EXHIBIT 10.7
EXHIBIT C
SYNTROLEUM CORPORATION
SECURED PROMISSORY NOTE
$19,000,000 May 8, 2002
Syntroleum Corporation, a Delaware corporation (the "Borrower"), the
principal office of which is located at ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, for value received hereby promises to pay to Marathon Oil Company, an
Ohio corporation ("Lender"), at P. O. Box 3128, Houston, Texas 77253-3128
("Registered Address"), or its registered assigns, the lesser of (i) the sum of
Nineteen Million and no/100ths Dollars ($19,000,000), or (ii) the then
outstanding principal amount of advances made to Borrower under this Note, in
each case together with interest thereon, on the terms and conditions set forth
hereinafter. The principal amount of all advances made by ▇▇▇▇▇▇ to Borrower
under this Note together with accrued interest thereon, as set forth below,
shall be due and payable in accordance with the payment terms set forth in
Section 4 below, or when declared due and payable by the Lender upon the
occurrence of an Event of Default (as defined below). Payment for all amounts
due hereunder shall be made by mail to the Registered Address of the Lender.
This Note is issued pursuant to the provisions of that certain Participation
Agreement between the Borrower and the Lender dated May 8, 2002 (the
"Participation Agreement").
The following is a statement of the rights of the Lender of this Note and
the obligations and conditions to which this Note are subject, and to which the
Lender and Borrower hereby agree.
1. Definitions. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(a) Borrower means Syntroleum Corporation, a Delaware corporation,
and includes any corporation or other entity which shall succeed
to or assume the obligations of the Borrower under this Note.
(b) Change of Control means if (i) any "person" or "group of related
persons" shall have acquired "beneficial ownership" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended, and the applicable rules and regulations
thereunder), of shares of Voting Stock representing 35% or more
of the Voting Power of Borrower, (ii) during any period of
twenty-five consecutive months, commencing on the Original Issue
Date, individuals who on the Original Issue Date were members of
the board of directors of the Borrower (together with any
replacement or additional directors whose election was
recommended by
incumbent management of the Borrower or who were elected by a
majority of directors then in office) cease to constitute a
majority of the board of directors of the Borrower, (iii) any
person or group of related persons shall merge or consolidate
with the Borrower and, as a result of such merger or
consolidation, the holders of a majority of the Voting Stock
immediately before such merger or consolidation cease to hold a
majority of the Voting Stock immediately after such merger or
consolidation, or (iv) any person or group of related persons
shall acquire all or substantially all of the assets of the
Borrower. A Change of Control shall not include an increase in
the percentage of shares of Voting Stock representing 35% or more
of the Voting Power of the Borrower beneficially owned by any
person solely as a result of a reduction in the number of shares
of Voting Stock then outstanding solely due to the repurchase of
Voting Stock by ▇▇▇▇▇▇▇▇.
(c) Common Stock means the Borrower's common stock, $.01 par value
per share.
(d) Event of Default means any of the events set forth in Article 8
of this Note which constitute Borrower's default under this Note.
(e) GAAP means generally accepted accounting principles as in effect
from time to time in the United States of America.
(f) Governmental Authority means (i) the government of (a) the United
States of America or any State or other political subdivision
thereof, or (b) any jurisdiction in which Borrower or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of Borrower or any
Subsidiary, or (ii) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
(g) Lender means Marathon Oil Company, an Ohio corporation, and
includes any corporation or other entity which shall succeed to
or assume the rights and obligations of the Lender under this
Note.
(h) Market Value means the average closing price of the Common Stock
on the five (5) trading days preceding the date in question as
quoted on the NASDAQ Market System or, if the Common Stock is no
longer traded on the NASDAQ Market System, on the largest U.S.
stock exchange or market on which the Common Stock is traded or,
if the Common Stock is not listed and traded on a stock exchange
or market system, then as determined by an independent third
party with expertise in the valuation of businesses. Such
independent third party shall be selected by mutual agreement of
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇.
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(i) Material means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of
Borrower and its Subsidiaries taken as a whole.
(j) Material Adverse Effect means any change to or effect on the
business, operations, affairs, financial condition, assets or
properties of Borrower and its Subsidiaries taken as a whole,
other than as a result of the sole acts or omissions of Lender,
including a default by Lender of any of its obligations under the
Participation Agreement or this Note, that is Materially adverse
to the ability of the Borrower to substantially perform its
obligations under the Participation Agreement or this Note and
will likely result in an Event of Default in the near term;
provided, however, in no event shall cost overruns from the
Project constitute a Material Adverse Effect.
(k) Maturity Date means the June 30, 2004.
(l) Original Issue Date means May 8, 2002.
(m) Participation Agreement means the Participation Agreement dated
May 8, 2002 between the Borrower and Lender.
(n) Subsidiary means, as to any person, any corporation, association
or other entity in which such person or one or more of its
Subsidiaries or such person and one or more of its Subsidiaries
owns sufficient equity or voting interests to enable it or them
(as a group) to elect a majority of the directors (or persons
performing similar functions) of such entity.
(o) Voting Power means the total voting power represented by all
outstanding Voting Stock.
(p) Voting Stock means stock of any class or classes (however
designated) of Borrower having ordinary voting power for the
election of the directors of Borrower, other than stock having
such power only by reason of the happening of a contingency.
(q) Other Defined Terms. Unless otherwise defined herein, any
capitalized term used herein shall have its respective meaning as
defined in the Participation Agreement. Terms defined herein
shall include the plural, as well as the singular use of such
words.
2. Advances. The Lender shall make advances under this Note as and when
requested by ▇▇▇▇▇▇▇▇ from time to time up to and not to exceed
$19,000,000 in principal amount, the proceeds of which will be used by
Borrower to carry out the Project. Borrower requests for advances
shall be in minimum amounts of $1,000,000 or more. Such requests for
advances shall be supported by actual and
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forecasted Project expenditures in accordance with the unanimously
approved Project budget and approved and submitted by the Executive
Committee to Lender on or before the first (1st) day of the month and
funded by ▇▇▇▇▇▇ on or before the fifteenth (15th) day of such month.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall reconcile such expenditures and advances on
a monthly basis. Lender reserves the right to temporarily or
permanently suspend any such advances upon (i) the occurrence of an
Event of Default, or (ii) a termination under Article VI of the
Participation Agreement or suspension of performance under Article XV
of the Participation Agreement. The Lender is hereby authorized by the
Borrower to endorse on the schedule forming a part of this Note
appropriate notations evidencing the date and the amount of each
advance made by the Lender to Borrower.
3. Interest.
(a) Subject to Section 17 hereof, simple interest on the unpaid
balance of the Note shall accrue from the Original Issue Date
until this Note is paid at the rate of interest equal to eight
percent (8%) per annum (the "Interest Rate").
(b) Subject to Section 17 hereof, upon the occurrence of an Event of
Default (as defined below) the interest rate on this Note will
increase immediately to a rate equal to the Interest Rate plus 2%
until such time as no Event of Default exists (whether through
cure, repayment or otherwise).
4. Repayment. This Note shall be repaid by Borrower and Lender shall have
no recourse against Borrower or its affiliates for the repayment of
this Note (or interest accrued thereon), except in the manner and only
in the manner set forth below.
(a) Subject to ▇▇▇▇▇▇'s conversion right and notice provisions as set
forth in Section 4(d), Borrower may prepay, from the date hereof
until and including May 31, 2003, in cash, in whole or in part
and without penalty, the outstanding principal balance, together
with accrued interest to date of payment, of this Note upon five
(5) days written notice to Lender. Other than as provided above,
Borrower shall not prepay the Note.
(b) In the event a third party participant (excluding the DOE)
provides capital contributions to the Project on or before May
31, 2003, Borrower shall apply such capital contributions to the
outstanding principal advanced to Borrower under this Note, plus
accrued interest thereon with payment due within five (5) days of
receipt of such capital contributions.
(c) Notwithstanding Sections 4(a) and 4(b) hereof and within five (5)
business days of the date of ▇▇▇▇▇▇'s written notice to Borrower,
Lender shall have the option until this Note has been fully
satisfied by ▇▇▇▇▇▇▇▇ and from time-to-time to convert all or any
part of the then outstanding principal
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balance and interest accrued thereon owed to Lender under this
Note in any combination of the following methods:
(i) in the form of validly issued, fully paid and
nonassessable shares of Common Stock at a per share
conversion price of (y) $7.50 on or prior to June 30,
2003 or (z) $8.50 between July 1, 2003 and June 30,
2004 (adjusted in each such case for any stock splits,
reverse stock splits, stock dividends or any other
recapitalizations or reorganizations subsequent to the
date hereof);
(ii) in the form of current or future credits on a
$1-for-$1 basis against Net License Fees payable by
Lender to Borrower in accordance with Section 4.05(a)
of the Participation Agreement; or
(iii) in the form of credit on a $1-for-$1 basis against any
amounts due Borrower resulting from ▇▇▇▇▇▇'s equity
participation in a gas-to-liquids specialty chemicals
plant located in Equatorial Guinea using Lender's
natural gas as plant feedstock and in which Lender and
Borrower each own an equity interest.
Upon satisfaction by Borrower of its obligations under this
Section 4(c), this Note shall be deemed repaid in the amount of
principal and interest to the extent applied by Lender to the
conversion to Common Stock or credits pursuant to this Section
4(c).
(d) Without limiting Lender's other rights and remedies contained
herein, if any unpaid balance of this Note (including accrued
interest) remains outstanding on the Maturity Date or has not
been converted pursuant to any of the provisions contained in
this Section 4 prior to the Maturity Date, the unpaid balance
outstanding under this Note (including accrued interest) shall be
payable to Lender as follows:
(i) if the Market Value is at or above $8.50 per share on
the Maturity Date, Lender shall convert in the form of
validly issued, fully paid and nonassessable shares of
Common Stock at a per share conversion price of $8.50
(adjusted in each such case for any stock splits,
reverse stock splits, stock dividends or any other
recapitalizations or reorganizations subsequent to the
date hereof); or
(ii) if the then Market Value is below $8.50 per share on
the Maturity Date, Borrower shall have the option to
pay Lender in cash; provided however, that if Borrower
does not pay Lender all amounts due and owing under
this Note within ten (10)
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business days after the Maturity Date, Lender shall
have the option to receive, at Lender's option, any
combination of the following upon notification to
Borrower:
(x) payment in the form of validly issued, fully
paid and nonassessable shares of Common Stock
at a per share conversion price of the higher
of (1) the Market Value on the Maturity Date,
or (2) $6.00 (adjusted in each such case for
any stock splits, reverse stock splits, stock
dividends or any other recapitalizations or
reorganizations subsequent to the date
hereof);
(y) payment in the form of current or future
credits, on a $1-for-$1 basis, against Net
License Fees payable by Lender to Borrower in
accordance with Section 4.05(a) of the
Participation Agreement; or
(z) payment in the form of credits on a $1-for-$1
basis against any amounts due Borrower
resulting from ▇▇▇▇▇▇'s equity participation
in a gas-to-liquids specialty chemicals plant
located in Equatorial Guinea using Lender's
natural gas as plant feedstock and in which
Lender and Borrower each own an equity
interest.
▇▇▇▇▇▇▇▇ agrees to provide written notice to ▇▇▇▇▇▇ on or about
the Maturity Date reminding Lender of its election rights under
this Section 4. In the event that ▇▇▇▇▇▇ has not notified
Borrower of its election under this Section 4(d)(ii) within
twenty (20) business days after the Maturity Date, Lender shall
be deemed to have elected payment in the form specified in
Section 4(d)(ii)(y) (license fee credits). Upon satisfaction by
Borrower of all of its obligations under this Section 4(d), this
Note shall be deemed repaid in full.
5. Common Stock Payment Procedure.
(a) Upon ▇▇▇▇▇▇'s election to receive payment of this Note in the
form of Common Stock, the payment of this Note will be deemed to
have been made as of the close of business on the date on which
Lender receives the number of validly issued, fully paid and
nonassessable shares of Common Stock equal to the principal and
interest due and owing on the Note divided by the applicable
conversion price per share as provided herein (adjusted for any
stock splits, reverse stock splits, stock dividends or any other
recapitalizations or reorganizations subsequent to the date
hereof). Upon such event, ▇▇▇▇▇▇ shall surrender this Note at the
principal office
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of the Borrower. At such time as such payment has been effected,
the rights of the Lender of this Note as such a Lender will cease
and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have been the holder or holders
of record of the shares of Common Stock represented thereby.
(b) Upon any conversion to Common Stock by ▇▇▇▇▇▇ as provided herein,
Borrower will deliver to the Lender within ten (10) business days
of ▇▇▇▇▇▇'s election to convert to such Common Stock:
(i) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such payment in
such name or names and such denomination or denominations as
the Lender has specified; and
(ii) payment in an amount equal to the principle and interest
payable to the Lender in lieu of a fractional share of
Common Stock, if any.
(c) The issuance of certificates for shares of Common Stock upon
payment of this Note upon ▇▇▇▇▇▇'s election to receive payment in
the form of Common Stock will be made without charge to the
Lender for any issuance tax in respect thereof or other cost
incurred by the Borrower in connection with such payment and the
related issuance of shares of Common Stock. Upon payment of this
Note in the form of Common Stock, the Borrower will take all such
actions as are necessary in order to insure that the Common Stock
issuable with respect to such payment will be validly issued,
fully paid and nonassessable.
(d) The Borrower will not close its books against the transfer of
this Note or of Common Stock issued or issuable upon payment of
this Note, in any manner which interferes with the timely payment
of this Note in such manner.
(e) The Borrower shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the payment of this Note, such number of
its shares of Common Stock as shall from time to time be
sufficient to effect a payment of this Note and if at any time
the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the payment of the Note, the
Borrower shall promptly seek such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
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(f) The Borrower shall pay all issue taxes and other governmental
charges (other than income or other taxes imposed upon profits
realized by the recipient) that may be imposed in respect of the
issue or delivery of shares of Common Stock or other securities
or property upon payment of this Note.
(g) No fractional share shall be issued upon payment of this Note in
the form of Common Stock. All shares of Common Stock (including
fractions thereof) issuable upon payment of this Note in the form
of Common Stock by the Borrower shall be aggregated for purposes
of determining whether the payment would result in the issuance
of any fractional share. If, after such aggregation, the payment
would result in the issuance of a fraction of a share of Common
Stock, the Borrower shall, in lieu of issuing any fractional
share, pay the Lender a sum in cash equal to the remainder of
principal and interest otherwise not payable pursuant to such
payment.
(h) Except as specified in this Section 5(h), Borrower is under no
obligation to file a registration under the Securities Act of
1933 for shares of Common Stock issued to Lender under this Note.
(i) For all Common Stock collectively issued to Lender under
this Note, Lender may on one occasion demand the Borrower
to file a registration under the Securities Act of 1933 in
respect of all or a portion of such Common Stock shares by
delivering to Borrower written notice stating that such
right is being exercised, specifying the number of shares
to be included in such registration and describing the
intended method of distribution thereof. In response to
such request, Borrower shall as promptly as practicable,
file with the SEC a registration statement providing for
the registration of such number of shares as the Lender
shall have requested be registered for distribution and
perform all other acts reasonably necessary to insure that
such registration statement becomes effective in a timely
manner.
(ii) If, at any time during the term of this Note, Borrower on
its own initiative or on behalf of any other holder of
registration rights proposes to register any Common Stock
on a registration statement on Form S-1, Form S-2 or Form
S-3 for purposes of a primary or secondary offering,
Borrower shall give prompt written notice to Lender of its
intention to do so and Lender shall, upon prompt written
request specifying the number of shares to be disposed, be
entitled to "piggy-back" upon such registration subject to
the limitations contained herein. In the event that
Borrower and its investment advisors reasonably and in
good faith determine that the inclusion of such
"piggy-back" shares creates a substantial risk that the
price per share of Common Stock will be materially and
8
adversely affected or that the number of shares of Common
Stock sought to be registered is a greater number than can
reasonably be sold or the success of the offering would
otherwise be materially and adversely affected, Borrower
shall include in such registration statement such number
of shares of Common Stock as Borrower, any other holder of
registration rights, and Lender are advised can be sold in
such offering without such an effect (the "Maximum
Number") as follows and in the following order of
priority: (A) first, such number of shares of Common Stock
as Borrower intended to be registered and sold by
Borrower; and (B) second, such additional shares, up to
the Maximum Number, requested by Lender on a pro rata
basis with all other holders of registration rights
desiring to participate in the registration.
(i) Lender agrees that, with respect to any Common Stock issued
pursuant to this Note, if Lender sells such Common Stock, the
amount of Common Stock sold, together with all sales of Common
Stock sold by or for the account of Lender within the preceding
three months, excluding any Common Stock held by Lender prior to
the Original Issue Date, shall not exceed the greater of (i) one
percent of the shares of Common Stock outstanding as shown by the
most recent Form 10-K, 10-Q, or other report or statement
published by Borrower, or (ii) the average weekly reported volume
of trading in such securities on all national securities
exchanges and/or reported through the automated quotation system
of a registered securities association during the four calendar
weeks preceding the date of sale. Notwithstanding the sales
limitations contained in this Section 5(i), Lender shall be
entitled to dispose of its shares of Common Stock through
privately negotiated block sales in excess of 50,000 shares.
6. Representations, Warranties and Covenants.
(a) Borrower's Representations, Warranties and Covenants. In addition
to other representations, warranties and covenants of Borrower
set forth herein, Borrower further represents, warrants and
covenants to Lender that as of the Original Issue Date:
(i) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction or incorporation and is duly qualified as a
foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not,
individually or in the aggregrate, reasonably be expected
to have a Material Adverse Effect.
9
(ii) This Note and the transactions contemplated herein have
been duly authorized by all necessary corporate action on
the part of the Borrower, and upon execution and delivery,
this Note will constitute, a legal, valid and binding
obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as such
enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(iii) The execution, delivery and performance of the Borrower of
this Note will not (i) contravene, result in any breach
of, or constitute a default under, or result in the
creation of any Lien (except as provided herein) in
respect of any property of the Borrower or any Subsidiary
under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the
Borrower or any Subsidiary is bound or by which the
Borrower or any Subsidiary or any of their respective
properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of
any court, arbitrator or Governmental Authority applicable
to the Borrower or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of
any Governmental Authority applicable to the Borrower or
any Subsidiary.
(iv) No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or
performance by the Borrower of this Note.
(v) There are no actions, suits or proceedings pending against
the Borrower or any Subsidiary or any property of the
Borrower or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregrate, could
reasonably be expected to have a Material Adverse Effect.
(vi) To the knowledge of Borrower, neither the Borrower nor any
Subsidiary is in default under any term of any agreement
or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority or is in
violation of any applicable law, ordinance, rule or
regulation (including without limitation
10
environmental laws) of any Governmental Authority, which
default or violation, individually or in the aggregrate,
could reasonably be expected to have a Material Adverse
Effect.
(vii) The Borrower and its Subsidiaries have filed all tax
returns that are required to have been filed in any
jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and
assessments levied upon them or their properties, assets,
income or franchises, to the extent such taxes and
assessments have become due and payable and before they
have become delinquent, except for any taxes and
assessments (i) the amount of which is not individually or
in the aggregrate Material or (ii) the amount,
applicability or validity of which is currently being
contested in good faith by appropriate proceedings and
with respect to which the Borrower or a Subsidiary, as the
case may be, has established adequate reserves in
accordance with GAAP. The Borrower knows of no basis for
any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect.
(viii) Except for the rights of the DOE in the Project and the
existing real property lease upon which the Project will
be constructed, Borrower is not aware of any mortgage,
lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such person
under any agreement including, without limitation, any
conditional sale or other title retention agreement or
capital lease, upon or with respect to such lease or the
Project assets.
(b) ▇▇▇▇▇▇'s Representations, Warranties, and Covenants. With respect
to ▇▇▇▇▇▇'s right to convert outstanding balances due under this
Note into Common Stock pursuant to Section 4 of this Note, Lender
represents, warrants and covenants to Borrower the following:
(i) Lender is a sophisticated investor and has experience in
evaluating and investing in private placement transactions
of securities in companies similar to Borrower so that
Lender is capable of evaluating the merits and risks of
its investment in Borrower and has the capacity to protect
▇▇▇▇▇▇'s own interests. Further, ▇▇▇▇▇▇ recognizes that an
investment in Borrower is highly speculative and involves
significant risks (including those identified in
Borrower's Annual Report on Form 10-K for its fiscal year
ended December 31, 2001 and the Proxy Statement dated
March 25, 2002 (the "SEC Reports")) including a complete
loss of such investment. In addition, Lender is an
"accredited investor" as such term is defined in Rule
501(a) of Regulation D under the Securities Act. ▇▇▇▇▇▇ is
able to bear the substantial economic risk of an
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investment in the Common Stock for an indefinite period
and could afford the complete loss of ▇▇▇▇▇▇'s investment
in the Common Stock.
(ii) ▇▇▇▇▇▇ has read carefully and understands this Note and
has consulted with ▇▇▇▇▇▇'s own attorney, accountant or
investment advisor with respect to the investment
contemplated hereby and its suitability for Lender. ▇▇▇▇▇▇
has received a copy of the SEC Reports. ▇▇▇▇▇▇ has had an
opportunity to discuss ▇▇▇▇▇▇▇▇'s business, management and
financial affairs with its management and has had the
opportunity to review Borrower's facilities. ▇▇▇▇▇▇ also
has had opportunity to ask questions of officers of
▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇'s taking advantage of any such
opportunity however, does not limit or modify the
representations and warranties of Borrower in Section 6(a)
hereof or the right of Lender to rely thereon. ▇▇▇▇▇▇ has
relied solely upon the information provided by ▇▇▇▇▇▇▇▇ in
the SEC Reports and this Note in making the decision to
invest in the Common Stock.
7. Grant of Security Interest and Leasehold Mortgage; Other Agreements.
(a) Within ninety (90) days of the Original Issue Date and subject to
the interest of the DOE in the Project, Borrower shall exercise
its commercially reasonable efforts to execute those agreements
(including, without limitation, a security agreement and
leasehold mortgage) and other documents and to do all things
necessary to grant to Lender a first security interest, leasehold
mortgage and mortgage in the Project's assets for the purpose and
only for the purpose of allowing ▇▇▇▇▇▇ to complete the Project
(as described in Article II of the Participation Agreement) in
the event of an Event of Default by ▇▇▇▇▇▇▇▇. The security
granted by Borrower to Lender shall include without limitation:
(i) a first perfected security interest in all tangible and
intangible personal property associated with the SFP or
located from time to time on the property on which the SFP
is located;
(ii) a first position with respect to the leasehold mortgage in
the lease between ▇▇▇▇▇▇▇▇ and the Port of Catoosa
Authority relating to the real property (including without
limitation any buildings and fixtures) on which the SFP is
located;
(iii) a first mortgage position with respect to any buildings
and fixtures located on the real property on which the SFP
is located; and
(iv) a first perfected security interest in the rights-of-way
and easements necessary to operate the SFP.
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In the case of an Event of ▇▇▇▇▇▇▇, Borrower further covenants
and agrees to (i) grant Lender such further rights-of-way and
easements necessary to complete and operate the SFP, and (ii)
enter into a services agreement with Lender for providing
utilities and services to Lender necessary to operate the SFP.
Such agreement shall provide that such utilities and services
shall be provided by Borrower to Lender at Borrower's cost and
shall include, without limitation, any water, electricity, gas
and other utilities and services necessary to operate the SFP and
complete the Project. Borrower shall further assist Lender with
obtaining all necessary licensing rights, catalysts and other
facilities and services necessary to operate the SFP and complete
the Project in the event that Lender exercises its rights
hereunder.
(b) Each of the agreements referenced in Section 7(a) shall provide
that upon completion of the Project (as described in Article II
of the Participation Agreement), Lender shall reasonably promptly
release its security interest in and mortgages on any Project
assets and shall reasonably promptly return possession and
control of the SFP to Borrower, with the SFP to be in
substantially the same condition as when Lender took control,
normal wear and tear excepted along with any Project additions
completed by ▇▇▇▇▇▇ as contemplated by the Participation
Agreement.
8. Events of Default. If any of the events specified in this Section 8
shall occur (herein individually referred to as an "Event of
Default"), Lender may, so long as such condition exists, declare the
entire outstanding principal and unpaid accrued interest under this
Note immediately due and payable and exercise its remedies pursuant to
Section 9 of this Note by notice in writing to the Borrower.
(a) The Borrower shall default in the payment of principal, interest
or any other amounts due under this Note when the same shall
become due and payable, whether at any stated due date, at
maturity or by acceleration or otherwise and such default shall
not have been remedied within five (5) business days after
written notice thereof shall have been given to the Borrower; or
(b) The Borrower shall default in the performance of or compliance
with any representation and warranty, covenant, agreement,
condition or term contained in this Note or the Participation
Agreement and such default shall not have been remedied within
the applicable cure period herein or therein, if any; or
(c) The Borrower shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts as they become due, or an order for relief is entered
against the Borrower under any bankruptcy, insolvency or similar
laws or the Borrower shall file any petition or
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answer seeking for itself any reorganization, arrangement,
composition, readjustment, dissolution or similar relief under
any present or future statute, law or regulation, or shall file
an answer admitting the material allegations of a petition filed
against the Borrower in any such proceeding, or shall seek or
consent to the acquiesce in the appointment of any trustee,
receiver or liquidator of the Borrower of all or any substantial
part of the properties of the Borrower, or the Borrower or its
board of directors or a majority of its stockholders shall take
any action looking to the dissolution or liquidation of the
Borrower and such default shall not have been remedied within 60
days after written notice thereof shall have been given by Lender
to the Borrower; or
(d) Within 60 days after the commencement of any proceeding against
the Borrower seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation,
such proceeding shall not have been dismissed or, within 60 days
after the appointment without the consent or acquiescence of the
Borrower of any trustee, receiver or liquidator of the Borrower
or of all or any substantial part of the properties of the
Borrower such appointment shall not have been vacated; or
(e) Borrower shall have a Material Adverse Effect; or
(f) Borrower shall experience a Change of Control; or
(g) Borrower's current assets minus current liabilities as set forth
on its most recent audited or unaudited balance sheet filed with
the Securities and Exchange Commission with Form 10-K or Form
10-Q fall below $10 million; provided, however, that for purposes
of calculating such amount, amounts due under this Note and
liabilities associated with prepaid license fees shall be
excluded from current liabilities.
9. Remedies for an Event of Default. Without limiting any other rights or
remedies of Lender contained herein or under the Participation
Agreement, Lender shall have the right to exercise any and all of the
following remedies upon an Event of Default:
(a) Lender may exercise any of its rights and remedies with respect
to the security interests, leasehold mortgage, mortgage,
rights-of-way and easements granted to Lender hereunder pursuant
to Section 7; and
(b) Lender shall have the right to appoint a majority of the
Executive Committee under the Participation Agreement, and in
such event, shall be entitled to such other rights as provided by
Section 3.02(b) of the Participation Agreement.
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The limitation of ▇▇▇▇▇▇'s rights and remedies contained herein shall
in no event limit ▇▇▇▇▇▇'s remedies available at law or equity to
enforce such rights and remedies.
10. Assignment. Subject to the restrictions on transfer and assignment
described in Section 18 below, the rights and obligations of the
Borrower and the Lender of this Note shall be binding upon and benefit
the permitted successors, assigns, heirs, administrators and
transferees of the parties.
11. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written agreement of the Borrower and
Lender.
12. Notices. Any notice relating to this Note shall be deemed sufficiently
given and served for all purposes when receipt has been evidenced (i)
if by facsimile notification, by the sending facsimile confirming
receipt, or (ii) if by courier, certified or registered mail, by
signature of recipient confirming receipt. Notice shall be given to
the address of the party set forth in the Participation Agreement.
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Lender or any other person the right
to vote or to consent or to receive notice as a stockholder in respect
of meetings of stockholders for the election of directors of the
Borrower or any other matters or any rights whatsoever as a
stockholder of the Borrower and no dividends shall be payable or
accrued in respect of the Common Stock obtainable hereunder until, and
only to the extent that, this Note shall have been paid in the form of
Common Stock.
14. Course of Dealing. No course of dealing between the Borrower and the
Lender or any delay on the part of the Lender in exercising any rights
hereunder shall operate as a waiver of any rights of the Lender.
15. Waiver of Notice. Except as otherwise expressly specified in this
Note, the Borrower and each surety, guarantor, endorser, or other
party liable for payment on this Note hereby waive diligence,
presentment, demand, protest, and notice of any kind whatsoever, and
agree that their liability on this Note shall not be affected by any
renewal or extension in the time of payment hereof, or any
indulgences, or by any taking, release, or change in any security for
payment of this Note.
16. Costs and Fees. If this Note is placed in the hands of an attorney for
collection after occurrence of an Event of Default, or if it is
collected through legal or bankruptcy proceedings, the Borrower agrees
to pay all costs of collection, including but not limited to, court
costs and reasonable attorneys fees.
17. Interest Limitation. All agreements between or among the Borrower and
the Lender, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether
by reason of demand or
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acceleration of the maturity hereof or otherwise, shall the interest
contracted for, charged, received, paid or agreed to be paid to the
Lender under this Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to the Lender in excess of the maximum lawful
amount, the interest payable to the Lender shall be reduced to the
maximum amount permitted under applicable law; and if from any
circumstance the Lender shall ever receive anything of value deemed to
be interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall be applied to the
reduction of the principal hereof and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to the Borrower. All interest
paid or agreed to be paid to the Lender shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and/or spread
throughout the full period until payment in full of the principal
(including the period of any renewal or extension hereof) so that the
interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all
agreements between or among the Lender and the Borrower.
18. Transfer. This Note is transferable only on the books of the Borrower
by the Lender or the Lender's duly authorized attorney-in-fact. Unless
notified by ▇▇▇▇▇▇, the Borrower shall be entitled to treat the
registered Lender of this Note as the true and lawful owner hereof for
all purposes, including payment. Lender may transfer or assign its
rights and obligations to any party and shall provide reasonably
prompt notice to Borrower. Borrower shall not transfer or assign its
rights or obligations hereunder.
19. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Oklahoma, excluding that body
of law relating to conflict of laws.
20. Heading; References. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Note. Except
where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Borrower has caused this Note to be issued this 8th
day of May 2002.
SYNTROLEUM CORPORATION MARATHON OIL COMPANY
By: By:
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▇▇▇▇ ▇. ▇▇▇▇, President ▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President
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SYNTROLEUM CORPORATION
UNSECURED PROMISSORY NOTE
ADVANCES AND PAYMENTS OF PRINCIPAL
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AMOUNT OF
AMOUNT OF TYPE OF PRINCIPAL
DATE ADVANCES ADVANCES REPAID NOTATION MADE BY
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