 by giving written notice to the Company
of its request to withdraw no later than 5 Business Days before such
Registration Statement becomes effective. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective; provided that
the Company shall give prompt notice thereof to participating Selling Holders.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a registration statement effected pursuant to
this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to complete the sale of shares of Common Stock in connection therewith shall
relieve the Company of any other obligation under this Agreement.
2.3 Reduction of Offering.
---------------------
(a) Piggy-Back Registration. (i) If the managing underwriter(s)
-----------------------
of any underwritten offering described in Section 2.2 have informed, in writing,
the Selling Holders of the Registrable Securities requesting inclusion in such
offering that it is their opinion that the total number of shares which the
Company, the Selling Holders and any other Persons desiring to
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<PAGE>
participate in such registration intend to include in such offering is such as
to adversely affect the success of such offering, including the price at which
such securities can be sold, then the number of shares to be offered for the
account of the Selling Holders and all such other Persons (other than the
Company) participating in such registration shall be reduced or limited pro rata
in proportion to the respective number of shares requested to be registered to
the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by such
managing underwriters; provided, however, that if such offering is effected for
the account of any securityholder of the Company other than the Selling Holders,
pursuant to the demand registration rights of any such securityholder, then the
number of shares to be offered for the account of the Selling Holders and all
other Persons (other than the Company) participating in such registration (but
not such securityholders who have exercised their demand registration rights)
shall be reduced or limited pro rata in proportion to the respective number of
shares requested to be registered to the extent necessary to reduce the total
number of shares requested to be included in such offering to the number of
shares, if any, recommended by such managing underwriters.
(ii) If the managing underwriter or underwriters of any
underwritten offering described in Section 2.2 notify the Selling Holders
requesting inclusion of Registrable Securities in such offering, that the kind
of securities that the Selling Holders, the Company and any other Persons
desiring to participate in such registration intend to include in such offering
is such as to adversely affect the success of such offering, (x) the Registrable
Securities to be included in such offering shall be reduced as described in
clause (i) above or (y) if a reduction in the Registrable Securities pursuant to
clause (i) above would, in the judgment of the managing underwriter(s) or
underwriters, be insufficient to substantially eliminate such 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.
(iii) Notwithstanding anything herein to the contrary, this
Section 2.3(a) shall be subject to the provisions of the Warrant to purchase
Common Stock expiring on November 24, 2002 held by Amoco Corporation.
(b) If, as a result of the proration provisions of this Section
2.3, any Selling Holder shall not be entitled to include all Registrable
Securities in a Piggy-Back Registration that such Selling Holder has requested
to be included, such Selling Holder may elect to withdraw his request to include
Registrable Securities in such registration (a "Withdrawal Election"); provided,
--------
however, that a Withdrawal Election shall be irrevocable and, after making a
- -------
Withdrawal Election, a Selling Holder shall no longer have any right to include
Registrable Securities in the registration as to which such Withdrawal Election
was made.
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<PAGE>
3. Transfers of Warrant Shares.
---------------------------
3.1 Generally. All Warrant Shares at any time and from time to time
---------
outstanding that are Registrable Securities shall be held subject to the
conditions and restrictions set forth in this Section 3. Each Holder of Warrant
Shares by executing this Agreement or by accepting a certificate representing
Common Stock or other indicia of ownership therefor from the Company agrees with
the Company to such conditions and restrictions.
3.2 Restrictions on Transfer. Each Holder of Registrable Securities
------------------------
agrees that it will not sell, assign, give, transfer, exchange, devise,
bequeath, pledge or otherwise dispose of (collectively, "Transfer") any Warrant
Shares or any interest therein except in compliance with Sections 3.3 and 3.4
hereof. Each certificate representing Warrant Shares shall contain conspicuous
notation on such certificate indicating that the transfer of such Warrant Shares
is subject to the terms and restrictions of this Agreement.
3.3 Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Certificates. The
------------------------------------------------
Company and the Transfer Agent shall not be obligated to register the transfer
or exchange of any Definitive Certificate that is a Restricted Security unless
such Warrant Shares are delivered to the Transfer Agent duly endorsed or
accompanied by written instruments of transfer and are accompanied by the
following additional information and documents, as applicable:
(A) if such Restricted Security is being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (in substantially the
form of Exhibit A hereto); or
(B) if such Restricted Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S or
pursuant to an effective registration statement under the Securities Act, a
certification to that effect (in substantially the form of Exhibit A hereto)
and, with respect to transfers pursuant to Rule 144 or Regulation S, an opinion
of counsel reasonably acceptable to the Company and the Transfer Agent to the
effect that such transfer does not require registration under the Securities
Act; or
(C) if such Restricted Security is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially the form of
Exhibit A hereto) and an opinion of counsel reasonably acceptable to the Company
and to the Transfer Agent to the effect that such transfer does not require
registration under the Securities Act.
-9-
<PAGE>
(b) Restrictions on Transfer of a Definitive Certificate for a
----------------------------------------------------------
Beneficial Interest in a Global Certificate. A Definitive Certificate may not
- -------------------------------------------
be exchanged for a beneficial interest in a Global Certificate except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of a Definitive Certificate, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Transfer Agent, together
with:
(A) if such Definitive Certificate represents Restricted
Securities, certification, substantially in the form of Exhibit A hereto, that
such Definitive Certificate is being transferred to a Qualified Institutional
Buyer (as defined in Rule 144A) in accordance with Rule 144A; and
(B) whether or not such Definitive Certificate represents
Restricted Securities, written instructions directing the Transfer Agent to
make, or to direct the Depositary to make, an endorsement on the Global
Certificate to reflect an increase in the aggregate number of shares of Common
Stock represented by the Global Certificate,
then the Transfer Agent shall cancel such Definitive Certificate and cause, or
direct the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Transfer Agent, the number of
shares of Common Stock represented by the Global Certificate to be increased
accordingly. If no Global Certificate is then outstanding, the Company shall
issue and the Transfer Agent shall authenticate a new Global Certificate in the
appropriate amount.
(c) Transfer and Exchange of Global Certificate. The transfer
-------------------------------------------
and exchange of a Global Certificate or beneficial interests therein shall be
effected through the Depositary, in accordance with this Agreement (including
the restrictions on transfer set forth herein) and the procedures of the
Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Certificate for
-------------------------------------------------------------
a Definitive Certificate.
- ------------------------
(i) Any person having a beneficial interest in a Global
Certificate may upon request exchange such beneficial interest for a Definitive
Certificate. Upon receipt by the Transfer Agent of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a beneficial interest
in a Global Certificate and upon receipt by the Transfer Agent of a written
order or such other form of instructions as is customary for the Depositary or
the person designated by the Depositary as having such a beneficial interest
containing registration instructions and, in the case of a beneficial interest
in shares that are Restricted Securities only, the following additional
information and documents:
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<PAGE>
(A) If such beneficial interest is being transferred to
the person designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the form of
Exhibit A hereto); or
(B) if such beneficial interest is being transferred to
a Qualified Institutional Buyer in accordance with Rule 144A or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S or
pursuant to an effective registration statement under the Securities Act, a
certification to that effect from the transferee or transferor (in substantially
the form of Exhibit A hereto) and, with respect to transfers pursuant to Rule
144 or Regulation S, an opinion of counsel reasonably acceptable to the Company
and the Transfer Agent to the effect that such transfer does not require
registration under the Securities Act; or
(C) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferee or transferor
(in substantially the form of Exhibit A hereto) and an opinion of counsel from
the transferee or transferor reasonably acceptable to the Company and to the
Transfer Agent to the effect that such transfer does not require registration
under the Securities Act, then the Transfer Agent will cause, in accordance with
the standing instructions and procedures existing between the Depositary and the
Transfer Agent, the aggregate amount of the Global Certificate to be reduced
and, following such reduction, the Company will execute and, upon receipt of a
written order in the form of an officers' certificate signed by the Chief
Executive Officer, the President, any vice President and the Chief Financial
Officer, the Treasurer, the Secretary or any Assistant Secretary of the Company
(an "Officers' Certificate"), the Transfer Agent will countersign and deliver to
the transferee a Definitive Certificate.
(ii) Definitive Certificates issued in exchange for a
beneficial interest in a Global Certificate pursuant to this Section 3.3(d)
shall be registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Transfer Agent in writing. The Transfer Agent
shall deliver such Definitive Certificates to the persons in whose names such
Definitive Certificates are registered.
(e) Restrictions on Transfer and Exchange of Global Certificates.
-------------------------------------------------------------
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 3.3), a Global
Certificate may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
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<PAGE>
(f) Issuance of Definitive Certificates in Absence of Depositary.
-------------------------------------------------------------
If at any time:
(i) the Depositary for the Global Certificates notifies the
Company that the Depositary is unwilling or unable to continue as Depositary for
the Global Certificates and a successor Depositary for the Global Certificates
is not appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the
Transfer Agent in writing that it elects to cause the issuance of Definitive
Certificates under this Agreement and such action would not cause the Common
Stock to be ineligible for trading in the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market, then the Company will execute, and
the Transfer Agent, upon receipt of an Officers' Certificate requesting the
issuance and delivery of Definitive Certificates, will countersign and deliver
Definitive Certificates, in an aggregate number equal to the aggregate number of
shares represented by the Global Certificate, in exchange for such Global
Certificate.
(g) Legends.
-------
(i) Except as permitted by the following paragraph (ii),
each Definitive Certificate (and all shares of Common Stock issued in exchange
therefor or substitution thereof) shall bear a legend substantially to the
following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)
UNDER THE ACT (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER
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<PAGE>
THE ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS'
BEHALF BY A U.S. BROKER-DEALER) TO THE TRANSFER AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR SUCH TRANSFER IS MADE
IN ACCORDANCE WITH CLAUSES (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRANSFER AGENT AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY
REGULATION S UNDER THE ACT.
(ii) Upon any sale or transfer of any share of Common Stock
that is a Restricted Security (including any Restricted Security represented by
a Global Certificate) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
(A) in the case of any Restricted Security represented
by a Definitive Certificate, the Transfer Agent shall permit the holder thereof
to exchange such Restricted Security for a Definitive Certificate (subject to
Section 3.3(a) and (b)) that does not bear the legend set forth above and
rescind any related restriction on the transfer of such Restricted Security; and
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<PAGE>
(B) any Restricted Security represented by a Global
Certificate shall not be subject to the provisions set forth in (i) above (such
sales or transfers being subject only to the provisions of Section 3.3(c)
through (f); provided, however, that with respect to any request for an exchange
--------- --------
of a Restricted Security that is represented by a Global Certificate for a
Definitive Certificate that does not bear the legend set forth above, which
request is made in reliance upon Rule 144, the holder thereof shall certify in
writing to the Transfer Agent that such request is being made pursuant to Rule
144 (such certification to be substantially in the form of Exhibit A hereto) and
shall provide an opinion of counsel reasonably acceptable to the Company to the
effect that such transfer does not require registration under the Securities
Act.
(iii) Any Global Certificate shall bear a legend (which would be
in addition to any other legends required in the case of a Restricted Security)
in substantially the following form:
THIS SECURITY IS A GLOBAL CERTIFICATE AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE COMMON STOCK REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 23, 1998 AMONG THE COMPANY AND THE STOCKHOLDERS PARTY
THERETO (THE "SHAREHOLDERS AGREEMENT") AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE SHAREHOLDERS AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
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<PAGE>
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
(h) Cancellation and/or Adjustment of a Global Certificate. At such
------------------------------------------------------
time as all beneficial interests in a Global Certificate have either been
exchanged for Definitive Certificates, redeemed, repurchased or canceled, such
Global Certificate shall be returned to or retained and canceled by the Transfer
Agent. At any time prior to such cancellation, if any beneficial interest in a
Global Certificate is exchanged for Definitive Certificates, redeemed,
repurchased or canceled, the number of shares of Common Stock represented by
such Global Certificate shall be reduced and an endorsement shall be made on
such Global Certificate, by the Transfer Agent to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
--------------------------------------------------- --
Definitive Certificates.
- -----------------------
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Transfer Agent's request, and the Transfer Agent
shall countersign and register Definitive Certificates and Global Certificates.
(ii) All Definitive Certificates and Global Certificates issued
upon any registration, transfer or exchange of Definitive Certificates or Global
Certificates shall be validly issued, fully paid and non-assessable.
(iii) Prior to due presentment for registration of transfer of any
Warrant Shares, the Company and the Transfer Agent may deem and treat the person
in whose name any Warrant Share is registered as the absolute owner of such
Warrant Share, and neither the Transfer Agent nor the Company shall be affected
by notice to the contrary.
4. Registration Procedures. In connection with the obligations of the
-----------------------
Company with respect to any Registration Statement pursuant to Sections 2.1 and
2.2 hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the Securities Act, which form (i) shall be selected by
the Company and (ii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and the Company shall use its best
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
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<PAGE>
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period, cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each Selling Holder of Registrable Securities and to
each underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Selling Holder or underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Selling Holder thereof covered by a Registration Statement
shall reasonably request in writing by the time the applicable Registration
Statement is declared effective by the SEC, 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 each such jurisdiction of such
Registrable Securities owned by such Selling-Holder; provided, however, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) take any action that would
subject it to general service of process in any jurisdiction in which it is not
then so subject or (iii) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction;
(e) notify each Selling Holder of Registrable Securities promptly and,
if requested by such Selling Holder, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (v) of the happening of any event during the
period a Registration Statement is effective which makes any
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<PAGE>
statement made in such Registration Statement or the related Prospectus untrue
in any material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements therein not
misleading;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(g) furnish to each Selling Holder of Registrable Securities and to
the Purchasers, without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto (with documents incorporated
therein by reference or exhibits thereto);
(h) cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends and
registered in such names as the Selling Holders may reasonably request at least
two business days prior to the closing of any sale of Registrable Securities;
(i) upon the occurrence of any event contemplated by Section 4(e)(v)
hereof, use reasonable efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company shall not be required to amend or supplement a Registration
Statement, any related Prospectus or any document incorporated therein by
reference in the event that, and for so long as, an event occurs and is
continuing as a result of which the Registration Statement, any related
Prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Company agrees to notify each Selling Holder to
suspend use of the Prospectus as promptly as practicable after the occurrence of
such an event, and each Selling Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission. At such time as such public disclosure
is otherwise made or the Company determines in good faith that such disclosure
is not necessary, the Company agrees promptly to notify each Selling Holder of
such determination, to amend or supplement the Prospectus if necessary to
correct any untrue statement or omission therein and to furnish each Selling
Holder such numbers of copies of the Prospectus as so amended or supplemented as
each Selling Holder may reasonably request;
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<PAGE>
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing and prior to the effective date of a Registration Statement,
provide copies of such document to the Holders and make available for discussion
of such document the representatives of the Company as shall be reasonably
requested by the Holders of Registrable Securities;
(k) obtain a CUSIP number for the Common Stock;
(1) (i) make reasonably available for inspection by a representative
of, and counsel for, any managing underwriter participating in any disposition
pursuant to a Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause the
Company's officers, directors and employees to supply all relevant information
reasonably requested by such representative, counsel or any such managing
underwriter in connection with any such Registration Statement;
(m) take all action necessary so that the Warrant Shares will be
listed on the principal securities exchanges and markets within the United
States of America (including the NASDAQ National Market System), if any, on
which other shares of Common Stock are then listed; and
(n) if requested by the Holders in connection with any Registration
Statement, shall use its best efforts to cause (x) counsel for the Company to
deliver an opinion relating to the Registration Statement and the Common Stock,
in customary form, (y) its officers to execute and deliver all customary
documents and certificates requested by a representative of the Holders or any
managing underwriter, as applicable and (z) its independent public accountants
to provide a comfort letter in customary form.
The Company may, as a condition to such Holder's participation in any
Registration Statement, require each Holder of Registrable Securities to (i)
furnish to the Company such information in writing regarding the Holder and the
proposed distribution by such Holder of such Registrable Securities as the
Company may from time to time reasonably request in writing and (ii) agree in
writing to be bound by this Agreement.
5. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Holder and
each person, if any, who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against all losses, claims, damages
-18-
<PAGE>
and liabilities (including, without limitation, any reasonable legal fees or
other expenses actually incurred by any Holder or any such controlling or
affiliated person in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
pursuant to which Registrable Securities were registered under the Securities
Act, or caused by any omission or alleged omission to state therein a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Holder furnished to the
Company in writing by such Holder expressly for use in any such Registration
Statement or Prospectus; provided that the foregoing indemnity with respect to
--------
any preliminary prospectus shall not inure to the benefit of any Holder (or to
the benefit of any person controlling such Holder) from whom the person
asserting any such losses, claims, damages or liabilities purchased Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary prospectus is completely eliminated or
remedied in the related Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) and a copy of the
related Prospectus (as so amended or supplemented) shall have been furnished to
such Holder at or prior to the sale of such Registrable Securities, as the case
may be, to such person, and (i) such Holder failed to send or deliver a copy of
the Prospectus with or prior to the delivery of written confirmation of the sale
of Registrable Securities and (ii) the Prospectus would have completely
corrected such untrue statement or omission.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers 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 to the same extent as the
foregoing indemnity from the Company to such Holder, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto), any Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus. The liability of any Holder under this paragraph (b)
shall in no event exceed the proceeds received by such Holder from sales of
Registrable Securities giving rise to such obligations.
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<PAGE>
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against which such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain one
counsel (and appropriate local counsel) reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel relating to such proceeding. In any such
proceeding any indemnified party shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified party
shall have mutually agreed in writing to the contrary or (ii) the indemnifying
party fails promptly to assume the defense of such proceeding or fails to employ
counsel reasonably satisfactory to such indemnified party or parties or (iii)
the named parties to any such proceeding (including any impleaded parties)
include both such indemnified party or parties and the indemnifying parties or
an affiliate of the indemnifying parties or such indemnified parties, and there
may be one or more defenses available to such indemnified party or parties that
are different from or additional to those available to the indemnifying parties,
in which case, if such indemnified party or parties notifies the indemnifying
parties in writing that it elects to employ separate counsel of its choice at
the expense of the indemnifying parties, the indemnifying parties shall not have
the right to assume the defense thereof and such counsel shall be at the expense
of the indemnifying parties, it being understood, however, that unless there
exists a conflict among indemnified parties, the indemnifying parties shall not,
in connection with any one such proceeding or separate but substantially similar
or related 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 indemnified party or parties. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but, if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is a party, and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 5 is unavailable to an indemnified party in respect of any
losses, claims, damages or liabilities, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified
-20-
<PAGE>
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Holders on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Holders on the other hand 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 or by the Holders and the
parties, relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred (and not otherwise reimbursed) by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, in no event shall a Selling
Holder be required to contribute any amount in excess of the amount by which
proceeds received by such Selling Holder from sales of Registrable Securities
exceeds the amount of damages that such Selling Holder has otherwise been
required to pay by reason of such untrue or allegedly 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. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
6. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not entered into nor
--------------------------
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities, if any, under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate number of the
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<PAGE>
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided, however, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders of Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by the Holders of
a majority of the Registrable Securities proposed to be sold.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to each Purchaser, the
address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered, five business
days after being deposited in the mail, postage prepaid, if mailed; (ii) when
answered back, if telexed; (iii) when receipt is acknowledged, if telecopied;
and (iv) on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of this Agreement or the Purchase
Agreement. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(e) Rules 144 and 144A. The Company covenants that it will file the
------------------
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time the Company is not required to file such reports, it will,
upon the request of any Holder of Registrable Securities, make publicly
available other information of a like nature so long as necessary to permit
sales pursuant to Rule 144 or Rule 144A under the Securities Act. The Company
further covenants
-22-
<PAGE>
that so long as any Registrable Securities remain outstanding to make available
to any Holder of Registrable Securities in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Securities pursuant to (a) such Rule 144A, or
(b) any similar rule or regulation hereafter adopted by the SEC.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Gothic Energy Corporation
By: /s/ Michael Paulk
-----------------
Michael Paulk, President
Purchaser
By:
_________________________
Name:
Title:
-24-
<PAGE>
EXHIBIT "A"
CERTIFICATE TO BE DELIVERED UPON
EXCHANGE OR REGISTRATION OF RESTRICTED SECURITIES
Re: Common Stock, par value $.01 per share ("Common Stock"),
of Gothic Energy Corporation
This Certificate relates to shares of Common Stock held in book-entry or
definitive form by _________________________ (the "Transferor").
The Transferor (check applicable box):
[_] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Global Certificate held by the
Depositary shares of Common Stock in definitive, registered form equal to its
beneficial interest in the shares of Common Stock represented by such Global
Certificate (or the portion thereof indicated above); or
[_] has requested the Transfer Agent by written order to exchange or
register the transfer of shares of Common Stock.
In connection with such request, the Transferor does hereby certify that
Transferor is familiar with the Common Stock Registration Rights Agreement (the
"Agreement") relating to the shares of Common Stock and the restrictions on
transfers thereof as provided in Sections 3.2 and 3.3 of such Agreement, and
that the transfer of shares of Common Stock requested hereby does not require
registration under the Securities Act (as defined below) because:
[_] Such shares of Common Stock are being acquired for the Transferor's
own account, without transfer (in satisfaction of Section 3.3(a)(A) or Section
3.3(d)(i)(A) of the Agreement).
[_] Such shares of Common Stock are being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")), in reliance on Rule 144A or in accordance
with Regulation S under the Securities Act. If such transfer is in accordance
with Regulation S, an opinion of counsel to the effect that such transfer does
not require registration under the Securities Act accompanies this Certificate.
<PAGE>
[_] Such shares of Common Stock are being transferred in accordance with
Rule 144 under the Securities Act. An opinion of counsel to the effect that
such transfer does not require registration under the Securities Act accompanies
this Certificate.
[_] Such shares of Common Stock are being transferred pursuant to an
effective registration statement under the Securities Act.
[_] Such shares of Common Stock are being transferred in reliance on and
in compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A or Rule 144 or Regulation S under the
Securities Act. An opinion of counsel to the effect that such transfer does not
require registration under the Securities Act accompanies this Certificate.
[Insert Name of Transferor]
Date: By: ____________________________________
-2-
<PAGE>
EXHIBIT 10.7
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE OR OTHER APPLICABLE SECURITIES LAWS AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD,
PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY STATE OR OTHER APPLICABLE SECURITIES
LAWS.
WARRANT
to Purchase Common Stock of
GOTHIC ENERGY CORPORATION
Expiring on November 24, 2002
Date of Issuance: January 23,1998 Certificate No. W-AMO-1
This Warrant to purchase Common Stock (the "Warrant") certifies that for
value received, Amoco Corporation, an Indiana corporation, or its registered
assigns (the "Holder"), is entitled to subscribe for and purchase from the
Company (as hereinafter defined), in whole or in part, 1,500,000 duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
(as hereinafter defined) at the Exercise Price (as hereinafter defined),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of shares of Common Stock purchasable
hereunder and the Exercise Price therefor are subject to adjustment as
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00PM, Tulsa, Oklahoma time, on November 24, 2002.
As used herein, the following terms shall have the meanings set forth
below:
"Company" shall mean Gothic Energy Corporation, an Oklahoma corporation,
-------
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par value
------------
$0.01 per share, authorized on the date of the original issue of this Warrant
and shall also include (i) in case of any reorganization, reclassification,
consolidation, merger, share exchange or sale, transfer or other disposition of
assets
<PAGE>
of the character referred to in Section 3.4 hereof, the stock or securities
provided for in such Section 3.4, and (ii) any other shares of common stock of
the Company into which such shares of Common Stock may be converted.
"Common Stock Deemed Outstanding" means at any given time, the number of
-------------------------------
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to paragraphs 3.2.1 and
3.2.2 hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time.
"Convertible Securities" means any stock or securities (directly or
----------------------
indirectly) convertible into or exchangeable for Common Stock.
"Exercise Price" shall mean the initial purchase price of $3.00 per share
--------------
of Common Stock payable upon exercise of the Warrant. The Exercise Price shall
be adjusted from time to time pursuant to the provisions hereof.
"Market Price" means as to any security the average of the closing prices
------------
of such security's sales on all domestic securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 10 days
consisting of the day as of which "Market Price" is being determined and the 9
consecutive business days prior to such day; provided that if such security is
listed on any domestic securities exchange the term "business days" as used in
this sentence means business days on which such exchange is open for trading. If
at any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the "Market
Price" shall be the fair value thereof determined jointly by the Company and the
Registered Holders of Warrants representing a majority of the Warrant Shares
purchasable upon exercise of all the Warrants then outstanding; provided, that
if such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected by
the Company and the Registered Holders of Warrants representing a majority of
the Warrant Shares purchasable upon exercise of all the Warrants then
outstanding. The determination of such appraiser shall be final and binding on
the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid jointly by the Company and the
Registered Holders.
-2-
<PAGE>
"Options" means any rights or options to subscribe for or purchase Common
-------
Stock or Convertible Securities.
"Person" means any individual, corporation, partnership, limited liability
------
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Warrant" shall mean this Warrant Certificate, and any one or more Warrant
-------
Certificates into which this Warrant may be exchanged or converted ("Warrants"),
representing the right to purchase up to 1,500,000 Warrant Shares, or such
greater or lesser amounts as may result pursuant to the adjustments provided for
herein.
"Warrant Shares" shall mean the shares of Common Stock or other securities
--------------
purchased or purchasable by the holder hereof upon the exercise of the Warrants,
taking into account all adjustments provided for herein.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Exercise Period.
---------------
The Warrant represented hereby may be exercised by the Holder hereof,
in whole or in part, at any time and from time to time on or after the date
hereof until 5:00PM, Tulsa, Oklahoma time, on November 24, 2002.
1.2 Method of Exercise.
------------------
To exercise the Warrants, the Holder hereof shall deliver to the
Company, at the Warrant Office designated in Section 2.1 hereof, (i) a written
notice in the form of the Subscription Notice attached as Exhibit I hereto,
stating therein the election of such holder to exercise the Warrant in the
manner provided in the Subscription Notice; (ii) payment in full of the Exercise
Price in cash or by bank check or wire transfer for all Warrant Shares purchased
hereunder, or a written notice (a "Cashless Exercise" notice) to the Company
that such Holder is exercising the Warrant (or a portion thereof) by authorizing
the Company to withhold from issuance a number of Warrant Shares issuable upon
such exercise of the Warrant which, when multiplied by the Market Price for such
shares, is equal to the Exercise Price for the total number
-3-
<PAGE>
of Warrant Shares to which such exercise relates (and such withheld shares shall
no longer be issuable under this Warrant); (iii) if this Warrant is not
registered in the name of the Holder, an Assignment or Assignments in the form
set forth in Exhibit II hereto evidencing the assignment of this Warrant to the
current Holder; and (iv) this Warrant. The Warrants shall be deemed to be
exercised on the date of receipt by the Company of the Subscription Notice,
accompanied by payment for the Warrant Shares (or the Cashless Exercise notice)
and surrender of this Warrant, as aforesaid, and such date is referred to herein
as the "Exercise Date". Upon such exercise, the Company shall, as promptly as
practicable and in any event within five (5) business days, issue and deliver to
such holder a certificate or certificates for the full number of the Warrant
Shares purchased by such holder hereunder, and shall, unless the Warrant has
expired, deliver to the holder hereof (within such five (5) day period) a new
Warrant representing the right to purchase the number of Warrant Shares, if any,
with respect to which the Warrant shall not have been previously exercised, but
in all other respects identical to this Warrant. As permitted by applicable law,
the Person in whose name the certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date and shall be entitled to all of the benefits of such holder on the
Exercise Date, including without limitation, the right to receive dividends and
other distributions for which the record date falls on or after the Exercise
Date and the right to exercise voting rights.
1.3 Expenses and Taxes. The Company shall pay all expenses and taxes
------------------
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes), other than income taxes payable by the Holder,
attributable to the preparation, issuance or delivery of the Warrant and of the
issuance of the Warrant Shares.
1.4 Reservation of Shares. The Company shall reserve at all times so long
---------------------
as the Warrant remains outstanding, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrant. The Company shall take all
such actions as may be necessary to assure that all such Warrant Shares may be
so issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange or automated quotation
system upon which shares of Common Stock may be listed or quoted (except for
official notice of issuance, which shall be immediately delivered by the Company
upon each such issuance). The Company shall take all such actions as may be
necessary to assure that all such Warrant Shares shall be authorized, approved
for and listed on any national securities exchange or quotation system on which
the Company's Common Stock is listed or quoted. The Company shall not take any
action which would cause the number of authorized but unissued shares of Common
Stock to be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant.
-4-
<PAGE>
1.5 Valid Issuance. All Warrant Shares that may be issued upon any
--------------
exercise of the Warrant will, upon issuance by the Company, be duly and validly
issued, fully paid and non-assessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price then in effect to be less than the par value, if
any, of the Common Stock).
1.6 Purchase Agreement. The Warrant represented hereby is part of a duly
------------------
authorized issuance and sale of warrants to purchase Common Stock pursuant to
that certain Agreement of Purchase and Sale dated November 24, 1997 (the
"Agreement"), between the Company and Amoco Production Company, a wholly-owned
indirect subsidiary of Amoco ("Amoco Production"). The Warrant is issued in
partial consideration for Amoco Production's sale of certain properties to the
Company.
1.7 Acknowledgment of Rights. At the time of the exercise of the Warrants
------------------------
in accordance with the terms hereof and upon the written request of the Holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such Holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
provided, however, that if the holder hereof shall fail to make any such
- -------- -------
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
1.8 No Fractional Shares. The Company shall not be required to issue
--------------------
fractional shares of Common Stock (or other securities) on the exercise of this
Warrant. If more than one Warrant shall be presented for exercise at the same
time by the same Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of whole Warrant Shares purchasable on exercise of the Warrants so
presented. If any fraction of a Warrant Share would, except for the provisions
of this Section 1.8, be issuable on the exercise of this Warrant, the Company
shall pay an amount in cash calculated by it to be equal to the Market Price of
one such share at the time of such exercise multiplied by such fraction computed
to the nearest whole cent.
1.9 Assistance and Cooperation. The Company shall not close its books
--------------------------
against the transfer of this Warrant or of any Warrant Share in any manner which
interferes with the timely exercise of this Warrant. The Company shall assist
and cooperate with any Holder required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
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<PAGE>
1.10 Delayed Exercise. Notwithstanding any other provision hereof, if an
----------------
exercise of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the Holder hereof, be
conditioned upon the consummation of the public offering or sale of the Company
in which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
ARTICLE II
TRANSFER
2.1 Warrant Office. The Company shall maintain an office for certain
---------------
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 5727 South Lewis Avenue, Suite 8700, Tulsa, Oklahoma
74105, and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to the holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the Person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
2.2 Ownership of Warrants. The Company may deem and treat the Person in
---------------------
whose name the Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if otherwise properly assigned in compliance with this
Article II (i.e., but for registration of the transfer at the Warrant Office),
may be exercised by an assignee for the purchase of Warrant Shares without
having a new Warrant issued.
2.3 Restrictions on Transferability of Warrant. Subject to the transfer
------------------------------------------
conditions referred to herein, this Warrant and all rights hereunder (including,
but not limited to, Registration Rights under Article VII) are transferable, in
whole or in part, without charge to the Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
Warrant Office of the Company. The Company agrees to maintain at the Warrant
Office books for the registration and transfer of the Warrants. The Company
shall, from time to time, register the transfer of the Warrants in such books
upon surrender of any such Warrant at the Warrant Office accompanied by a
properly executed Assignment and written instructions for transfer satisfactory
to the Company. Upon any such transfer and upon payment
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<PAGE>
by the holder or its transferee of any applicable transfer taxes, a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be cancelled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the transfer of the Warrants pursuant to this Section 2.3. Prior to any
transfer as provided herein, the transferor shall provide written notice to the
Company.
2.4 Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof, by the Holder at the Warrant Office of
the Company, for new Warrants of like tenor representing in the aggregate the
purchase rights hereunder, and each of such new Warrants shall represent such
portion of such rights as is designated by the Holder at the time of such
surrender. The date the Company initially issues this Warrant shall be deemed to
be the "Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All Warrants representing portions
of the rights hereunder are referred to herein as the "Warrants."
2.5 Compliance with Securities Laws. Subject to Article VII hereof, and
-------------------------------
notwithstanding any other provisions contained in this Warrant, the Holder
hereof understands and agrees that the following restrictions and limitations
shall be applicable to all Warrant Shares and to all resales or other transfers
thereof pursuant to the Securities Act:
2.5.1 The holder hereof agrees that the Warrant and Warrant Shares
shall not be sold or otherwise transferred unless the Warrant or Warrant Shares
are registered under the Securities Act and applicable state securities or blue
sky laws or are sold in a transaction that is exempt therefrom.
2.5.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE OR OTHER APPLICABLE SECURITIES LAWS
AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
STATE OR OTHER APPLICABLE SECURITIES LAWS."
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<PAGE>
2.5.3 Stop transfer instructions will be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof not in
accordance with this Section 2.5.
ARTICLE III
ANTI-DILUTION
3. Adjustment of Exercise Price and Number of Shares. In order to
-------------------------------------------------
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 3,
and the number of shares of Common Stock (i.e., Warrant Shares) obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time as
provided in this Article III.
3.1 Adjustment of Exercise Price and Number of Shares upon Issuance of
------------------------------------------------------------------
Common Stock.
- ------------
3.1.1 If and whenever on or after the Date of Issuance of this
Warrant the Company issues or sells, or in accordance with paragraph 3.2 is
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Exercise Price in effect immediately prior to such time,
then immediately upon such issue or sale the Exercise Price shall be reduced to
the new Exercise Price determined by dividing:
(A) the sum of (x) the product derived by multiplying the
Exercise Price in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (y) the consideration, if any, received by the Company upon
such issue or sale, by
(B) the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale.
3.1.2 Upon each such adjustment of the Exercise Price hereunder, the
number of shares of Common Stock acquirable upon exercise of this Warrant shall
be adjusted to the number of shares determined by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock acquirable upon exercise of this
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<PAGE>
Warrant immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
3.2 Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price upon paragraph 3.1, the following shall
be applicable:
3.2.1 Issuance of Rights or Options. If the Company in any manner
-----------------------------
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Exercise Price in effect immediately prior to the time of the granting or
sale of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options, or upon conversion or exchange of
the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options, shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting or sale of such
Options for such price per share. For purposes of this paragraph, the "price per
share for which Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by dividing
(A) the total amount, if any, received or receivable by the Company as
consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon exercise of such Options
or upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
3.2.2 Issuance of Convertible Securities. If the Company in any
----------------------------------
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Exercise Price in effect immediately prior to the time of such issue or
sale, then the maximum number of shares of Common Stock issuable upon conversion
or exchange of such Convertible Securities shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the issue or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable upon
conversion or exchange thereof" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B)
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<PAGE>
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Exercise Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Exercise Price had been or are to be made pursuant to
other provisions of this paragraph 3.2, no further adjustment of the Exercise
Price shall be made by reason of such issue or sale.
3.2.3 Change in Option Price or Conversion Rate. If the purchase
-----------------------------------------
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Exercise Price in effect at the time
of such change shall be adjusted immediately to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of shares of Common Stock
issuable hereunder shall be correspondingly adjusted. For purposes of this
paragraph 3.2, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change; provided that no such change shall at any time cause the Exercise Price
hereunder to be increased.
3.2.4 Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any right to
- ----------
convert or exchange any Convertible Securities without the exercise of such
Option or right, the Exercise Price then in effect and the number of shares of
Common Stock acquirable hereunder shall be adjusted immediately to the Exercise
Price and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued. For purposes of this paragraph 3.2, the expiration or termination
of any Option or Convertible Security which was outstanding as of the date of
issuance of this Warrant shall not cause the Exercise Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
3.2.5 Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Company
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<PAGE>
therefor. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company shall be the Market
Price thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity the
amount of consideration therefor shall be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
shall be determined at the reasonable discretion of the board of directors of
the Company consistent with the value assigned for Generally Accepted Accounting
Principles purposes.
3.2.6 Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed to
have been issued for consideration determined at the reasonable discretion of
the board of directors of the Company consistent with the value assigned for
Generally Accepted Accounting Principles purposes.
3.2.7 Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
3.2.8 Record Date. If the Company takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
3.3 Stock Splits and Reverse Splits. In the event that the Company shall
-------------------------------
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares (by stock split, stock dividend, recapitalization or
otherwise), the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Warrant Shares purchasable
pursuant to this Warrant immediately prior to such subdivision shall be
proportionately increased. Conversely, in the event that the outstanding shares
of Common Stock shall at any time be combined into a smaller number of shares
(by reverse stock split or
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<PAGE>
otherwise), the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of Warrant Shares purchasable
upon the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
3.4 Reorganizations and Asset Sales. If any capital recapitalization,
-------------------------------
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another Person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another Person shall be effected in such a way that a holder of Common
Stock of the Company shall be entitled to receive capital stock, securities or
assets with respect to or in exchange for their shares, then the following
provisions shall apply:
3.4.1 As a condition of such recapitalization, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or other
disposition (except as otherwise provided below in this Section 3.2), lawful and
adequate provisions (in form and substance satisfactory to the Holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of all of the Warrants then outstanding) shall be made whereby the holder of
Warrants shall thereafter have the right to purchase and receive upon the terms
and conditions specified in this Warrant and in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore receivable upon the
exercise of the rights represented hereby, such shares of capital stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
Warrant Shares immediately theretofore so receivable had such recapitalization,
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision (in form and
substance satisfactory to the Holders of Warrants representing a majority of the
Warrant Shares obtainable upon exercise of all of the Warrants then outstanding)
shall be made with respect to the rights and interests of such Holder(s) to the
end that the provisions hereof (including, without limitation, in the case of
any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate adjustment in the
number of shares of Common Stock acquirable and receivable upon exercise of the
Warrants, if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
3.4.2 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such
-12-
<PAGE>
assets shall have assumed by written instrument executed and mailed or delivered
to each of the Holders hereof at the last address of such holder appearing on
the books of the Company, (i) the obligation to deliver to such holder such
shares of capital stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to receive, and (ii) all other
liabilities and obligations of the Company hereunder. As a condition to any
consolidation, share exchange or merger, such successor Person must assume the
Company's obligations hereunder by written instrument and issue a new warrant
revised to reflect the modifications in this Warrant effected pursuant to this
Section 3.4.
3.5 Certain Events. If any event occurs of the type contemplated by the
--------------
provisions of this Article III but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
board of directors shall make an appropriate adjustment in the Exercise Price
and the number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the holders of the Warrants; provided
that no such adjustment shall increase the Exercise Price or decrease the number
of shares of Common Stock obtainable as otherwise determined pursuant to this
Article III.
3.6 Notice of Adjustment. Whenever the Exercise Price or the number of
--------------------
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based. The Company shall promptly cause to be mailed to the
holder hereof copies of such Officer's Certificate together with a notice
stating that the Exercise Price and the number of Warrant Shares purchasable
upon exercise of the Warrants have been adjusted and setting forth the adjusted
Exercise Price and the adjusted number of Warrant Shares purchasable upon the
exercise of the Warrants.
3.7 Notices to Holders. In case at any time the Company proposes:
------------------
(i) to declare any dividend upon its Common Stock payable in capital
stock or make any dividend or other distribution (including cash dividends) to
the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
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<PAGE>
(iii) to effect any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation, merger or share exchange of
the Company with another Person, or sale, transfer or other disposition of all
or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 20 days' (but not more than 90 days') prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of such issuance, recapitalization, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, recapitalization, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, at least 20 days' (but not more than 90 days') prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock, as the case
may be, for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
3.8 Exceptions to Anti-Dilution Adjustment. Notwithstanding anything to
--------------------------------------
the contrary contained in this Warrant, there shall be no adjustment in the
Exercise Price or the number of shares of Common Stock (i.e., Warrant Shares)
obtainable upon exercise of this Warrant as a consequence of the issuance by the
Company of any shares of Common Stock upon exercise or conversion of (i) any
option, warrant, convertible security or other right to acquire shares of Common
Stock of the Company outstanding or in effect as of the date of issuance of this
Warrant, and (ii) any options, stock purchase or other rights to acquire Common
Stock of the Company on exercise of options granted or that may be granted under
the Company's 1989 Incentive Plan, 1996 Omnibus Incentive Plan, or 1996 Non-
Employee Option Plan.
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<PAGE>
ARTICLE IV
Liquidating Dividends
If the Company declares or pays a dividend upon the Common Stock payable
otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Company shall pay to the Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to such
Holder on the Common Stock had this Warrant been fully exercise immediately
prior to the date on which a record is taken for such Liquidating Dividend, or,
if no record is taken, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined.
ARTICLE V
Purchase Rights
If at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the "Purchase
Rights"), then the Holder of this Warrant shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
ARTICLE VI
Information Rights
6.1 Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to each Holder (so long as such Person holds any Warrants), within ten
days after transmission thereof, copies of all notices and reports which the
Company is required to file (or would be required to file as a publicly listed
company) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the NASD By-Laws and Listing Agreement (or other applicable exchange
rules) and all reports, press releases and correspondence sent to stockholders
of the Company and
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<PAGE>
shall notify each Holder of each other filing by the Company with the Securities
and Exchange Commission.
6.2 Rule 144 and 144A Reporting Information. With a view to making
---------------------------------------
available the benefits of certain rules and regulations of the SEC which may at
times permit the sale of the Warrant or Warrant Shares to the public or other
persons without registration, the Company shall use its reasonable best efforts
to:
6.2.1 make and keep public information available, as contemplated by
Rule 144 under the Securities Act;
6.2.2 file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
6.2.3 furnish to each holder of Warrant Shares promptly upon request
(A) a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 of the Securities Act and the Exchange Act, (B)
copies of all SEC filings made by the Company within the previous one (1) year
period and any press releases issued by the Company since the date of the last
such filing, and (C) copies of all Rule 144A information with respect to the
Company.
ARTICLE VII
Registration Rights
7.1 Demand Registrations.
--------------------
7.1.1 Registration of Immediate Offering. At any time after March
----------------------------------
31, 1998, the holders of at least 50% of the Registrable Securities (hereinafter
the "Majority Holders") may request registration by the Company under the
Securities Act of the resale by such holders of all or any portion of their
Registrable Securities (an "Immediate Offering Registration"). A request for an
Immediate Offering Registration shall specify the approximate number of
Registrable Securities requested to be registered by the requesting holders and
the anticipated per share price range for such offering. Within 10 days after
receipt of such request, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and shall include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after
delivery of the Company's notice.
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<PAGE>
7.1.2 Registration of Delayed or Continuous Offering. At any time
----------------------------------------------
after March 31, 1998, the Majority Holders may request registration by the
Company under the Securities Act of all or any portion of their Registrable
Securities for resale in a delayed or continuous offering to the extent
permitted by Rule 415 (or any successor rule thereto) under the Securities Act
(a "Shelf Registration"). A registration statement for a Shelf Registration
shall provide for resale by the holders in the manner or manners designated in
writing to the Company by them (including, without limitation, one or more
underwritten offerings). Within 10 days after the receipt of such request, the
Company shall give similar written notice of such requested registration to all
other holders of Registrable Securities and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after delivery of the
Company's notice.
7.1.3 Number of Demand Registrations. The Majority Holders shall be
------------------------------
entitled to request two (2) Immediate Offering Registrations; provided, a
registration shall not count as one of the permitted Immediate Offering
Registrations (A) until it has become effective, and (B) unless the Holders of
Registrable Securities requesting such registration are able to register and
sell at least 80% of the Registrable Securities requested to be included in such
registration. In addition, the Majority Holders shall be entitled to one (1)
Shelf Registration; provided, a registration shall not count as the permitted
Shelf Registration until it has become effective. For purposes of this Warrant,
an Immediate Offering Registration and a Shelf Registration shall each
constitute and be referred to as "Demand Registration."
7.1.4 Priority on Demand Registrations. The Company shall not include in
--------------------------------
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the Holders of at least 75% of the
Registrable Securities initially requesting such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of shares, if any, which can be
sold in an orderly manner in such offering within a price range acceptable to
the Majority Holders initially requesting registration, the Company shall
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold in an orderly
manner within the price range of such offering, pro rata (i) first, among the
respective Majority Holders requesting registration, and (ii) second, among the
remaining respective holders of Registrable Securities, in each case on the
basis of the amount of shares requested for inclusion by each such holder. Then,
after the inclusion of all such Shares, the Company shall include any other
securities requested for inclusion.
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<PAGE>
7.1.5 Selection of Underwriters. The Majority Holders initially
-------------------------
requesting registration in any Demand Registration hereunder shall have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which shall not be unreasonably
withheld.
7.1.6 Other Registration Rights. Except as provided in this Agreement,
-------------------------
the Company shall not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, on a basis pari passu or
senior to the Holders' rights granted in Section 7.1 or 7.2 hereof, without the
prior written consent of all the holders of the Warrant Shares underlying all
Warrants then outstanding (or the Holders of such Warrants representing the
right to purchase such Warrant Shares).
7.2 Piggyback Registrations.
-----------------------
7.2.1 Right to Piggyback. At any time after March 31, 1998,
------------------
whenever the Company proposes to register any of its securities under the
Securities Act (other than pursuant to a registration on Form S-8) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give prompt written
notice (in any event within five (5) business days after its receipt of notice
of any exercise of demand registration rights other than under this Agreement)
to all holders of Warrants or Registrable Securities of its intention to effect
such a registration and shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 20 days after the receipt of the Company's notice.
7.2.2 Priority on Primary Registrations. If a Piggyback
---------------------------------
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration, subject, however, to the terms of any other agreement entered
into prior to the date hereof to which the Company shall be a party, (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, subject to pro rata
cut back among the holders thereof, and (iii) third, other securities requested
to be included in such registration.
7.2.3 Priority on Secondary Registrations. If a Piggyback
-----------------------------------
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in
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<PAGE>
an orderly manner in such offering within a price range acceptable to the
holders initially requesting such registration, the Company shall include in
such registration, subject, however, to the terms of any other agreement entered
into prior to the date hereof to which the Company shall be a party, (i) first,
the securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among the holders of such securities on the basis
of the number of securities so requested to be included therein, and (iii),
third, other securities requested to be included in such registration.
7.2.4 Right of Holder to Withdraw. A Holder who has given notice to
---------------------------
the Company under paragraph 7.2.1 requesting inclusion of any Registrable
Securities in a Piggyback Registration shall, on five (5) business days notice
to the Company or secondary sellers, have the right to withdraw its Registrable
Securities from the Piggyback Registration.
7.2.5 Right of Company to Withdraw. The Company shall, on five
----------------------------
business days notice to all holders who have given notice to the Company under
paragraph 7.2.1 requesting inclusion of their Registrable Securities in a
Piggyback Registration have the right to withdraw any registration statement
filed pursuant to this Section 7.2 for a Piggyback Registration at any time
prior to the effective date thereof.
7.3 Maintaining Effectiveness of Registration Statement.
---------------------------------------------------
7.3.1 The Company shall use its reasonable best efforts to keep any
registration statement prepared and filed pursuant to this Article VII
continuously effective under the Securities Act from the initial effectiveness
thereof until the earliest to occur of (i) the date when all Registrable
Securities registered thereunder have been sold in the manner set forth and as
contemplated in the registration statement, or (ii) the date when counsel to the
Company or other counsel of such Holders' choosing shall render an opinion
addressed to the Holders whose Registrable Securities are registered thereunder,
to the effect that all remaining Registrable Securities are freely transferable
in the open market without limitations as to volume and manner of sale, and
without being required to file any forms or reports with the Securities and
Exchange Commission (the "SEC") under the Securities Act or the rules and
regulations thereunder of the Company (such period being referred to as the
"Effectiveness Period").
7.3.2 If the registration statement filed pursuant to this Article
VII ceases to be effective for any reason at any time during the Effectiveness
Period, the Company shall use its reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 45 days of such cessation of effectiveness amend such registration
statement in a manner reasonable expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional registration
statement covering all of
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<PAGE>
the Registrable Securities originally registered. If an additional registration
statement is filed, the Company shall use its reasonable best efforts to cause
such registration statement to be declared effective as soon as practicable
after such filing and to keep such registration statement continuously effective
for the remainder of the Effectiveness Period.
7.4 Expenses of Registration. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Holder shall be borne by the Holder. The
Company shall pay all Registration Expenses in connection with any registration
initiated under this Article whether or not it has become effective and whether
or not such registration has counted as one of the permitted registrations.
7.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant hereto, the Company
will keep the Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense, the Company will:
7.5.1 Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
7.5.2 Notify each Holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period of time set forth in paragraph
7.3, as applicable, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement.
7.5.3 Furnish to each Holder such number of copies of the
registration statement, each supplement and amendment thereto, and the
prospectus included therein, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as such
Holder may reasonably request in order to facilitate the public sale of the
shares by such Holder, and promptly furnish to each Holder notice of any stop-
order or similar notice issued by the Commission or any state agency charged
with the regulation of securities, and notice of any Nasdaq or securities
exchange listing.
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<PAGE>
7.5.4 Use its reasonable best efforts to register or qualify such
Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller.
7.5.5 Use its best efforts to cause the Warrant Shares to be listed
on the Nasdaq SmallCap Market and each Securities Exchange on which the Common
Stock is approved for listing.
7.5.6 Notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the existence of facts or the happening of any event (without
necessarily identifying such facts or event to such sellers) as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading.
7.5.7 Enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities in any underwritten offering of Registrable Securities.
7.5.8 Make available for reasonable inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, such financial and other
records, corporate documents and properties of the Company as are customarily
made available to such persons on a confidential basis by the issuer in
connection with a registered public offering of securities similar to the
Registrable Securities, and cause the Company's officers, directors, employees
and independent accountants to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection with
such registration statement.
7.5.9 Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration
-21-
<PAGE>
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
7.6 Indemnification.
7.6.1 To the extent permitted by law, the Company will indemnify the
Holder, each of its officers and directors and partners, and each person
controlling the Holder within the meaning of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of the Securities Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, to the extent such expenses, claims, losses, damages or
liabilities arise out of or are based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other similar document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse Holder, each of its officers and directors and partners, and each
person controlling Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); provided, further,
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company by the Holders or such controlling person specifically for use therein.
Notwithstanding the foregoing, insofar as the foregoing indemnity relates to any
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the registration
statement becomes effective or in the final prospectus filed with the Commission
pursuant to the applicable rules of the Commission or in any supplement or
addendum thereto, the indemnity agreement herein shall not inure to the benefit
of any underwriter if a copy of the final prospectus filed pursuant to such
rules, together with all supplements and addenda thereto, was not furnished to
the person or entity asserting the loss, liability, claim or damage at or prior
to the time such furnishing is required by the Securities Act.
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<PAGE>
7.6.2 To the extent permitted by law, each Holder will, if
securities held by the Holder are included in the securities as to which such
registration, qualification or compliance is being effected pursuant to terms
hereof, severally but not jointly, indemnify the Company, each of its directors
and officers, each person who controls the Company or such underwriter within
the meaning of the Securities Act, and each other person selling the Company's
securities covered by such registration statement, each of such person's
officers and directors and each person controlling such persons within the
meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, or any violation by Holder of any rule or regulation promulgated
under the Securities Act applicable to Holder and relating to action or inaction
required of Holder in connection with any such registration, qualification or
compliance, and will reimburse the Company, such other persons, such directors,
officers, persons, or control persons for any legal or other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder specifically for use therein; provided,
however, that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of such
Holder under this subsection (b) shall be limited in an amount equal to the net
proceeds from the sale of the shares sold by such Holder, unless such liability
arises out of or is based on willful conduct by such Holder. In addition,
insofar as the foregoing indemnity relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement becomes
effective or in the final prospectus filed pursuant to applicable rules of the
Commission or in any supplement or addendum thereto, the indemnity agreement
herein shall not inure to the benefit of the Company if a copy of the final
prospectus filed pursuant to such rules, together with all supplements and
addenda thereto, was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
7.6.3 Notwithstanding the foregoing paragraphs 7.6.1 and 7.6.2 of
this Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought,
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<PAGE>
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or as
to which the Indemnifying Party is asserting separate or different defenses,
which defenses are inconsistent with the defenses of the Indemnified Party (in
which case the Indemnifying Party shall pay for one separate counsel for those
Indemnified Parties with whom such conflict exists). No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party. The failure of an Indemnifying Party to give
notice to the Indemnified Party of its election to assume and control the
defense of any action for which notice has been given to the Indemnifying Party
in accordance with this paragraph within 30 days after receipt of such notice
shall constitute an election by the Indemnifying Party not to assume and control
the defense of such action. An Indemnifying Party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
Indemnifying Party with respect to such claim, unless in the reasonable judgment
of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other of such Indemnified Parties or the Indemnifying
Party with respect to such claim, in which event the Indemnifying Party shall be
obligated to pay the fees and expenses of one separate counsel for such
Indemnified Parties.
7.6.4 If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each 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 or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and each respective
shareholder offering securities in the offering (the "Selling Security Holder"),
on the other, from the offering of the Company's securities, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and each Selling Security Holder, on the other, in connection with
the statements or omissions which resulted in such losses, claims,
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<PAGE>
damages or liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and each Selling
Security Holder, on the other, shall be the net proceeds from the offering
(before deducting expenses) received by the Company, on the one hand, and each
Selling Security Holder, on the other. The relative fault of the Company, on the
one hand, and each Selling Security Holder, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Selling Security
Holder and the parties' relevant intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each Selling Security Holder agree that it would not be just and equitable if
contribution pursuant to this Section were based solely upon the number of
entities from whom contribution was requested or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section. Notwithstanding the provisions of this Section, no
Selling Security Holder shall be required to contribute any amount or make any
other payments under this Agreement which in the aggregate exceed the proceeds
received by such Selling Security Holder. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.6.5 The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party or any officer, director or controlling person
of such Indemnified Party and shall survive the transfer of securities.
7.7 Certain Information.
7.7.1 The Holder agrees, with respect to any Registrable Securities
included in any registration, to furnish to the Company such information
regarding Holder, the Registrable Securities and the distribution proposed by
the Holder as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
7.7.2 The failure of the Holder to furnish the information requested
pursuant to this Section shall not affect the obligation of the Company to any
other selling security holders who furnish such information unless, in the
reasonable opinion of counsel to the Company, such failure impairs or may impair
the legality of the Registration Statement or the underlying offering.
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<PAGE>
7.8 Covenant to Remain Public. The Company covenants that, so long as the
Warrant or any Registrable Securities (so long as such securities remain
Registrable Securities) remains issued and outstanding, the Company shall take
all action necessary to keep its shares registered under Section 12(b) or 12(g)
of the Exchange Act, and listed and traded on the Nasdaq SmallCap Market or
other national exchange or quotation system. In the event that such registration
is suspended or the Common Stock is delisted, the Company shall use its best
efforts to promptly reinstate such shares.
7.9 Definitions Contained in Article VII. As used in this Article, the
following terms shall have the meanings set forth below:
7.9.1 "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
7.9.2 "Holder" shall mean the Holder of any Warrants or holder of
any Warrant Shares issued upon exercise of any Warrants and any transferees.
7.9.3 "Registrable Securities" shall mean (i) the Warrant Shares;
and (ii) any Common Stock issued or issuable at any time or from time to time in
respect of the Warrant Shares upon a stock split, stock dividend,
recapitalization or other similar event involving the Company until such Common
Stock is sold pursuant to a Registration Statement or under Rule 144(k) (or
successor Rule) under the Securities Act.
7.9.4 The terms "register", "registered", and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
7.9.5 "Registration Expenses" shall mean all expenses, other than
Selling Expenses (as defined below), incurred by the Company in complying with
this Article, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company and all auditors, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
7.9.6 "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of Warrant
Shares registered by the Holder and, except as set forth above, all fees and
disbursements of counsel for the Holder.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement. This Warrant and the Purchase Agreement contains
----------------
the entire agreement between the holder hereof and the Company with respect to
the Warrant Shares purchasable upon exercise hereof and supersedes all prior
arrangements or understandings with respect thereto.
8.2 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws (other than the laws of conflicts) of the State of
Oklahoma.
8.3 Amendment and Waiver. Except as otherwise provided herein, the
--------------------
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holders of
Warrants representing a majority of the Warrant Shares obtainable upon exercise
of the Warrants; provided that no such action may change the Exercise Price of
the Warrants, the number of shares or class of stock obtainable upon exercise of
each Warrant or the Registration Rights set forth in Article VII herein.
Notwithstanding the foregoing, the Company may, at its option, reduce the
Exercise Price of the Warrants, increase the number of shares of stock
obtainable upon exercise of each Warrant, or extend the Term of the Warrant for
such period as it may determine.
8.4 Illegality. In the event that any one or more of the provisions
----------
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
8.5 Copy of Warrant. A copy of this Warrant shall be filed among the
---------------
records of the Company.
8.6 Notice. Any notice or other document required or permitted to be
------
given or delivered to the Holder hereof shall be in writing and delivered at, or
sent by certified or registered mail to such holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of this Warrant or at any more recent address of which the holder
hereof shall have notified the Company in writing. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent by certified or registered mail to, the offices of the
Company at 5727 South Lewis Avenue, Suite
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<PAGE>
700, Tulsa, Oklahoma 74105, or such other address within the continental United
States of America as shall have been furnished by the Company to the Holder of
this Warrant.
8.7 Limitation of Liability; Not Stockholders. No provision of this
-----------------------------------------
Warrant shall be construed as conferring upon the Holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided, including, but not limited to, the notice of an upcoming
dividend record date), in respect of meetings of stockholders for the election
of directors of the Company or any other matter whatsoever as a stockholder of
the Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such Holder for the purchase price of any shares of Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
8.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
--------------------------------------------
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any warrant issued under the provisions
of this Section 8.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of warrants
pursuant to this Section 8.8.
8.9 Headings. The Article and Section and other headings herein are for
--------
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name.
GOTHIC ENERGY CORPORATION
Dated: January 23, 1998 By: /s/ Michael Paulk
-----------------
Name: Michael Paulk
Title: President
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<PAGE>
Exhibit I
SUBSCRIPTION NOTICE
-------------------
The undersigned, the holder of the attached Warrant (Certificate No.
W-__________), hereby elects to subscribe to exercise purchase rights
represented thereby and to purchase thereunder, __________ shares of the Common
Stock covered by such Warrant, and herewith makes payment in full for such
shares pursuant to Section 1.1 of such Warrant, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to
_________________________ and (b) if such shares shall not include all of the
shares issuable as provided in such Warrant, that a new warrant of like tenor
and date for the balance of the shares of Common Stock issuable thereunder be
delivered to the undersigned.
Dated: __________________________________________
__________________________________________
Address
__________________________________________
City, State, Zip Code
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<PAGE>
Exhibit II
ASSIGNMENT
----------
For value received, _________________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint _________________________ attorney, to transfer such Warrant on the
books of the Company, with full power of substitution.
Dated: __________________________________________
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<PAGE>
EXHIBIT 10.8
FIRST SUPPLEMENTAL INDENTURE
AMONG GOTHIC ENERGY CORPORATION,
GOTHIC ENERGY OF TEXAS, INC.,
GOTHIC GAS CORPORATION
AND
THE BANK OF NEW YORK
THIS FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") is
made as of the 23rd day of January 1998 by and between GOTHIC ENERGY
CORPORATION, an Oklahoma corporation (the "Company") and GOTHIC ENERGY OF TEXAS,
INC., an Oklahoma corporation, and GOTHIC GAS CORPORATION, an Oklahoma
corporation (the "Initial Guarantors") and THE BANK OF NEW YORK, a New York
banking corporation, as trustee (the "Trustee").
RECITALS:
WHEREAS, the Company, the Initial Guarantors and the Trustee have
entered into an indenture dated as of September 9, 1997 (the "Indenture"); (all
terms defined in the Indenture shall have the same meanings in this Supplemental
Indenture unless otherwise defined herein); and
WHEREAS, the Company is entering into a series of transactions,
including the acquisition by the Company of producing natural gas properties,
located in the Anadarko and Arkomo Basins of Oklahoma, from Amoco Production
Company, a subsidiary of Amoco Corporation (the "Amoco Acquisition,'); and
WHEREAS, the purpose of the amendment to the Indenture described in
this Supplemental Indenture is to permit the Company to incur indebtedness to
complete the Amoco Acquisition and to collateralize such Indebtedness; and
WHEREAS, Article IX of the Indenture provides a manner by which the
Indenture may be amended, with the consent of the Holders of at least two-thirds
in aggregate principal amount of the then outstanding Securities, by written act
of said Holders delivered to the Company and the Trustee; and
WHEREAS, the Holders of at least two-thirds in aggregate principal
amount of the outstanding Securities have delivered said consents to the Trustee
and the Company; and
WHEREAS, pursuant to and in accordance with Section 9.02 of the
Indenture, and with the consent of the Holders of at least two-thirds in
aggregate principal amount of the outstanding Securities, the Company, the
Initial Guarantors and the Trustee have agreed to enter into this Supplemental
Indenture;
<PAGE>
NOW THEREFORE, each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the Holders of the
Company's 12 1/4% Series A and Series B Senior Notes due 2004:
1. Subject to Section 4 hereof, the following definition is added to
Section 1.01 of the Indenture:
"Amoco Acquisition" means the acquisition by the Company pursuant
to an agreement dated November 15, 1997 with Amoco Production Company
of natural gas producing properties located in the Anadarko and Arkoma
Basins of Oklahoma.
2. Subject to Section 4 hereof, the definition of "Permitted
Indebtedness" contained in Section 1.01 of the Indenture is hereby amended to
read in its entirety as follows;
"Permitted Indebtedness" means (i) Indebetedness of the Company
and its Subsidiaries outstanding as of the Issue Date plus
Indebtedness incurred to consummate the Amoco Acquisition (less Net
Cash Proceeds from an Equity Offering applied to permanently retire
indebtedness incurred to consummate the Amoco Acquisition); (ii)
indebtedness of the Company and its Subsidiaries that are, or will
become, guarantors under a Bank Credit Facility as the same may be
amended, refinanced or replaced, in a principal amount outstanding at
any time not to exceed a principal amount equal to $30.0 million, plus
related accrued interest and costs, less any Net Cash Proceeds applied
in accordance with Section 4.11(b) to repay or prepay such
Indebtedness that results in a permanent reduction in any revolving
credit or other commitment relating thereto or the maximum amount that
may be borrowed thereunder; provided, however, that Indebtedness
-----------------
outstanding which was incurred to consummate the Amoco Acquisition
shall reduce amounts available for incurrence under this subclause
(ii); (iii) other indebtedness of the Company and its Subsidiaries in
a principal amount not to exceed $10.0 million at any one time
outstanding plus accrued interest thereon; (iv) Non-Recourse
Indebtedness; (v) Indebtedness of the Company to any Wholly Owned
Subsidiary of the Company and Indebtedness of any Subsidiary of the
Company to the Company or another Wholly Owned Subsidiary of the
Company; (vi) Permitted Company Refinancing Indebtedness; (vii)
Permitted Subsidiary Refinancing Indebtedness; (viii) obligations
under hedging arrangements that the Company and its Subsidiaries enter
into in the ordinary course of business for the purpose of protecting
their production against fluctuations in oil and natural gas prices;
(ix) Indebtedness under the Securities; and (x) Indebtedness
of a Subsidiary pursuant to a Guarantee of the Securities pursuant to
Article X of this Indenture.
3. Subject to Section 4 hereof, the definition of "Permitted Liens"
contained in Section 1.01 of the Indenture is hereby amended to read in its
entirety as follows:
2
<PAGE>
"Permitted Liens" means (i) Liens outstanding as of the Issue
Date; (ii) Lien now or hereafter securing a Bank Credit Facility and
bank Indebtedness incurred to consummate the Amoco Acquisition; (iii)
Liens now or hereafter securing any interest rate hedging obligations
so long as the related Indebtedness (a) constitutes Senior
Indebtedness or (b) is, or is permitted to be under this Indenture,
secured by a Lien on the same property securing such interest rate
obligations; (iv) Liens now or hereafter securing any interest rate
hedging obligations so long as the related Indebtedness (a)
constitutes the Securities (or any Refinancing Indebtedness of the
Company in respect thereof) or (b) is, or is permitted to be under the
Indenture, secured by a Lien on the same property securing such
interest rate hedging obligations; (v) Liens securing Indebtedness,
the proceeds of which are used to refinance secured Indebtedness of
the Company or its Subsidiaries; provided, that such Liens extend to
--------
or cover only the property or assets currently securing the
Indebtedness being refinanced; (vi) Liens for taxes, assessments and
governmental charges not yet delinquent or being contested in good
faith and for which adequate reserves have been established to the
extent required by GAAP; (vii) mechanics', workmen's, materialmen's,
operators' or similar Liens arising in the ordinary course of
business; (viii) Liens in connection with workers' compensation,
unemployment insurance or other social security, old age pension or
public liability obligations; (ix) Liens, deposits or pledges to
secure the performance of bids, tenders, contracts (other than
contracts for the payment of money), leases, public or statutory
obligations, surety, stay, appeal indemnity, performance or other
similar bonds, or other similar obligations arising in the ordinary
course of business; (x) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, rights of way, zoning or
other restrictions as to the use of real properties, and minor defects
in title which, in the case of any of the foregoing, were not incurred
or created to secure the payment of borrowed money or the deferred
purchase price of property or services, and in the aggregate do not
materially adversely affect the value of such properties or materially
impair use for the purposes of
which such properties are held by the Company or any Subsidiaries;
(xi) Liens on, or related to, properties to secure all or part of the
costs incurred in the ordinary course of business of exploration,
drilling, development or operation thereof, (xii) Liens on pipeline or
pipeline facilities which arise out of operation of law; (xiii)
judgment and attachment Liens not giving rise to an Event of Default
or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by
appropriate proceedings and for which adequate reserves have been
made; (xiv) (a) Liens upon any property of any Person existing at the
time of acquisition thereof by the Company or a Subsidiary, (b) Liens
upon any property of a Person existing at the time such Person is
merged or consolidated with the Company or any Subsidiary or existing
at the time of the sale or transfer of any such property of such
Person to the Company or any Subsidiary, or (c) Liens upon any
property of a Person existing at the time such
3
<PAGE>
Person becomes a Subsidiary; provided, that in each case such Lien has
--------
not been created in contemplation of such sale, merger, consolidation,
transfer or acquisition; and provided that in each such case no such
--------
Lien shall extend to or cover any property of the Company or any
Subsidiary other than the property being acquired and improvements
thereon; (xv) Liens on deposits to secure public or statutory
obligations or in lieu of surety or appeal bonds entered into in the
ordinary course of business; (xvi) Liens in favor of collecting or
payor banks having a right of setoff, revocation, refund or chargeback
with respect to money or instruments of the Company or any Subsidiary
on deposit with or in possession of such bank; (xvii) purchase money
security interests granted in connection with the acquisition of
assets in the ordinary course of business and consistent with past
practices; provided, that (A) such Liens attach only to the property
--------
so acquired with the purchase money indebtedness secured thereby and
(B) such Liens secure only Indebtedness that is not in excess of 100%
of the purchase price of such assets; (xviii) Liens reserved in oil
and gas mineral leases for bonus or rental payments and for compliance
with the terms of such leases; (xix) Liens arising under partnership
agreements, oil and gas leases, farm-out agreements, division orders,
contracts for the sale, purchase, exchange, transportation or
processing (but not refining) of oil, gas or other hydrocarbons,
unitization and pooling declarations and agreements, development
agreements, operating agreements, area of mutual interest agreements,
and other similar agreements which are customary in the Oil and Gas
Business; (xx) Liens securing obligations under hedging arrangements
that the Company or any Subsidiary enters into in the ordinary course
of business for the purpose of protecting its production against
fluctuations in oil and natural gas prices; and (xxi) Liens to secure
Dollar-Denominated Production Payments and Volumetric Production
Payments.
4. Upon the execution and delivery of this Supplemental Indenture by
the Company, the Initial Guarantors and the Trustee, the Indenture shall be
supplemented in accordance herewith, and this Supplemental Indenture shall form
a part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered under the Indenture shall he
bound thereby; provided, however, that Sections 1 through 3 hereof shall become
-----------------
operative upon the satisfaction (or waiver by the Company) of the conditions set
forth in the Consent Solicitation Statement, dated January 7, 1998, as
supplemented, that was provided to Holders of Securities in connection with the
Company's solicitation of consents by such Holders to the amendments set forth
herein. Upon the receipt by the Trustee of (i) an Officers' Certificate
certifying that such conditions have been satisfied, or waived by the Company,
and (ii) an Opinion of Counsel to the effect set forth in Section 9.06 of the
Indenture, the amendments set forth herein shall become operative.
5. Except as supplemented hereby, all provisions in the Indenture
shall remain in full force and effect. This Supplemental Indenture is an
indenture supplemental to and in implementation of the Indenture, and the
Indenture and the Supplemental Indenture shall
4
<PAGE>
henceforth be read and construed together. The Indenture as supplemented by this
Supplemental Indenture is in all respects confirmed and preserved.
6. If any provision of this Supplemental Indenture limits, qualifies
or conflicts with any provision of the Trust Indenture Act that is required
under such Act to be part of and govern any provision of this Supplemental
Indenture, the provisions of such Act shall control. If any provision of this
Supplemental Indenture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the provision of such Act shall be
deemed to apply to the Indenture as so modified or to be excluded by this
Supplemental Indenture, as the case may be.
7. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8. Nothing in this Supplemental Indenture, the Indenture or the
Securities, express or implied, shall give to any Person, other than the parties
hereto and thereto and their successors hereunder and thereunder and the Holders
of Securities, any benefit of any legal or equitable right, remedy or claim
under the Indenture, this Supplemental Indenture or the Securities.
9. The recitals contained herein shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
In entering into this Supplemental Indenture, the Trustee shall be entitled to
the benefit of every provision of the Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee, whether or
not elsewhere herein so provided.
10. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.
11. This Supplemental Indenture may be executed in counterparts, each
of which, when so executed, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
5
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.
GOTHIC ENERGY CORPORATION
By: /s/ Michael Paulk
-----------------
Name: Michael Paulk
Title: President
GUARANTORS
GOTHIC ENERGY OF TEXAS, INC.
By: /s/ Michael Paulk
-----------------
Name: Michael Paulk
Title: President
GOTHIC GAS CORPORATION
By: /s/ Michael Paulk
-----------------
Name: Michael Paulk
Title: President
THE BANK OF NEW YORK,
as Trustee
By: /s/ Van K. Brown
----------------
Name: Van K. Brown
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.9
SECOND SUPPLEMENTAL INDENTURE
AMONG GOTHIC ENERGY CORPORATION,
GOTHIC ENERGY OF TEXAS, INC.,
GOTHIC GAS CORPORATION
AND
THE BANK OF NEW YORK
THIS SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") is made
as of the 27th day of January 1998 by and between GOTHIC ENERGY CORPORATION, an
Oklahoma corporation (the "Company") and GOTHIC ENERGY OF TEXAS, INC., an
Oklahoma corporation, and GOTHIC GAS CORPORATION, an Oklahoma corporation (the
"Initial Guarantors") and THE BANK OF NEW YORK, a New York banking corporation,
as trustee (the "Trustee").
RECITALS:
WHEREAS, the Company, the Initial Guarantors and the Trustee have entered
into an indenture dated as of September 9, 1997 and a First Supplemental
Indenture dated as of January 23, 1998 (as supplemented, the "Indenture"); (all
terms defined in the Indenture shall have the same meanings in this Supplemental
Indenture unless otherwise defined herein); and
WHEREAS, the purpose of the amendment to the Indenture described in this
Supplemental Indenture is to permit the Company to redeem the Securities at its
option on the terms provided herein; and
WHEREAS, Article IX of the Indenture provides a manner by which the
Indenture may be amended, with the consent of the Holders all of the then
outstanding Securities, by written act of said Holders delivered to the Company
and the Trustee to amend certain provisions of the Indenture; and
WHEREAS, the Holders of all of the outstanding Securities have delivered
said consents to the Trustee and the Company; and
WHEREAS, pursuant to and in accordance with Section 9.2 of the Indenture,
and with the consent of the Holders of all of the outstanding Securities, the
Company, the Initial Guarantors and the Trustee have agreed to enter into this
Supplemental Indenture;
<PAGE>
NOW THEREFORE, each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Company's 12 1/4% Series A and Series B Senior Notes due 2004:
1. Subject to Section 4 hereof, Section 3.1 of the Indenture is amended to
read in its entirety as follows:
Section 3.01 Optional Redemption
-------------------
The Securities are redeemable at the option of the Company, in whole or in
part, at any time and from time to time, on or prior to March 31, 1998 at a
redemption price equal to 100% of the principal amount thereof, and from
April 1, 1998 until any time on or prior to April 30, 1998 at a redemption
price equal to 101% of the principal amount thereof, in each case plus
accrued and unpaid interest to the date of redemption. If the Company
elects to redeem Securities pursuant to the preceding sentence or the
optional redemption provisions of paragraph 6 or 7 of the Securities, it
will furnish to the Trustee and the Registrar, at least 45 days but not
more than 60 days before the redemption date (unless the Trustee consents
to a shorter period in writing), an Officers' Certificate setting forth the
redemption date, the principal amount of Securities to be redeemed and the
redemption price.
2. Upon the execution and delivery of this Supplemental Indenture by the
Company, the Initial Guarantors and the Trustee, the Indenture shall be
supplemented in accordance herewith, and this Supplemental Indenture shall form
a part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered under the Indenture shall he
bound thereby.
3. Except as supplemented hereby, all provisions in the Indenture shall
remain in full force and effect. This Supplemental Indenture is an indenture
supplemental to and in implementation of the Indenture, and the Indenture and
the Supplemental Indenture shall henceforth be read and construed together. The
Indenture as supplemented by this Supplemental Indenture is in all respects
confirmed and preserved.
4. If any provision of this Supplemental Indenture limits, qualifies or
conflicts with any provision of the Trust Indenture
Act that is required under such Act to be part of and govern any provision of
this Supplemental Indenture, the provisions of such Act shall control. If any
provision of this Supplemental Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the provision of
such Act shall be deemed to
-2-
<PAGE>
apply to the Indenture as so modified or to be excluded by this Supplemental
Indenture, as the case may be.
5. In case any provision in this Supplemental Indenture shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6. Nothing in this Supplemental Indenture, the Indenture or the
Securities, express or implied, shall give to any Person, other than the parties
hereto and thereto and their successors hereunder and thereunder and the Holders
of Securities, any benefit of any legal or equitable right, remedy or claim
under the Indenture, this Supplemental Indenture or the Securities.
7. The recitals contained herein shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee, whether or not
elsewhere herein so provided.
8. This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.
9. This Supplemental Indenture may be executed in counterparts, each of
which, when so executed, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-3-
<PAGE>
SIGNATURES
IN WTTNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.
Gothic Energy Corporation
By: /s/Michael Paulk
------------------
Michael Paulk, President
Gothic Energy of Texas, Inc., as Guarantor
By: /s/ Michael Paulk
-------------------
Name: Michael Paulk
Title: President
Gothic Gas Corporation, as Guarantor
By: /s/ Michael Paulk
-------------------
Name: Michael Paulk
Title: President
The Bank of New York, as Trustee
By: /s/ Van K. Brown
-----------------
Name: Van K. Brown
Title: Assistant Vice President
-4-
