EXHIBIT 10.1
ABRAXAS PETROLEUM CORPORATION
$125,000,000
Floating Rate Senior Secured Notes due 2009
PURCHASE AGREEMENT
October 21, 2004
Guggenheim Capital Markets, LLC
000 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Abraxas Petroleum Corporation, a Nevada corporation (the "Company"),
proposes to issue and sell $125,000,000 aggregate principal amount of its
Floating Rate Senior Secured Notes due 2009 (the "Notes"). The Notes will be
issued pursuant to an Indenture (the "Indenture") to be dated as of the Closing
Date (as defined below) among the Company, Eastside Coal Company, Inc., Sandia
Oil & Gas Corporation, Sandia Operating Corp., Wamsutter Holdings, Inc. and
Western Associated Energy Corporation (each of the foregoing subsidiaries of the
Company, a "Guarantor" and collectively, the "Guarantors"; the Guarantors,
together with the Company, being herein referred to as the "Company Persons")
and U.S. Bank, N.A., as trustee (the "Trustee"). The Notes will be guaranteed by
a guarantee of each of the Guarantors (each, a "Guarantee" and collectively with
the Guarantee of each of the other Guarantors, the "Guarantees"; the Guarantees,
together with the Notes, being herein referred to as the "Securities"). The
Company hereby confirms its agreement with Guggenheim Capital Markets, LLC (the
"Initial Purchaser") concerning the purchase of the Securities from the Company
Persons by the Initial Purchaser. Each capitalized term used but not defined
herein shall have the meaning given to such term in the "Description of the
Notes" section of the Offering Memorandum (as defined below).
The Securities will be offered and sold to the Initial Purchaser
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. A preliminary
offering memorandum, dated October 7, 2004 (the "Preliminary Offering
Memorandum"), and an offering memorandum, dated the date hereof (the "Offering
Memorandum"), each setting forth information concerning the Company Persons and
the Securities, have been prepared in connection with the offering of the
Securities. Copies of the Offering Memorandum will be delivered by the Company
to the Initial Purchaser pursuant to the terms of this Agreement. Any reference
herein to the Offering Memorandum shall be deemed to include all amendments and
supplements thereto prepared in accordance with the terms of this Agreement,
unless otherwise noted. The Company hereby confirms that it has authorized the
use of the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchaser in accordance with Section 3 hereof.
Holders of the Securities (including the Initial Purchaser and its
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, in a form reasonably satisfactory to the
Initial Purchaser (the "Registration Rights Agreement"), pursuant to which the
Company Persons will agree to file with the Securities and Exchange Commission
(the "Commission") a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of Floating Rate
Senior Secured Notes due 2009 (the "Exchange Notes") of the Company and a
guarantee of the Exchange Notes by each of the Guarantors (the "Exchange
Guarantees", and together with the Exchange Notes, the "Exchange Securities")
that are identical in all material respects to the Securities (except that the
Exchange Securities will not contain terms with respect to transfer
restrictions) and, under certain circumstances, a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement").
Simultaneously with the issuance of the Securities pursuant to the
Indenture, (i) the Company proposes to borrow an aggregate amount of $25,000,000
(the "Bridge Loan") pursuant to a $25,000,000 term loan agreement, to be dated
as of the Closing Date (the "Bridge Loan Agreement"), among the Company Persons,
certain lenders party thereto and an affiliate of the Initial Purchaser, as
administrative agent (the "Bridge Loan Administrative Agent"), (ii) Grey Wolf
Exploration Inc., an Alberta corporation and wholly-owned subsidiary of the
Company ("Grey Wolf"), proposes to borrow an aggregate amount of $35,000,000
(the "Grey Wolf Term Loan" and together with the Bridge Loan, the "Term Loans")
pursuant to a $35,000,000 term loan agreement, to be dated as of the Closing
Date (the "Grey Wolf Loan Agreement" and together with the Bridge Loan
Agreement, the "Term Loan Agreements"), among Grey Wolf, certain lenders party
thereto and an affiliate of the Initial Purchaser, as administrative agent, and
(iii) the Company proposes to enter into a $15,000,000 senior secured revolving
credit facility, to be dated as of the Closing Date (the "New Credit Facility
Agreement"), among the Company Persons, certain lenders party thereto and Xxxxx
Fargo Foothill, Inc., as administrative agent (the "New Credit Facility
Administrative Agent"). The Term Loan Agreements, together with the New Credit
Facility Agreement, are herein referred to as the "Loan Documents"; it being
understood and agreed that neither the Initial Purchaser nor any of its
affiliates is, as of the date of this Agreement (or by virtue of the Initial
Purchaser entering into this Agreement), obligated to enter into the Loan
Documents or to provide any funding thereunder.
The proceeds of the sale of the Securities, together with the proceeds
from the Term Loans, will be used (i) to repay all outstanding amounts under and
terminate the Loan and Security Agreement, dated as of January 22, 2003 (the
"Existing Credit Agreement"), among the Company, the subsidiaries of the Company
party thereto, the lenders thereunder, Xxxxx Fargo Foothill, Inc., as agent
thereunder (the "Existing Credit Agreement Agent"), and Guggenheim Corporate
Funding, LLC, as the specified appointee thereunder (the "Existing Credit
Agreement Specified Appointee"), and (ii) to redeem all of the Company's 11 1/2%
Secured Notes due 2007 (the "Existing Notes") in accordance with the Indenture,
dated as of January 23, 2003 (the "Existing Notes Indenture"), among the
Company, the subsidiary guarantors party thereto and U.S. Bank, N.A., as trustee
thereunder (the "Existing Notes Indenture Trustee"). The termination and
repayment of the Existing Credit Agreement and the redemption by the Company of
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the Existing Notes, each with the proceeds from the sale of the Securities and
borrowings under the Term Loans, are herein referred to collectively as the
"Refinancing Transaction".
The Company Persons will agree to secure (i) the Securities and their
obligations under the New Credit Facility Agreement and guarantees thereof by
granting to the Collateral Agent (as defined below), for the benefit of the
holders of the Securities, the Trustee, the lenders under the New Credit
Facility Agreement and the New Credit Facility Administrative Agent
(collectively, the "Senior Secured Parties"), shared first priority liens on all
of their material property and assets, excluding shares of Grey Wolf held by the
Company Persons, and (ii) their obligations under the Bridge Loan Agreement and
guarantees thereof by granting to the Collateral Agent, for the benefit of the
lenders under the Bridge Loan Agreement and the Bridge Loan Administrative Agent
(collectively, the "Junior Secured Parties", and together with the Senior
Secured Parties, the "Secured Parties"), a second priority lien on all of their
material property and assets, excluding shares of Grey Wolf held by the Company
Persons, as evidenced by the Intercreditor, Security and Collateral Agency
Agreement, to be dated as of the Closing Date (the "Intercreditor Agreement"),
among the Company Persons, the Trustee, the Bridge Loan Administrative Agent,
the New Credit Facility Administrative Agent and U.S. Bank, N.A., as collateral
agent (the "Collateral Agent"). The Company Persons will also agree to secure
their obligations under the Bridge Loan Agreement and guarantees thereof by
granting to the Bridge Loan Administrative Agent, for the benefit of the Junior
Secured Parties, a first priority lien on all of the shares of Grey Wolf held by
the Company Persons. The Intercreditor Agreement, together with the mortgages,
deeds of trust, pledge agreements, account control agreements and other security
instruments being executed and delivered by the Company Persons in respect of
the liens securing the indebtedness under the Loan Documents, are herein
referred to as the "Security Documents".
1. Representations, Warranties and Agreements of the Company Persons.
The Company Persons, jointly and severally, represent and warrant to, and agree
with, the Initial Purchaser on and as of the date hereof and at the Closing Time
(as defined below) as follows:
(a) The Preliminary Offering Memorandum did not as of its date,
and the Offering Memorandum will not at the Closing Time, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the Company Persons make no representation or warranty as to any
information contained in or omitted from the Preliminary Offering Memorandum or
the Offering Memorandum in reliance upon and in conformity with information
relating to the Initial Purchaser furnished in writing to the Company by or on
behalf of the Initial Purchaser expressly for use therein as specified in
Section 16 hereof (the "Initial Purchaser's Information").
(b) Assuming the accuracy of the representations and warranties
of the Initial Purchaser contained in Section 3 hereof and its compliance with
the agreements set forth therein, it is not necessary, in connection with the
issuance, offer, sale and delivery of the Securities to the Initial Purchaser,
and the offer, resale and delivery of the Securities by the Initial Purchaser,
in the manner contemplated by this Agreement and the Offering Memorandum, to
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register the Securities under the Securities Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(c) Each of the Company Persons has been duly organized and is a
validly existing corporation in good standing under the laws of its jurisdiction
of incorporation, and has the requisite corporate power and authority necessary
to own, lease and operate its properties and to conduct its business as
currently conducted and as proposed to be conducted as described in the Offering
Memorandum. Each of the Company Persons is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which its
ownership, lease or operation of property or the conduct of its business or
proposed conduct of its business as described in the Offering Memorandum
requires such qualification, except where the failure to be so qualified or in
good standing, individually or in the aggregate, has not had and could not
reasonably be expected to have, a material adverse effect on (i) the ability of
a Company Person to perform its obligations under, and consummate the
transactions (including the Refinancing Transaction) contemplated by, this
Agreement, the Indenture, the Calculation Agent Agreement (as defined in the
Indenture), the Securities, the Exchange Securities, the Registration Rights
Agreement, any Loan Document or any Security Document (collectively, the
"Transaction Documents"), as applicable, (ii) the condition (financial or
otherwise), results of operations, earnings, business affairs, management or
business prospects of the Company and its subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, or (iii) the value of
the Collateral or the validity or enforceability of the Security Documents or
any lien purporting to be created thereby or any right or remedy arising
thereunder (each, a "Material Adverse Effect").
(d) The Guarantors and Grey Wolf are the only subsidiaries of the
Company. Grey Wolf has been duly organized and is a validly existing corporation
in good standing under the laws of its jurisdiction of incorporation, and has
the requisite corporate power and authority necessary to own, lease and operate
its properties and to conduct its business as currently conducted and as
proposed to be conducted as described in the Offering Memorandum. Grey Wolf is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which its ownership, lease or operation of property or
the conduct of its business or proposed conduct of its business as described in
the Offering Memorandum requires such qualification, except where the failure to
be so qualified or in good standing, individually or in the aggregate, has not
had and could not reasonably be expected to have, a Material Adverse Effect.
(e) The Company has an authorized capitalization as set forth in
the Offering Memorandum, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable. All of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free and
clear of any security interest, mortgage, pledge, lien, hypothecation, claim,
restriction upon voting or transfer, charge or other encumbrance of any kind
(other than those imposed by the Securities Act or the securities or "Blue Sky"
laws of any state) (each, a "Lien") other than the Liens granted to the Existing
Notes Indenture Trustee and the Existing Credit Agreement Agent to secure the
Existing Notes and the Existing Credit Agreement, respectively. All of such
shares of capital stock will be owned directly or indirectly by the Company,
free and clear of all Liens, at the Closing Time upon the discharge of the
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Existing Notes and the termination and discharge of the Existing Credit
Agreement.
(f) Each Company Person has the requisite corporate power and
authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party and to perform its obligations
hereunder and thereunder. Each Company Person has duly and validly taken all
corporate action required to be taken by it for the due and proper (i)
authorization, execution and delivery of each Transaction Document to which it
is a party, and the performance of its obligations thereunder, (ii) issuance,
authentication, offer, sale, resale and delivery, as applicable, of the
Securities and the Exchange Securities and the use of the Offering Memorandum in
any jurisdiction, in each case as contemplated by this Agreement and the
Offering Memorandum and assuming the accuracy of the representations of, and the
compliance with the agreements by, the Initial Purchaser contained in Section 3
hereof, (iii) grant and perfection of security interests in the Collateral
pursuant to the Security Documents and (iv) consummation of the transactions
contemplated by the Transaction Documents, including the Refinancing
Transaction.
(g) This Agreement has been duly authorized, executed and
delivered by each Company Person and constitutes a valid and legally binding
agreement of such Company Person, enforceable against such Company Person in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
any right to indemnification or contribution hereunder may be limited by federal
or state securities laws and public policy considerations.
(h) The Registration Rights Agreement has been duly authorized by
each Company Person, and at the Closing Time, will be duly executed and
delivered by such Company Person. The Registration Rights Agreement, when duly
executed and delivered by each Company Person and each other party thereto, will
constitute a valid and legally binding agreement of such Company Person,
enforceable against such Company Person in accordance with its terms, except to
the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as any right to indemnification or contribution
thereunder may be limited by federal or state securities laws and public policy
considerations.
(i) The Indenture has been duly authorized by each Company Person
and, at the Closing Time, will be duly executed and delivered by such Company
Person. The Indenture, when duly executed and delivered by each Company Person
and the Trustee, will constitute a valid and legally binding agreement of such
Company Person, enforceable against such Company Person in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). At the Closing Time, the
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Indenture will conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(j) The Notes have been duly authorized by the Company and, at
the Closing Time, will be duly executed, issued and delivered by the Company and
authenticated by the Trustee in accordance with to the Indenture. The Notes,
when duly executed by the Company and authenticated by the Trustee in accordance
with the Indenture, and delivered against payment therefor, will be duly and
validly issued and outstanding and will constitute valid and legally binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(k) The Guarantee of each Guarantor has been duly authorized by
such Guarantor and, at the Closing Time, will be duly executed and delivered by
such Guarantor in accordance with the Indenture. Each Guarantee, when duly
executed and delivered by the respective Guarantor in accordance with the
Indenture and the Securities have been paid for as provided herein, will
constitute a valid and legally binding obligation of such Guarantor, entitled to
the benefits of the Indenture and enforceable against such Guarantor in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(l) The Exchange Notes have been duly authorized by the Company
and, at the time(s) provided for in the Registration Rights Agreement, will be
duly executed, issued and delivered by the Company and authenticated by the
Trustee in accordance with the Indenture. The Exchange Notes, when duly executed
and delivered by the Company and authenticated by the Trustee in accordance with
the Indenture, will be duly and validly issued and outstanding and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(m) The Exchange Guarantee of each Guarantor has been duly
authorized by such Guarantor and, at the time(s) provided for in the
Registration Rights Agreement, will be duly executed and delivered by such
Guarantor in accordance with the Indenture. Each Exchange Guarantee, when duly
executed and delivered by the respective Guarantor in accordance with the
Indenture, will constitute a valid and legally binding obligation of such
Guarantor, entitled to the benefits of the Indenture and enforceable against
such Guarantor in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
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creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(n) Each of the Transaction Documents not referred to in the
preceding clauses (g) through (p) has been duly authorized by each Company
Person that is a party thereto and, at the Closing Time, will be duly executed
and delivered by each Company Person that is a party thereto. Each such
Transaction Document, when duly executed and delivered by each Company Person
that is a party thereto, will constitute a valid and legally binding agreement
of such Company Person, enforceable against such Company Person in accordance
with its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(o) The Transaction Documents will conform in all material
respects to the descriptions thereof in the Offering Memorandum.
(p) None of (i) the execution and delivery by a Company Person of
each Transaction Document to which it is a party, and the performance of its
obligations thereunder, (ii) the issuance, authentication, offer, sale, resale
and delivery of the Securities and the Exchange Securities and the use of the
Offering Memorandum in any jurisdiction, in each case as contemplated by this
Agreement and the Offering Memorandum and assuming the accuracy of the
representations and warranties of, and the compliance with the agreements by,
the Initial Purchaser contained in Section 3 hereof, (iii) the grant and
perfection of security interests in the Collateral pursuant to the Security
Documents or (iv) the consummation by the Company Persons of the transactions
contemplated by the Transaction Documents, including the Refinancing
Transaction, will (A) result in any violation of the provisions of the charter
or by-laws (or other comparable organizational documents) of the Company or any
of its subsidiaries, (B) result in any violation of the provisions of any law,
statute, rule or regulation (other than the securities or "Blue Sky" laws of any
state) ("Law") or any judgment, injunction, ordinance, order or decree
(including any stop order) of any court, arbitrator or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets ("Order"), (C) conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement, lease
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of their respective properties or assets may be subject
(each, a "Contract"), or which, with notice or lapse of time or both, would
constitute such a breach, violation or default or (D) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any property
or asset of the Company or any of its subsidiaries pursuant to any Contract
(other than a Transaction Document), except in the case of clauses (B), (C) and
(D) for such conflicts, breaches, violations, defaults or Liens that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect.
(q) Each of BDO Xxxxxxx LLP ("BDO Xxxxxxx") and Deloitte &
Touche, LLP ("D&T"), which has certified certain financial statements of the
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Company and its subsidiaries, are independent public accountants within the
meaning of the Code of Professional Conduct of the American Institute of
Certified Public Accountants and its interpretations and rulings thereunder and
as required by the Securities Act and the rules and regulations of the
Commission thereunder.
(r) The historical financial statements, including the notes
thereto, contained in the Offering Memorandum comply as to form in all material
respects with the accounting requirements of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder applicable to a registration statement
on Form S-1 under the Securities Act (except that certain supporting schedules
are omitted), and present fairly in all material respects the financial position
of the Company and its consolidated subsidiaries and the other entities for
which financial statements are included in the Offering Memorandum as of the
dates indicated and the results of operations and cash flows for the periods
indicated; such financial statements have been prepared in conformity with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered. The other historical financial
and statistical information and data contained in the Offering Memorandum are
prepared on a basis consistent with the financial statements contained in the
Offering Memorandum and the books and records of the Company and present fairly
in all material respects the information purported to be shown thereby.
(s) The pro forma financial information contained in the Offering
Memorandum has been prepared on a basis consistent with the historical financial
statements contained in the Offering Memorandum (except for the pro forma
adjustments specified therein), and complies as to form in all material respects
with the applicable accounting requirements of the Securities Act, the Exchange
Act and the rules and regulations of the Commission thereunder (including all
material adjustments to the historical financial information required by Rule
11-02 of Regulation S-X under the Securities Act and by the Exchange Act to
reflect the transactions described in the Offering Memorandum), gives effect to
assumptions made on a reasonable basis and presents fairly in all material
respects the historical financial information and proposed transactions
contemplated by the Offering Memorandum and the Transaction Documents, including
the Refinancing Transaction.
(t) The financial information contained in the Offering
Memorandum under the headings "Summary-Summary Historical Consolidated and Pro
Forma Statement of Operations", "Summary--Summary Historical and Pro Forma
Operating Data", "Capitalization", "Ratio of Earnings to Fixed Charges",
"Unaudited Pro Forma Financial Information", "Selected Historical Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations", and the consolidated financial statements of the
Company contained in the Offering Memorandum, are derived from the accounting
records of the Company and its subsidiaries and present fairly in all material
respects the information purported to be shown thereby.
(u) Except as otherwise disclosed in the Offering Memorandum,
there are no legal or governmental proceedings pending to which the Company
(including any predecessor entity) or any of its subsidiaries is a party or of
which any property or asset of the Company or any of its subsidiaries is the
subject that, individually or in the aggregate, has had and, if determined
8
adversely to the Company or any of its subsidiaries could reasonably be expected
to have, a Material Adverse Effect, and to the best knowledge of the Company
Persons, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(v) No Law has been, or to the best knowledge of the Company
Persons has been proposed to be, enacted, adopted or issued, and no Order has
been, or has been proposed to be, issued, which would suspend or prevent the
issuance, authentication, offer, sale, resale or delivery of the Securities or
the Exchange Securities or the use of the Offering Memorandum in any
jurisdiction, in each case, as contemplated by this Agreement and the Offering
Memorandum. No action, suit or proceeding is pending against or, to the best
knowledge of the Company Persons, threatened against or affecting the Company or
any of its subsidiaries before any court or arbitrator or any governmental
agency, body or official, domestic or foreign, that could reasonably be expected
to (i) interfere with or adversely affect the issuance, authentication, offer,
sale, resale or delivery of the Securities or the Exchange Securities or the use
of the Offering Memorandum in any jurisdiction, in each case, as contemplated by
this Agreement and the Offering Memorandum and assuming the accuracy of the
representations and warranties of, and the compliance with the agreements by,
the Initial Purchaser contained in Section 3 hereof or (ii) in any manner draw
into question the validity or enforceability of this Agreement or any of the
other Transaction Documents or any action taken or to be taken pursuant to the
terms hereof or thereof. The Company has complied with any and all requests by
any securities authority in any jurisdiction for additional information to be
included in the Offering Memorandum.
(w) Neither the Company nor any of its subsidiaries is, or with
notice or lapse of time or both would be, (i) in violation of the provisions of
its charter or by-laws (or other comparable organizational documents), (ii) in
violation of the provisions of any Law or (iii) in breach or violation of any of
the provisions of, or in default under, any Contract, except in the case of
clauses (ii) and (iii) for such violations, breaches or defaults that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect.
(x) No consent, authorization, approval, license, order,
registration, qualification or decree of, or filing with, any court or
governmental authority or agency is necessary or required for (i) the execution
and delivery by a Company Person of each Transaction Document to which it is a
party, and the performance of its obligations thereunder, (ii) the issuance,
authentication, offer, sale, resale and delivery of the Securities and the
Exchange Securities and the use of the Offering Memorandum in any jurisdiction,
in each case as contemplated by this Agreement and the Offering Memorandum and
assuming the accuracy of the representations and warranties of, and the
compliance with the agreements by, the Initial Purchaser contained in Section 3
hereof, (iii) the grant and perfection of security interests in the Collateral
pursuant to the Security Documents or (iv) the consummation by the Company
Persons of the transactions contemplated by the Transaction Documents, including
the Refinancing Transaction, except for (A) with respect to the performance by
the Company of its obligations under the Registration Rights Agreement, the
registration with the Commission of the Securities under the Shelf Registration
Statement and/or the registration of the Exchange Offer with the Commission, (B)
the registration or qualification of the Securities under applicable securities
9
or "Blue Sky" laws of the various states in connection with the purchase and
distribution of the Securities by the Initial Purchaser as contemplated by this
Agreement and the Offering Memorandum, (C) the filings required to release
existing Liens on the Collateral, (D) the filings required to perfect the
Collateral Agent's security interests granted pursuant to the Security
Documents, (E) those required in connection with the qualification of the
Indenture under the Trust Indenture Act and (F) those required in connection
with arranging for the Securities to be designated eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
Market or for the Securities and the Exchange Securities to be eligible for
clearance and settlement through The Depository Trust Company ("DTC").
(y) The Company and each of its subsidiaries possess all
licenses, certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or foreign
regulatory agencies or bodies that are necessary or desirable for the ownership
of their respective properties or the conduct of their respective businesses or
the proposed conduct thereof as described in the Offering Memorandum, except
where the failure to possess or make the same, individually or in the aggregate,
has not had and could not reasonably be expected to have a Material Adverse
Effect, and neither the Company nor any of its subsidiaries has received
notification of any revocation or modification of any such license, certificate,
authorization or permit or has received notification that any such license,
certificate, authorization or permit will not be renewed in the ordinary course.
(z) The Company and each of its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns required to
be filed through the date hereof and have paid all taxes due thereon other than
those being contested in good faith and for which reserves have been provided in
accordance with GAAP and those currently payable without penalty or interest or
the nonpayment of which would not have a Material Adverse Effect, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries that has had, nor does the Company or any of its subsidiaries have
any knowledge of any tax deficiency that, if determined adversely to the Company
or any of its subsidiaries, could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(aa) Neither the Company nor any of its subsidiaries is, or after
giving effect to the offering and sale of the Securities and the application of
the proceeds thereof as described in the Offering Memorandum under the heading
"Use of Proceeds", will be, (i) an "investment company" or a company "controlled
by" an investment company within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"), or (ii) a "holding company" or
a "subsidiary company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended ("PUHCA").
(bb) The Company is subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act.
(cc) The Company and each of its subsidiaries make and keep
accurate books and records, and maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
10
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any difference.
(dd) Except as otherwise disclosed in the Offering Memorandum,
the Company and each of its subsidiaries have insurance covering their
respective properties, operations, personnel and businesses, which insurance is
in amounts and insures against such losses and risks as are standard in the oil
and gas industry for similarly situated companies. Neither the Company nor any
of its subsidiaries has received notice from any insurer or agent of such
insurer that capital improvements or other expenditures are required or
necessary to be made in order to continue such insurance.
(ee) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service xxxx registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of their respective businesses or the
proposed conduct thereof as described in the Offering Memorandum, and, to the
best knowledge of the Company Persons, the conduct of their respective
businesses will not conflict in any material respect with, and the Company and
its subsidiaries have not received any notice of any claim of conflict with, any
such rights of others.
(ff) The Company and each of its subsidiaries have good and
defensible title to, or have valid rights to lease or otherwise use, all items
of real and personal property which are material to the business of the Company
and its subsidiaries, in each case free and clear of all Liens and other defects
and imperfections of title, except for (i) the Liens granted to the Existing
Notes Indenture Trustee and the Existing Credit Agreement Agent to secure the
Existing Notes and the Existing Credit Agreement, respectively, and (ii) such
Liens and other defects or impefections of title that, individually or in the
aggregate, (A) do not materially interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries or (B) have not had
and could not reasonably be expected to have a Material Adverse Effect. All of
the Liens granted to the Existing Notes Indenture Trustee and the Existing
Credit Agreement Agent to secure the Existing Notes and the Existing Credit
Agreement, respectively, will be fully and completely released and discharged at
the Closing Time upon the discharge of the Existing Notes and the termination
and discharge of the Existing Credit Agreement.
(gg) No labor disturbance by or dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Company,
is contemplated or threatened. Neither the Company nor any of its subsidiaries
is party to a collective bargaining agreement and there are no unfair labor
practice complaints pending against the Company or any of its subsidiaries or,
to the knowledge of the Company Persons, threatened against any of them.
(hh) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
11
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")) or
"accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has been
waived) has occurred with respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA) of the Company or any of its subsidiaries or any employee
benefit plan of any entity which is considered one employer with the Company
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate")
which could reasonably be expected to have a Material Adverse Effect; each such
employee benefit plan is in compliance in all material respects with its
provisions and applicable law, including ERISA and the Code; neither the Company
nor any ERISA Affiliate has participated in any multiemployer plan (as defined
in Section 3(37) of ERISA); neither the Company nor any ERISA Affiliate has
incurred or could reasonably expect to incur any liability under Title IV of
ERISA with respect to the termination of, or withdrawal from, any "pension plan"
(as defined in Section 3(2) of ERISA) for which the Company or any of its
subsidiaries could have any liability; and each such pension plan that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which could reasonably be expected to cause the loss of such qualification.
(ii) The Company and its subsidiaries (i) are in material
compliance with any and all applicable foreign, federal, state and local laws,
regulations, rules, ordinances, codes, policies, rules of common law, judicial
or administrative orders, consents, decrees and judgments relating to pollution,
the protection of human health and safety, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) and wildlife, the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials"), and the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (ii) have received and are in material compliance with all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) have not received notice of any
actual or potential liability for any (A) actual or alleged violation of
Environmental Laws or (B) investigation or other action (including, but not
limited to, remediation) in response to, or personal injury (including death) or
property damage in connection with, any actual or alleged disposal or release of
Hazardous Materials, except where such notice has been resolved or is no longer
outstanding or where the actual or potential liability could not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has been named as a "potentially responsible party" under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. xx.xx. 9601 et seq., as amended. The Company and its subsidiaries have
not entered into any agreement, and are not subject to any order, pursuant to
which they currently have any ongoing obligation to investigate or take any
other action (including, but not limited to, remediation) in response to any
disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants.
(jj) Neither the Company nor any of its subsidiaries nor, to the
best knowledge of the Company, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of its
subsidiaries (i) has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity or
12
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, or failed to disclose
fully any contribution in violation of law, (ii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(kk) Each Company Person is and, immediately after the Closing
Time (after giving effect to the sale of the Securities pursuant to this
Agreement and the consummation of the other transactions contemplated by the
Transaction Documents, including the Refinancing Transaction) will be, Solvent.
As used in this paragraph, the term "Solvent" means, with respect to a Company
Person on a particular date, that on such date (i) the present fair market value
(or present fair saleable value) of the assets of such Company Person is not
less than the total amount required to pay the probable liabilities of such
Company Person on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and mature, (ii) such Company Person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and commitments as they mature and become due in the
normal course of business, (iii) such Company Person is not incurring debts or
liabilities beyond its ability to pay as such debts and liabilities mature and
(iv) such Company Person is not engaged in any business or transaction, and is
not about to engage in any business or transaction, for which its property would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Company Person is engaged. In
computing the amount of such contingent liabilities at any time, it is intended
that such liabilities will be computed at the amount that, in the light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability. No Company
Person is incurring obligations or making transfers under any evidence of
indebtedness with the intent to hinder, delay or defraud any entity to which it
is or will become indebted.
(ll) As of the Closing Time, the Company Persons will own the
Collateral free and clear of all Liens (other than Permitted Prior Liens and the
Liens granted to the Existing Notes Indenture Trustee and the Existing Credit
Agreement Agent to secure the Existing Notes and the Existing Credit Agreement,
respectively), and no Financing Statement (as defined below) in respect of any
property or asset of any Company Person will be on file in favor of any person
other than those (i) for which a termination statement has been properly filed
and (ii) in respect of (A) Permitted Prior Liens and (B) Liens granted to the
Existing Notes Indenture Trustee and the Existing Credit Agreement Agent to
secure the Existing Notes and the Existing Credit Agreement, respectively.
(mm) When executed and delivered to the Collateral Agent at the
Closing Time, the Security Documents will grant and create, in favor of the
Collateral Agent (i) for the benefit of the Senior Secured Parties, valid and
enforceable shared first priority security interests in the Collateral and (ii)
for the benefit of the Junior Secured Parties, valid and enforceable shared
second priority security interests in the Collateral, subject in each case to
the discharge of the Existing Notes and the termination and discharge of the
Existing Credit Agreement at the Closing Time.
13
(nn) When executed at the Closing Time, each Mortgage will be
delivered, duly acknowledged and, if required for recordation, attested and
otherwise will be in recordable form, and when such Mortgage is filed for record
and recorded in the filing office identified therein, the security interest of
the Collateral Agent in the real property described therein will be duly
perfected.
(oo) Each Company Person is a "registered organization" (as
defined in Article 9 of the Uniform Commercial Code (the "UCC")) under the law
of the state in which it is identified as being incorporated on Schedule 1
attached hereto, and at the Closing Time all security interests granted under
the Security Documents in Collateral consisting of personal property or fixtures
will be duly perfected to the extent such security interests may be perfected by
filing upon the filing of the Financing Statements.
(pp) At the Closing Time, (i) all Collateral consisting of
Capital Stock of the Guarantors will be represented by certificated securities
and (ii) all such certificated securities and all promissory notes and other
instruments then evidencing or representing any Collateral will be delivered to
the Collateral Agent in pledge for the benefit of the Secured Parties as
security for all of the Secured Obligations.
(qq) Neither the Company nor any of its subsidiaries owns any
"margin securities" as that term is defined in Regulations T and U of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), and
the issuance, offer and sale of the Securities and the application of the net
proceeds therefrom will not violate Regulation T, U or X of the Federal Reserve
Board.
(rr) Except for this Agreement, neither the Company nor any of
its subsidiaries is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Company or the Initial
Purchaser for a brokerage commission, finder's fee or like payment in connection
with the offering and sale of the Securities or the Exchange Securities.
(ss) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act. The Offering Memorandum contains all of the
information that, if requested by a prospective purchaser of the Securities,
would be required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
(tt) None of the Company Persons, any of their respective
affiliates (as defined in Rule 501(b) under the Securities Act) or any other
person acting on behalf of the Company Persons or such affiliates (other than
the Initial Purchaser, as to whom the Company Persons make no representation or
warranty) has, directly or indirectly, (i) sold, offered for sale, solicited
offers to buy, or otherwise negotiated in respect of, any security (as such term
is defined in the Securities Act) which is or may be integrated (within the
meaning of Rule 502 under the Securities Act) with the Securities in a manner
that would require the registration under the Securities Act of the Securities
or render invalid the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof, Rule 144A thereunder ("Rule
144A"), Regulation S thereunder ("Regulation S") or otherwise in connection with
(A) the offer and sale of the Securities by the Company Persons to the Initial
14
Purchaser hereunder, (B) the resale of the Securities by the Initial Purchaser
to subsequent purchasers as contemplated by this Agreement and the Offering
Memorandum or (C) the resale of the Securities by such subsequent purchasers to
others as contemplated by the Offering Memorandum or (ii) with respect to any
Securities being (A) offered or sold in the United States, engaged in any form
of general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or any public offering within the meaning of Section
4(2) of the Securities Act and (B) offered or sold outside the United States in
reliance upon Regulation S, engaged in any "directed selling efforts" (within
the meaning of Regulation S) in the United States.
(uu) When the Securities are issued and delivered to the Initial
Purchaser pursuant to this Agreement, none of the Securities will be of the same
class (within the meaning of Rule 144A) as securities of any of the Company
Persons which are listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted on a U.S. automated inter-dealer
quotation system. No securities of the same class as the Securities have been
issued by the Company Persons or their affiliates within the six-month period
immediately prior to the date hereof.
(vv) The Securities will be debt securities of a reporting issuer
(within the meaning of Regulation S) when issued, and the Securities will
continue to be at all times debt securities of a reporting issuer (within the
meaning of Regulation S) until the expiration of the Distribution Compliance
Period (as defined below). The Company Persons, each of their respective
affiliates and any person acting on behalf of the Company Persons or such
affiliates (other than the Initial Purchaser, as to whom the Company Persons
make no representation or warranty) have complied and will comply with the
offering restriction requirements of Regulation S. The sale of the Securities
pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(ww) Neither the Company nor any of its affiliates has taken, nor
will the Company or any such affiliate take, directly or indirectly, any action
which is designed to stabilize or manipulate, or which has constituted or which
would be expected to cause or result in stabilization or manipulation of, the
price of any security of the Company to facilitate the sale or resale of the
Securities or the Exchange Securities.
(xx) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) contained in the
Offering Memorandum has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith.
(yy) Since the date as of which information is given in the
Offering Memorandum (exclusive of amendments or supplements thereto), except as
otherwise stated or contemplated therein, (i) there has been no material adverse
change or any development involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs,
management or business prospects of the Company and its subsidiaries, considered
as one enterprise, whether or not arising in the ordinary course of business,
(ii) neither the Company nor any of its subsidiaries has incurred any material
liability or obligation, direct or contingent, other than in the ordinary course
of business, (iii) neither the Company nor any of its subsidiaries has entered
15
into any material transaction other than in the ordinary course of business and
(iv) there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries, or any dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock, or any
redemption in respect thereof.
(zz) The oil and gas reserve estimates of the Company and its
subsidiaries contained in the Offering Memorandum have been prepared or reviewed
by independent petroleum engineers, in each case in accordance with the
Commission guidelines applied on a consistent basis throughout the periods
involved, and the Company does not have any reason to believe that such
estimates do not fairly reflect the oil and gas reserves of the Company and its
subsidiaries at the dates indicated in the Offering Memorandum. Each of XxXxxxxx
and XxxXxxxxxxx and XxXxxxxx and Associates Consultants Ltd. is an independent
petroleum engineering firm with respect to the Company.
2. Purchase of the Securities. On the basis of the representations,
warranties and agreements set forth herein, and subject to the terms and
conditions set forth herein, the Company Persons agree to issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company
Persons, an aggregate principal amount of $125,000,000 of the Securities at a
purchase price equal to 96.75% of the principal amount thereof.
3. Resale of the Securities. The Initial Purchaser has advised the
Company that it proposes to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Memorandum, and the
Initial Purchaser hereby represents and warrants to, and agrees with, the
Company that:
(a) it is a "qualified institutional buyer" (a "QIB") within the
meaning of Rule 144A and it has not offered or sold the Securities to any person
other than, and it will offer and sell the Securities only, (i) in the United
States to (A) persons who it reasonably believes are QIBs in transactions
meeting the requirements of Rule 144A, (B) institutional investors that qualify
as an accredited investor as defined under Rule 501(a)(1), (2), (3), (7) or (8)
under the Securities Act and which, prior to their purchase of the Securities,
deliver to the Initial Purchaser a letter substantially in the form of Annex A
to the Offering Memorandum, and (C) a limited number of individual investors
that qualify as an accredited investor as defined under Rule 501(a)(4), (5) or
(6) under the Securities Act and which, prior to their purchase of the
Securities, deliver to the Initial Purchaser a letter substantially in the form
of Annex A to the Offering Memorandum, and (ii) outside the United States in
reliance on Regulation S;
(b) it has not solicited offers for, offered or sold, and will
not solicit offers for, offer or sell, the Securities by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act;
(c) it will take reasonable steps to inform persons acquiring
Securities from it that the Securities (i) have not been and, except as may be
required by the Registration Rights Agreement, will not be registered under the
Securities Act, (ii) are being sold to them without registration under the
Securities Act in reliance on Rule 144A (if applicable) and (iii) may not be
16
offered, sold or otherwise transferred except (A) to the Company or (B) in
accordance with (I) Rule 144A to a person whom the seller reasonably believes is
a QIB that is purchasing such Securities for its own account or for the account
of a QIB to whom notice is given that the offer, sale and transfer is being made
in reliance on Rule 144A, (II) in accordance with Regulation S or (III) pursuant
to another available exemption from registration under the Securities Act, and
in each case subject to the transfer restrictions described in the Offering
Memorandum under the heading "Transfer Restrictions";
(d) it will, prior to or simultaneously with the confirmation of
sale by it to any purchaser of any of the Securities purchased hereunder,
furnish to that purchaser a copy of the Offering Memorandum (and any amendment
or supplement thereto that the Company shall have furnished to it prior to the
date of such confirmation of sale); and
(e) with respect to the transactions described in subsection
(a)(ii) of this Section 3, (i) it has complied, and will comply, with all
applicable laws and regulations in each jurisdiction in which it offers, sells
or delivers the Securities, (ii) it has not offered or sold the Securities, and
it will not offer or sell the Securities, (A) as part of its distribution at any
time and (B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date (the "Distribution Compliance Period"), except in
accordance with Rule 903 of Regulation S, and (iii) neither it, nor any of its
affiliates, nor any person acting on behalf of it or such affiliates, has
engaged or will engage in any "directed selling efforts" (within the meaning of
Regulation S) in the United States with respect to the Securities, and each such
person has complied, and will comply, with all applicable "offering
restrictions" (with the meaning of Regulation S).
4. Delivery of and Payment for the Securities.
(a) Delivery of and payment for the Securities shall be made at
the offices of Sidley Xxxxxx Xxxxx & Xxxx llp, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, or at such other place as shall be agreed upon by the Initial Purchaser
and the Company (the "Closing Location"), at 10:00 A.M., New York City time, on
October 28, 2004, or at such other time or date as shall be agreed upon by the
Initial Purchaser and the Company (such date of payment and delivery being
herein referred to as the "Closing Date" and such time of payment and delivery
on the Closing Date being herein referred to as the "Closing Time"). A meeting
will be held at the Closing Location at 5:00 p.m., New York City time, on the
New York Business Day next preceding the Closing Date (or at such other
location, time or date as shall be agreed upon by the Initial Purchaser and the
Company), at which meeting the final drafts of the Transaction Documents and
other documents to be delivered pursuant to Section 6 hereof will be available
for review by the parties hereto. For the purposes of this Section 4(a), "New
York Business Day" shall mean each day other than a Saturday, Sunday or other
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
(b) At the Closing Time, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchaser of the
certificates evidencing the Securities. Time shall be of the essence, and
17
delivery of such certificates at the time and place specified pursuant to this
Agreement is a further condition of the obligations of the Initial Purchaser
hereunder. Upon delivery, the Securities will be represented by one or more
definitive global securities in book-entry form registered in such names and in
such denominations as the Initial Purchaser shall have requested in writing not
less than two full business days prior to the Closing Date. The Company agrees
to make one or more global certificates evidencing the Securities available for
inspection by the Initial Purchaser in New York, New York at least 24 hours
prior to the Closing Time.
5. Further Agreements of the Company Persons. Each Company Person
agrees with the Initial Purchaser:
(a) to prepare the Offering Memorandum in a form approved by the
Initial Purchaser; prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to the Initial Purchaser and its counsel
and to make no amendment or any supplement to the Offering Memorandum which
shall be reasonably disapproved by Initial Purchaser or its counsel promptly
after a reasonable period of review; and to promptly furnish to the Initial
Purchaser and counsel for the Initial Purchaser, without charge, such number of
copies of the Offering Memorandum (and any amendment or supplement thereto) as
may be reasonably requested;
(b) to advise the Initial Purchaser promptly and, if requested,
confirm such advice in writing, of the occurrence of any event or the existence
of any condition which makes any statement of a material fact made in the
Offering Memorandum untrue or which requires any addition or change to the
Offering Memorandum in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(c) if, at any time prior to the completion of the resale of all
of the Securities by the Initial Purchaser hereunder, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of the
Initial Purchaser or its counsel, or of counsel for the Company, to amend or
supplement the Offering Memorandum so that the Offering Memorandum (i) will not
contain an untrue statement of a material fact or (ii) will not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made
at the time the Offering Memorandum is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Offering Memorandum to comply
with applicable law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the Offering
Memorandum, as so amended or supplemented, will comply with applicable law;
(d) to not, and to cause its affiliates (as defined in Rule
501(b) under the Securities Act) and any other person acting on its or their
behalf not to, directly or indirectly, (i) sell, offer for sale, solicit any
offer to buy, or otherwise negotiate in respect of, any security (as such term
is defined in the Securities Act) which is or may be integrated (within the
meaning of Rule 502 under the Securities Act) with the Securities in a manner
that would require the registration under the Securities Act of the Securities
or render invalid the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof, Rule 144A, Regulation S or
18
otherwise in connection with (A) the offer and sale of the Securities by the
Company Persons to the Initial Purchaser hereunder, (B) the resale of the
Securities by the Initial Purchaser to subsequent purchasers as contemplated by
this Agreement and the Offering Memorandum or (C) the resale of the Securities
by such subsequent purchasers to others as contemplated by the Offering
Memorandum, (ii) with respect to the Securities being offered or sold (A) in the
United States, engage in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act or any public
offering within the meaning of Section 4(2) of the Securities Act and (B) and
outside the United States in reliance upon Regulation S, engage in any "directed
selling efforts" (within the meaning of Regulation S) in the United States or
(iii) offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale, contract
or disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(e) at any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act and the Securities are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, to furnish at its
expense to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act (the foregoing agreement being for the
benefit of the holders from time to time of the Securities and prospective
purchasers of the Securities designated by such holders);
(f) to promptly notify the Initial Purchaser if the Securities
cease to be debt securities of a reporting issuer (within the meaning of
Regulation S) at any time before the expiration of the Distribution Compliance
Period.
(g) to promptly take from time to time such actions as the
Initial Purchaser may reasonably request to qualify the Securities for offer and
sale (or obtain an exemption from registration) under the securities or "Blue
Sky" laws of such jurisdictions as the Initial Purchaser may designate and to
continue such qualifications in effect for so long as required for the resale of
the Securities; and to arrange for the determination of the eligibility for
investment of the Securities under the laws of such jurisdictions as the Initial
Purchaser may reasonably request; provided, however, that the Company and its
subsidiaries shall not be obligated to qualify as foreign corporations in any
jurisdiction in which they are not so qualified or to file a general consent to
service of process in any jurisdiction;
(h) to use its reasonable best efforts to cause the Securities to
be designated PORTAL Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities and the
Exchange Securities to be eligible for clearance and settlement through DTC;
(i) to comply with all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Securities by DTC
for "book entry" transfer;
19
(j) for a period of 180 days from the Closing Date, to not offer
for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file a registration statement for, or announce any offer, sale,
contract for sale of or other disposition of any debt securities issued or
guaranteed by the Company or any of its subsidiaries (other than the Securities)
without the prior written consent of the Initial Purchaser, except for the
Exchange Securities in connection with the Exchange Offer;
(k) until consummation of the Exchange Offer, without the prior
written consent of the Initial Purchaser, to not, and to not permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to, resell any of
the Securities that have been reacquired by them;
(l) in connection with the offering of the Securities, until the
Initial Purchaser shall have notified the Company (which it shall do as soon as
reasonably practicable) of the completion of the distribution of all of the
Securities contemplated hereby, to not, and to cause its affiliated purchasers
(as defined in Regulation M under the Exchange Act) not to, either alone or with
one or more other persons, bid for or purchase, for any account in which it or
any of its affiliated purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and to not, and to
cause its affiliated purchasers not to, make bids or purchase for the purpose of
creating actual or apparent active trading in the Securities or for the purpose
of raising the price of the Securities; provided, however, that notwithstanding
any other provision of this Agreement, the Initial Purchaser shall not be
prohibited from market-making, stabilization, covering or overallotment
transactions as contemplated by the Offering Memorandum;
(m) in connection with the offering of the Securities, to make
its officers, employees, independent accountants, independent petroleum
engineers and legal counsel reasonably available upon request by the Initial
Purchaser;
(n) to furnish to the Initial Purchaser on the date hereof a copy
of each independent accountants' report included in the Offering Memorandum
signed by the accountants rendering such report;
(o) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior to or
after the Closing Time, and to use its reasonable efforts to satisfy all
conditions precedent on its part to the delivery of the Securities;
(p) to not take any action prior to the execution and delivery of
the Indenture which, if taken after such execution and delivery, would have
violated any of the covenants contained in the Indenture;
(q) to not take any action, prior to the Initial Purchaser
notifying the Company (which it shall do as soon as reasonably practicable) of
the completion of the distribution of all of the Securities contemplated hereby,
which would require the Offering Memorandum to be amended or supplemented
pursuant to Section 5(c) hereof;
20
(r) prior to the Closing Time, to not issue any press release or
other communication directly or indirectly or hold any press conference with
respect to the Company, its condition, financial or otherwise, or earnings,
business affairs or business prospects (except for routine oral marketing
communications in the ordinary course of business and consistent with the past
practices of the Company and of which the Initial Purchaser is notified),
without consulting and obtaining the consent of the Initial Purchaser, unless in
the judgment of the Company and its counsel, and after notification to the
Initial Purchaser, such press release or communication is required by law;
(s) to apply the net proceeds from the sale of the Securities as
set forth in the Offering Memorandum under the heading "Use of Proceeds";
(t) to take all actions necessary (i) to cause the Existing Notes
Indenture, and the "Guarantees" and the "Security Documents" (as such terms are
defined in the Existing Notes Indenture), to be discharged and of no further
effect in accordance with Section 8.01 of the Existing Notes Indenture prior to
or concurrently with the purchase of the Securities by the Initial Purchaser
hereunder, including, without limitation, causing the Existing Notes Payout
Amount (as defined below) to be paid to the Existing Notes Indenture Trustee
prior to or concurrently with the purchase of the Securities by the Initial
Purchaser hereunder, and (ii) to cause the Existing Notes Indenture Trustee to
acknowledge, prior to or concurrently with the purchase of the Securities by the
Initial Purchaser hereunder, in writing its receipt of the Existing Notes
Indenture Payout Amount and such discharge of the Company's obligations under
the Existing Notes Indenture as provided in Section 8.05 thereof;
(u) to take all actions necessary (i) to cause the Existing
Credit Agreement Payout Amount (as defined below) to be paid to the Existing
Credit Agreement Agent prior to or concurrently with the purchase of the
Securities by the Initial Purchaser hereunder and (ii) to cause the Existing
Credit Agreement Agent to acknowledge, prior to or concurrently with the
purchase of the Securities by the Initial Purchaser hereunder, in writing its
receipt of the Existing Credit Agreement Payout Amount, the termination of the
Existing Credit Agreement and the release and discharge of all Liens securing
obligations thereunder to the Collateral Agent for the benefit of the Secured
Parties; and
(v) to take such steps as shall be necessary to ensure that
neither the Company nor any of its subsidiaries shall become an "investment
company" or a company "controlled by" an investment company within the meaning
of the Investment Company Act or a "holding company" or a "subsidiary company"
of a holding company or an "affiliate" thereof within the meaning of PUHCA.
6. Conditions of Initial Purchaser Obligations. The obligations of the
Initial Purchaser hereunder are subject, in its discretion, to the accuracy, on
and as of the date hereof and at the Closing Time, of the representations and
warranties of the Company Persons contained herein, to the accuracy of the
statements of the Company Persons and their respective officers made in any
certificates delivered pursuant hereto, to the performance by the Company
Persons of their respective obligations hereunder, and to each of the following
additional conditions:
21
(a) The Offering Memorandum (and any amendment or supplement
thereto) shall have been printed and copies distributed to the Initial Purchaser
as promptly as practicable on or following the date of this Agreement (or at
such other date and time as to which the Initial Purchaser may agree). If any
event shall have occurred that requires the Company under Section 5(c) hereof to
prepare an amendment or supplement to the Offering Memorandum, such amendment or
supplement shall have been prepared, the Initial Purchaser shall have been given
a reasonable opportunity to comment thereon, and copies thereof shall have been
delivered to the Initial Purchaser reasonably in advance of the Closing Date.
(b) No Law shall have been, or shall have been proposed to be,
enacted, adopted or issued, and no Order shall have been, or shall have been
proposed to be, issued, which would suspend or prevent the issuance,
authentication, offer, sale, resale or delivery of the Securities or the
Exchange Securities or the use of the Offering Memorandum in any jurisdiction,
in each case, as contemplated by this Agreement and the Offering Memorandum.
(c) There shall not have occurred any invalidation of Rule 144A,
Regulation S or Regulation D under the Securities Act by any court or any
withdrawal or proposed withdrawal of any rule or regulation under the Securities
Act or the Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchaser would
materially impair the ability of the Initial Purchaser to purchase, hold or
effect resales of the Securities contemplated hereby.
(d) Each Transaction Document, in form and substance satisfactory
to the Initial Purchaser, shall have been duly executed and delivered by an
authorized officer of each party thereto, and shall have been delivered to the
Initial Purchaser.
(e) The Notes, in form and substance satisfactory to the Initial
Purchaser, shall have been duly executed and delivered by an authorized officer
of the Company and duly authenticated by an authorized officer of the Trustee.
(f) The Securities shall have been approved by the NASD for
trading in the PORTAL Market.
(g) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement and each of the other
Transaction Documents and the Offering Memorandum, and all other legal matters
relating to this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby (including the Refinancing
Transaction), shall be satisfactory in all material respects to the Initial
Purchaser, and the Company shall have furnished to the Initial Purchaser all
documents and information that it or its counsel may reasonably request to
enable such counsel to pass upon such matters.
(h) The Initial Purchaser shall not have either discovered or
disclosed to the Company prior to the Closing Time that the Offering Memorandum
(or any amendment or supplement thereto) (i) contains an untrue statement of a
fact which, in the opinion of the Initial Purchaser or its counsel, is material
or (ii) omits to state any fact which, in the opinion of the Initial Purchaser
or such counsel, is material and is required to be stated therein or is
22
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(i) The Initial Purchaser shall have received from each of (i)
Xxx Xxxxx Xxxxxxxx Incorporated, counsel for the Company, and (ii) Xxxxx Xxxx
LLP, special New York counsel for the Company, a written opinion, addressed to
the Initial Purchaser and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser.
(j) The Initial Purchaser shall have received from Sidley Xxxxxx
Xxxxx & Xxxx LLP, counsel for the Initial Purchaser, such opinion or opinions,
dated the Closing Date, with respect to such matters as the Initial Purchaser
may reasonably require, and the Company shall have furnished to such counsel
such documents and information as they may request for the purpose of enabling
them to pass upon such matters.
(k) The Company shall have furnished to the Initial Purchaser
letters of BDO Xxxxxxx and D&T, addressed to the Initial Purchaser, dated the
date hereof and the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchaser.
(l) The Company shall have furnished to the Initial Purchaser
letters of XxXxxxxx and XxxXxxxxxxx and XxXxxxxx and Associates Consultants
Ltd., addressed to the Initial Purchaser, dated the date hereof and the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchaser.
(m) The Company shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of its chief executive officer and its
chief financial officer stating that (i) such officers have carefully examined
the Offering Memorandum, (ii) in their opinion, the Offering Memorandum, as of
its date, did not include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred that should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, (iii) the representations and warranties of the Company Persons in
this Agreement were true and correct on the date hereof and are true and correct
in all material respects as of the Closing Time, (iv) the Company Persons have
complied with all agreements and satisfied all conditions on their part to be
performed or satisfied hereunder on or prior to the Closing Time in all material
respects and (v) subsequent to the date of the most recent financial statements
contained in the Offering Memorandum, there has been no material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs,
management or business prospects of the Company and its subsidiaries, considered
as one enterprise, whether or not arising in the ordinary course of business,
except as set forth in the Offering Memorandum.
23
(n) Each Company Person shall have furnished to the Initial
Purchaser a certificate of its secretary or assistant secretary, dated the
Closing Date, in form and substance satisfactory to the Initial Purchaser.
(o) Each Company Person shall have furnished to the Initial
Purchaser (i) a certificate of good standing from the state in which it is
incorporated and from each other state or other jurisdiction in which the
failure to be in good standing could reasonably be expected to have a Material
Adverse Effect, each dated no more than seven days prior to the Closing Date,
and (ii) a bring-down letter of good standing from CT Corporation System (or
another similar service) with respect to the Company and each Guarantor in each
such state or other jurisdiction, dated as of the Closing Date.
(p) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall not
have been any change in the capital stock or long-term debt or any change in or
affecting the condition, financial or otherwise, earnings, business affairs,
management or business prospects of the Company and its subsidiaries, considered
as one enterprise, whether or not arising in the ordinary course of business,
the effect of which, in any such case described above, is, in the judgment of
the Initial Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Securities on the terms
and in the manner contemplated by this Agreement and the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(q) The Company shall have:
(i) notified the Existing Notes Indenture Trustee and the
paying agent under the Existing Notes Indenture of its intention to redeem all
of the Existing Notes in accordance with Section 3.01 of the Existing Notes
Indenture, and each such notice shall be in form and substance satisfactory to
the Initial Purchaser and shall have been given not less than five (5) days nor
more than thirty (30) days prior to the Closing Date (unless the Existing Notes
Indenture Trustee shall have agreed in writing to a shorter notice period or
waived such notice);
(ii) furnished a letter from the Existing Notes Indenture
Trustee, in form and substance satisfactory to the Initial Purchaser, (A)
confirming the amount (the "Existing Notes Payout Amount") required to be
deposited with the Existing Notes Indenture Trustee pursuant to clauses (a)(ii)
and (b) of Section 8.01 of the Existing Notes Indenture assuming the Company
redeems all of the Existing Notes on the thirtieth (30th) day (or if such day is
not a business day, the next succeeding business day) following the Closing Date
and the Company incurs no amounts referred to in such clause (b) after the
Closing Date and (B) agreeing to provide the acknowledgment referenced in clause
(ii) of Section 5(t) hereof upon its receipt of the Existing Notes Payout Amount
and satisfaction of the other conditions in Section 8.05 of the Existing Notes
Indenture; and
(iii) delivered a notice of redemption, in form and substance
satisfactory to the Initial Purchaser, to the Existing Notes Indenture Trustee
and irrevocably instructed the Existing Notes Indenture Trustee to mail such
notice of redemption to each holder of the Existing Notes in accordance with
24
Section 3.04 of the Existing Notes Indenture upon the Existing Notes Indenture
Trustee receiving the Existing Notes Payout Amount.
(r) The Company shall have furnished a letter from the Existing
Credit Agreement Agent, in form and substance satisfactory to the Initial
Purchaser:
(i) stating the amount (the "Existing Credit Agreement Payout
Amount") required to pay in full in cash on the Closing Date all outstanding
obligations under or in respect of Existing Credit Agreement;
(ii) confirming and agreeing that upon its receipt of the
Existing Credit Agreement Payout Amount, the Existing Credit Agreement will
immediately terminate in accordance with Section 3.6(a) thereof (without regard
to whether the Company provided thirty (30) days' prior written notice of such
termination to the Existing Credit Agreement Agent and the Existing Credit
Agreement Specified Appointee) and all Liens securing obligations under the
Existing Credit Agreement will be forever released and discharged; and
(iii) agreeing to provide the acknowledgment referenced in
clause (ii) of Section 5(u) hereof upon its receipt of the Existing Credit
Agreement Payout Amount.
(s) Each of the Loan Documents, on substantially the terms described in
the Offering Memorandum, shall have been duly executed and delivered by an
authorized officer of each party thereto. The Company shall have furnished to
the Initial Purchaser an officer's certificate, dated the Closing Date, (i)
attaching a copy of each Loan Document and any other document referred to
therein which the Initial Purchaser deems necessary and (ii) certifying (A) each
such Loan Document and other document is a true, correct and complete copy
thereof and remains in full force and effect and (B) that neither any Company
Person nor Grey Wolf has breached or defaulted in any of its obligations under
any of such Loan Documents and other documents. Such officer's certificate shall
also certify that:
(i) all conditions precedent (other than the satisfaction (or
waiver) of the conditions precedent set forth in this Section 6 and the
conditions precedent to (A) the making of the Grey Wolf Term Loan or (B) the
initial extension of credit contained in the New Credit Facility) to the
obligation of the lenders under the Bridge Loan Agreement to make a term loan in
the principal amount of $25,000,000 to the Company have been satisfied (or
waived) in accordance with the terms of the Bridge Loan Agreement;
(ii) all conditions precedent (other than the satisfaction (or
waiver) of the conditions precedent set forth in this Section 6 and the
conditions precedent to (A) the making of the Bridge Loan or (B) the initial
extension of credit contained in the New Credit Facility) to the obligation of
the lenders under the Grey Wolf Loan Agreement to make a term loan in the
principal amount of $35,000,000 to Grey Wolf have been satisfied (or waived) in
accordance with the terms of the Grey Wolf Loan Agreement; and
(iii) all conditions precedent (other than the satisfaction (or
waiver) of the conditions precedent set forth in this Section 6 and the
25
conditions precedent to (A) the making of the Bridge Loan or (B) the making of
the Grey Wolf Term Loan) to the obligation of the lenders under the New Credit
Facility to make revolving credit loans in the aggregate principal amount, at
any one time outstanding, not to exceed $15,000,000 have been satisfied (or
waived) in accordance with the terms of the New Credit Facility.
(t) The Collateral Agent shall have received (with a copy to the
Initial Purchaser and the Trustee) prior to the Closing Time:
(i) UCC requests for information (Form UCC-11), or similar search
reports certified by a party acceptable to the Initial Purchaser and the
Trustee, dated a date no more than fourteen (14) days prior to the Closing Date,
listing all effective UCC financing statements in the respective jurisdictions
listed on Schedule 1 hereto which name a Company Person (under its present name
and any previous name) as the debtor, together with copies of such financing
statements (none of which shall cover any collateral described in the Collateral
Documents not being released on or prior to the Closing Date (other than
Permitted Prior Liens);
(ii) appropriately completed UCC-3 termination statements which
have been duly authorized for filing by the appropriate person, or other similar
agreements, documents or instruments (including releases, reconveyances,
satisfactions or other instruments of discharge), necessary or, in the opinion
of the Initial Purchaser, the Trustee or their respective counsel, desirable to
release all Liens (other than Permitted Prior Liens) of any person in any
collateral described in the Security Documents previously granted by any person,
including, without limitation, each Lien identified in a report delivered
pursuant to clause (i) above that is not a Permitted Prior Lien; provided,
however, any such termination statement, instrument or document releasing Liens
which secure obligations under the Existing Credit Agreement Agent or the
Existing Notes Indenture Trustee may be delivered pursuant to an escrow
arrangement pending termination of the Existing Credit Agreement Agent or
mailing of a notice of redemption to each holder of the Existing Notes,
respectively; and
(iii) appropriately completed UCC financing statements which have
been duly authorized for filing by the appropriate person and which name the
Company and each Guarantor as a debtor and the Collateral Agent as the secured
party, or other similar agreements, documents or instruments (including
mortgages) to be filed under the UCC of all jurisdictions or otherwise as may be
necessary or, in the opinion of the Initial Purchaser, the Trustee or their
respective counsel, desirable to perfect the security interests of the
Collateral Agent pursuant to the Security Documents.
(u) All UCC financing statements, termination statements and other
similar agreements, documents and instruments for filing required to be
delivered to the Collateral Agent pursuant to Section 6(t) hereof (the
"Financing Statements") shall have been delivered to CT Corporation System
and/or one or more other similar filing service companies acceptable to the
Trustee, the Collateral Agent and the Initial Purchaser with arrangements
satisfactory to the Trustee, the Collateral Agent and the Initial Purchaser for
the filing of such Financing Statements.
(v) Prior to or concurrently with the Closing Time, the Company shall
have received cash proceeds from borrowings of the Loan Documents in an amount
26
sufficient, when added to the net cash proceeds from the sale of the Securities
hereunder, to pay in full in cash the Existing Credit Agreement Payout Amount
and the Existing Notes Payout Amount and all other fees, costs and expenses
payable by the Company Persons in connection with the closing of the
transactions contemplated by the Transaction Documents, including the
Refinancing Transaction, and shall have authorized disbursement of such cash
proceeds directly to pay the Existing Credit Agreement Payout Amount and the
Existing Notes Payout Amount and such fees, costs and expenses pursuant to a
disbursement authorization letter, in form and substance satisfactory to the
Initial Purchaser, executed and delivered by the Company Persons, and the
Initial Purchaser shall have received such other confirmations as it may request
as to the termination and discharge of the Existing Credit Agreement, the
discharge of the Existing Notes and the release and discharge of all Liens
securing the Existing Notes and obligations under the Existing Credit Agreement.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to the Initial
Purchaser and Sidley Xxxxxx Xxxxx & Xxxx LLP.
7. Termination. The Initial Purchaser may terminate this Agreement, by
notice to the Company, at any time prior to Closing Time (i) if any condition
specified in Section 6 hereof shall not have been fulfilled when and as required
to be fulfilled or (ii) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum (exclusive of any amendment or supplement thereto subsequent
to the date of this Agreement), any material adverse change in the condition,
financial or otherwise, earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business or (iii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Initial Purchaser, impracticable or inadvisable to market the
Securities or to enforce contracts for the sale of the Securities or (iv) if
trading in any securities of the Company has been suspended or materially
limited by the Commission, the American Stock Exchange or any other securities
exchange or automated quotation system upon which any such securities are
traded, or if trading generally on any national securities exchange or automated
quotation system of a registered securities association has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices have been required, by any such exchange or system or
by order of the Commission, the NASD or any other governmental authority or (v)
a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States or (vi) if a banking
moratorium has been declared by either Federal or New York authorities. Any such
termination shall be without liability of any party to another party and,
notwithstanding such termination, certain provisions of this Agreement shall
survive and remain in full force and effect as provided in Section 14 hereof.
8. Reimbursement of Initial Purchaser Expenses. If (i) this Agreement
shall have been terminated pursuant to Section 7 hereof, (ii) the Company shall
fail to tender the Securities for delivery to the Initial Purchaser in
accordance with the terms of this Agreement or (iii) the Initial Purchaser shall
27
decline to purchase the Securities for any reason permitted under this
Agreement, the Company and each of the Guarantors shall, jointly and severally,
reimburse the Initial Purchaser for such out-of-pocket expenses (including
reasonable fees and disbursements of counsel) as shall have been reasonably
incurred by the Initial Purchaser in connection with this Agreement and the
proposed purchase and resale of the Securities.
9. Indemnification.
(a) The Company Persons, jointly and severally, shall indemnify, defend
and hold harmless the Initial Purchaser, its affiliates, each person, if any,
who controls the Initial Purchaser within the meaning of the Securities Act or
the Exchange Act and each officer, director, employee, representative and agent
of the Company, its affiliates and any such other person who so controls the
Initial Purchaser (each such person being referred to herein as a "Purchaser
Indemnified Person"), from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, whether commenced or
threatened and regardless of whether such Purchaser Indemnified Person is a
party to such action, including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of the Securities, to which
such Purchaser Indemnified Person may become subject under the Securities Act,
the Exchange Act, any other federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum or in
any amendment or supplement thereto or in any information provided by the
Company or any Guarantor pursuant to Section 5(e) hereof or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that no Company Person shall be liable (i) in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Initial Purchaser's Information or (ii) with respect to the Preliminary Offering
Memorandum, to the extent that any such loss, claim, damage or liability arises
solely from the fact that the Initial Purchaser sold securities to a person to
whom there was not sent or given, on or prior to the written confirmation of
such sale, a copy of the Offering Memorandum, as amended or supplemented, if the
Company shall have previously and timely furnished copies thereof to the Initial
Purchaser in accordance with this Agreement and the Offering Memorandum, as
amended or supplemented, would have corrected any such untrue statement or
omission; and each Company Person shall jointly and severally reimburse each
Purchaser Indemnified Person promptly upon demand for any legal or other
expenses reasonably incurred by such Purchaser Indemnified Person in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred.
(b) The Initial Purchaser shall indemnify, defend and hold harmless
each Company Person, its affiliates, each person, if any, who controls a Company
Person within the meaning of the Securities Act or the Exchange Act and each
officer, director, employee, representative and agent of a Company Person, such
affiliates and any such other person who so controls a Company Person (each such
person being referred to herein as a "Company Indemnified Person"), from and
against any loss, claim, damage or liability, joint or several, or any action in
28
respect thereof, whether commenced or threatened and regardless of whether such
Company Indemnified Person is a party to such action, including, without
limitation, any loss, claim, damage, liability or action relating to purchases
and sales of the Securities, to which such Company Indemnified Person may become
subject under the Securities Act, the Exchange Act, any other federal or state
statutory law or regulation, at common law or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, in each case, only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with any Initial Purchaser's Information; and the Initial
Purchaser shall reimburse such Company Indemnified Person for any legal or other
expenses reasonably incurred by such Company Indemnified Person in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred.
(c) Promptly after receipt by a Purchaser Indemnified Person or a
Company Indemnified Person (each being referred to herein in such capacity as an
"indemnified party") of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made against
the Company or a Guarantor pursuant to Section 8(a) hereof or the Initial
Purchaser pursuant to Section 9(b) hereof (the Company Persons and the Initial
Purchaser being referred to herein in such capacity as an "indemnifying
person"), notify such indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under this Section 9 except to the extent that it has been materially prejudiced
by such failure; and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 9. If any such claim or
action shall be brought against an indemnified party and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (i)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has reasonably
concluded (based upon written advice of counsel to the indemnified party) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based upon written advice of
counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (iv)
29
the indemnifying party has not in fact employed counsel reasonably satisfactory
to the indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b) hereof, shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim.
(d) Settlement without Consent if Failure to Reimburse. An indemnifying
party shall not be liable for any settlement of any proceedings effected without
its written consent (which consent shall not be unreasonably withheld).
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse such
indemnified party for legal or other expenses in connection with investigating,
responding to or defending any proceeding as contemplated by Section 9(a) or
9(b) hereof, as the case may be, such indemnifying person shall be liable for
any settlement of any proceedings effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying person of such request for the reimbursement, (ii) such
indemnifying person shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement and (iii) such
indemnifying person shall not have responded in writing to such request,
specifying those expenses that it has chosen not to reimburse and the reason for
such non-reimbursement, prior to the date of such settlement. An indemnifying
person shall not, without the prior written consent of an indemnified party
(which consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceedings in respect of which indemnity could have been
sought hereunder by such indemnified party unless such settlement (i) includes
an unconditional release of such indemnified party in form and substance
satisfactory to such indemnified party from all liability on claims that are the
subject matter of such proceedings and (ii) does not include any statement as
to, or any admission of, fault, culpability or failure to act by or on behalf of
any indemnified party. In addition, except as otherwise set forth in this
paragraph, an indemnified party shall not, without the prior written consent of
an indemnifying person (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceedings in respect of
which indemnity could have been sought hereunder by such indemnified party
unless such settlement (i) includes an unconditional release of such
indemnifying person in form and substance satisfactory to such indemnifying
person from all liability on claims that are the subject matter of such
proceedings and (ii) does not include any statement as to, or any admission of,
fault, culpability or failure to act by or on behalf of such indemnifying
person.
The obligations of each of the Company Persons and the Initial
Purchaser in this Section 9 and in Section 10 hereof are in addition to any
other liability that any Company Person or the Initial Purchaser, as the case
may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.
30
10. Contribution. If the indemnification provided for in Section 9
hereof is unavailable or insufficient to hold harmless an indemnified party
under Section 9(a) or 9(b) hereof, then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company Persons, on the one hand,
and the Initial Purchaser, on the other, from the offering of the 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 Persons, on the one hand, and the Initial Purchaser, on the other,
with respect to the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company Persons,
on the one hand, and the Initial Purchaser, on the other, with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by or on behalf of the Company Persons, on the one
hand, and the total discounts and commissions received by the Initial Purchaser
with respect to the Securities purchased under this Agreement, on the other,
bear to the total gross proceeds from the sale of the Securities under this
Agreement. The relative fault 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 the Company
Persons or information supplied by the Company Persons, on the one hand, or to
any Initial Purchaser's Information, on the other, the intent of the parties,
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omissions and any other equitable consideration
appropriate in the circumstances. The Company, the Guarantors and the Initial
Purchaser agree that it would not be just and equitable if contributions
pursuant to this Section 10 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10 shall be deemed to include, for
purposes of this Section 10, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 10, the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the total discounts and commissions
received by the Initial Purchaser with respect to the Securities purchased by it
under this Agreement exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or 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.
11. Assignment; Persons Entitled to Benefit of Agreement. This
Agreement may not be assigned, by operation of law or otherwise, by any party
hereto without the prior written consent of each other party hereto and any
purported assignment without such consent shall be void; provided, that,
notwithstanding the foregoing, the Initial Purchaser shall, without being
released from any of its obligations hereunder, be permitted to assign its
rights and obligations hereunder to one or more of its affiliates. This
Agreement shall inure to the benefit of and be binding upon each of the Initial
31
Purchaser, the Company Persons and their respective successors and permitted
assigns. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except as provided in Sections 9 and 10 hereof
with respect to affiliates of such persons, controlling persons of the Company
Persons and the Initial Purchaser, and officers, directors, employees,
representatives and agents of such persons, such affiliates and such controlling
persons and in Section 5(e) hereof with respect to holders and prospective
purchasers of the Securities. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
11, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
12. Expenses. Each of the Company Persons, jointly and severally,
covenants and agrees with the Initial Purchaser to pay or cause to be paid all
reasonable expenses incident to the performance of the obligations of the
Company Persons under this Agreement, including the following: (i) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities and the Exchange Securities and any taxes payable in that connection;
(ii) the costs incident to the preparation, printing and distribution of the
Preliminary Offering Memorandum and the Offering Memorandum (and any amendment
or supplement thereto), and the mailing and delivering of copies thereof to the
Initial Purchaser and persons designated by them; (iii) the costs of reproducing
and distributing each of the Transaction Documents, the closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iv) the costs
incident to the preparation, printing and delivery of the certificates
evidencing the Securities and the Exchange Securities, including stamp duties
and transfer taxes, if any, payable upon issuance of the Securities and the
Exchange Securities; (v) the fees and expenses of the Company's counsel,
independent accountants and other representatives and agents; (vi) the fees and
expenses of qualifying the Securities and the Exchange Securities under the
securities laws of the several jurisdictions as provided in Section 5(g) hereof
and of preparing, printing and distributing "Blue Sky" memoranda (including
related fees and expenses of counsel for the Initial Purchaser); (vii) the fees
and expenses of the Trustee and any paying agent (including related fees and
expenses of any counsel to such parties); (viii) all expenses associated with
the creation and perfection of security interests and associated documents,
including, without limitation, the Security Documents and all Financing
Statements, including filing fees and the reasonable fees and disbursements of
counsel incurred in connection therewith and the fees and disbursements of local
counsel to the Initial Purchaser incurred in connection therewith; (ix) the fees
and expenses of the Collateral Agent and any agent of the Collateral Agent
(including related fees and expenses of any counsel to such parties); (x) all
expenses and application fees incurred in connection with the application for
the inclusion of the Securities on the PORTAL Market and the approval of the
Securities and the Exchange Securities for book-entry transfer by DTC; (xi) all
travel expenses of the Company's officers and employees and other expenses of
the Company in connection with attending or hosting meetings with prospective
purchasers of the Securities from the Initial Purchaser; (xii) such costs and
expenses owing pursuant to Section 4 of the Engagement Letter (as defined
below); and (xiii) all other costs and expenses incident to the performance of
the obligations of the Company Persons under this Agreement and the other
Transaction Documents that are not otherwise specifically provided for in this
Section 12.
32
13. Survival. The respective agreements of the Company Persons and the
Initial Purchaser contained in Sections 8 through 22 hereof and the respective
representations and warranties of such persons contained in this Agreement or
made by or on behalf of such persons pursuant to this Agreement or in any
certificate delivered pursuant hereto shall survive and remain in full force and
effect regardless of any termination or cancellation of this Agreement in
accordance with its terms. In addition, for purposes of clarification, the
respective agreements, representations and warranties of the Company Persons and
the Initial Purchaser contained in this Agreement or made by or on behalf of
such persons pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive and remain in full force and effect following the delivery
of and payment for the Securities hereunder.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail or facsimile transmission to Guggenheim Capital Markets, LLC, 000 Xxxx 00xx
Xxxxxx 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxx (facsimile
no.: (000) 000-0000); or
(b) if to any Company Person, shall be delivered or sent by mail
or facsimile transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Xxxxxx X.X. Xxxxxx (facsimile no.: (210)
490-8816).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
15. Definition of Terms; Construction. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act. A reference herein to any party to this Agreement or any other agreement or
instrument referred to herein shall include such party's successors and
permitted assigns. A reference herein to any agreement shall, unless otherwise
stated herein, be to such agreement (together with any schedule and exhibit
attached thereto) as it may have been, or may hereafter be, amended, modified,
supplemented, waived and/or restated from time to time in accordance with its
terms. A reference herein to any law or other legislation or to any provision of
any law or other legislation shall include any amendment, modification or
re-enactment thereof, any legislative provision substituted therefor and all
regulations, rules and interpretations issued thereunder or pursuant thereto.
All references to "$", funds and dollars refer to United States currency.
16. Initial Purchaser's Information. The parties hereto acknowledge and
agree that, for all purposes of this Agreement, the Initial Purchaser's
Information consists solely of the following information in the Offering
Memorandum: the statements concerning the Initial Purchaser contained in the
fifth and sixth sentences of the fourth paragraph, and the first, second,
penultimate and last sentences of the fifth paragraph, under the heading "Plan
of Distribution".
33
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to any
choice-of-law rules which might apply the laws of any other jurisdiction.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by facsimile) and, if
executed in more than one counterpart, each such counterpart shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
19. Amendments. No amendment of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by each of the parties
hereto. No waiver of any provision of this Agreement or any consent or approval
to any departure therefrom shall be effective unless the same shall be in
writing and signed by each party so waiving such provision or consenting to or
approving such departure.
20. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
21. Entire Agreement. This Agreement, together with the schedules and
annexes hereto (which schedules and annexes are deemed a part of this Agreement)
(a) contain the entire agreement and understanding of the parties with respect
to the subject matter hereof and (b) supersede all prior negotiations,
discussions, correspondence, communications, understandings, drafts and
agreements between the parties relating to the subject matter hereof, all of
which are merged into this Agreement; provided, however, that the terms of the
Engagement Letter, dated July 30, 2004 (the "Engagement Letter"), between the
Company and the Initial Purchaser shall survive execution of this Agreement and
shall continue to be in force regardless of whether the Securities are purchased
by the Initial Purchaser hereunder at the Closing Time or this Agreement is
terminated. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action or proceeding
involving this Agreement.
22. Severability. Any provision hereof which is held by any court of
competent jurisdiction in any jurisdiction to be illegal, void or unenforceable
shall, as to such jurisdiction, be ineffective to the extent of such illegality
or unenforceability without invalidating the remaining provisions hereof, and
any such illegality or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. To the fullest
extent permitted by applicable law, the parties hereby waive any provision of
law which may render any provision hereof prohibited or unenforceable in any
respect.
[signature page follows]
34
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us a counterpart hereof, whereupon this instrument
will become a binding agreement between the Company Persons and the Initial
Purchaser in accordance with its terms.
Very truly yours,
ABRAXAS PETROLEUM CORPORATION
By:
--------------------------------------------
Name:
Title:
EASTSIDE COAL COMPANY, INC.
By:
--------------------------------------------
Name:
Title:
SANDIA OIL & GAS CORPORATION
By:
--------------------------------------------
Name:
Title:
SANDIA OPERATING CORP.
By:
-------------------------------------------
Name:
Title:
WAMSUTTER HOLDINGS, INC.
By:
------------------------------------------
Name:
Title:
WESTERN ASSOCIATED ENERGY CORPORATION
By:
-----------------------------------------
Name:
Title:
Accepted:
GUGGENHEIM CAPITAL MARKETS, LLC
By:
----------------------------------------------
Name:
Title:
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