EXHIBIT 1.1
EXECUTION COPY
$175,000,000
KCS ENERGY, INC.
7 1/8% SENIOR NOTES DUE 2012
PURCHASE AGREEMENT
March 25, 2004
CREDIT SUISSE FIRST BOSTON LLC
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
XXXXXXXXX & COMPANY, INC.
XXXXXX XXXXXXX CORP.
BANC ONE CAPITAL MARKETS, INC.
BNP PARIBAS SECURITIES CORP.
c/o: Credit Suisse First Boston LLC
Eleven Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Dear Sirs:
1. Introductory. KCS Energy, Inc., a Delaware corporation (the
"COMPANY"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"PURCHASERS") U.S.$175,000,000 aggregate principal amount of its 7 1/8% Senior
Notes due 2012 (the "OFFERED SECURITIES") to be issued under an indenture, dated
as of April 1, 2004 (the "INDENTURE"), among the Company, KCS Resources, Inc., a
Delaware corporation, Medallion California Properties Company, a Texas
corporation, KCS Energy Services, Inc., a Delaware corporation, and Proliq,
Inc., a New Jersey corporation (collectively, the "GUARANTORS") and U.S. Bank
National Association, as Trustee.
The holders of the Offered Securities will be entitled to the benefits
of a Registration Rights Agreement, to be dated as of the Closing Date (as
defined below), among the Company, the Guarantors and the Purchasers (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company agrees to file a
registration statement with the Securities Exchange Commission (the
"COMMISSION") registering the resale of the Offered Securities under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT").
The Company and the Guarantors hereby agree with the several Purchasers
as follows:
2. Representations and Warranties of the Company and the Guarantors.
The Company and the Guarantors, jointly and severally, represent and warrant to,
and agree with, the several Purchasers that:
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have
been prepared by the Company. Such preliminary offering circular and
offering circular (the "OFFERING CIRCULAR"), as supplemented as of the
date of this Agreement, together with any other document approved by
the Company for use in connection with the contemplated resale of the
Offered Securities are hereinafter collectively referred to as the
"OFFERING DOCUMENT." On the date of this Agreement, the Offering
Document does not include any untrue statement of a material fact or
omit to state any 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. The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Company by any
Purchaser through Credit Suisse First Boston LLC ("CSFB") specifically
for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof. Except as
disclosed in the Offering Document, on the date of this Agreement, the
Company's Annual Report on Form 10-K most recently filed with the
Commission and all subsequent reports (collectively, the "EXCHANGE ACT
REPORTS") that have been filed by the Company with the Commission or
sent to stockholders pursuant to the Securities Exchange Act of 1934
(the "EXCHANGE ACT") do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in
the light of the circumstances under which they were made, not
misleading. Such documents, when they were filed with the Commission,
conformed in all material respects to the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
(b) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease and
operate its properties and conduct its business as described in the
Offering Document and to enter into and perform its obligations under
this Agreement; the Company is duly qualified to transact business as a
foreign corporation and is in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole ("MATERIAL ADVERSE
EFFECT"); and, to the Company's knowledge, no proceeding has been
instituted in any jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail, such power and authority or
qualification; and the Company does not own, lease or license any asset
or property or conduct any material business outside of the United
States.
(c) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company (the "SUBSIDIARIES").
(d) Each Subsidiary has been duly incorporated and is a
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority
to own and lease and operate its properties and conduct its business as
described in the Offering Document and to enter into and perform its
obligations under this Agreement; each Subsidiary is duly qualified to
transact business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect;
and all of the issued and outstanding capital stock of each Subsidiary
has been duly authorized and validly issued and is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries, free from liens, encumbrances and defects, except for
liens resulting from the Company's credit facility and pledges under
such credit facility.
(e) Except for the Registration Rights Agreement, there are no
contracts, agreements or understandings between the Company or any
Subsidiary and any person granting such person the right to require the
Company or such Subsidiary to file a registration statement under the
Securities Act with respect to any securities of the Company or such
Subsidiary or to require the Company or such Subsidiary to include such
securities with the Offered Securities and Subsidiary Guarantees
registered pursuant to any registration statement.
(f) The Indenture has been duly authorized by all necessary
corporate action; the Offered Securities have been duly authorized by
all necessary corporate action; and when the Offered Securities are
delivered and paid for pursuant to this Agreement on the Closing Date
(as defined in Section 3), the Indenture will have been duly executed
and delivered, such Offered Securities will have been duly executed,
authenticated, issued and delivered and will conform in all material
respects to the description thereof contained in the Offering Document
and the Indenture and such Offered Securities will constitute valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(g) On the Closing Date, the Indenture will conform in all
material respects to the requirements of the United States Trust
Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"), and the
rules and regulations of the Commission applicable to an indenture
which is qualified thereunder.
(h) On the Closing Date, the Exchange Securities (as defined
in the Registration Rights Agreement) will have been duly authorized by
the Company and the Guarantors; and when the Exchange Securities are
issued, executed and authenticated in accordance with the terms of the
Registration Rights Agreement and the Indenture, the Exchange
Securities will be entitled to the benefits of the Indenture and will
be the valid and legally binding obligations of the Company and the
Guarantors, enforceable in accordance with their
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terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(i) The Subsidiary Guarantee (as defined in the Indenture) to
be endorsed on the Exchange Securities by each Guarantor has been duly
authorized by such Guarantor and, when issued, will have been duly
executed and delivered by each such Guarantor and will conform to the
description thereof contained in the Offering Document; and when the
Exchange Securities have been issued, executed and authenticated in
accordance with the terms of the Registration Rights Agreement and the
Indenture, the Subsidiary Guarantee of each Guarantor endorsed thereon
will constitute valid and legally binding obligations of such
Guarantor, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(j) There are no contracts, agreements or understandings
between the Company and any person that would give rise to a valid
claim against the Company or any Purchaser for a brokerage commission,
finder's fee or other like payment, other than the fees and
compensation to be paid to the Purchasers in accordance with this
Agreement.
(k) The Registration Rights Agreement has been duly authorized
by the Company and each of the Guarantors and, on the Closing Date,
will have been duly executed and delivered by the Company and each of
the Guarantors; when the Registration Rights Agreement has been duly
executed and delivered by the Company and the Guarantors and duly
authorized, executed and delivered by the Purchasers, the Registration
Rights Agreement will be a valid and binding agreement of the Company
and each of the Guarantors, enforceable against the Company and each
Guarantor in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and on the Closing Date, the
Registration Rights Agreement will conform in all material respects as
to legal matters to the description thereof in the Offering Circular.
(l) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement
or the Registration Rights Agreement in connection with the issuance
and sale of the Offered Securities by the Company except for (i) such
consents as may be required under applicable state securities laws in
connection with the purchase and resale of the Notes by the Purchasers
and (ii) such consents, with respect to the Exchange Securities
(including the related Guarantee), as may be required under applicable
state securities laws and the Securities Act, including the order of
the Commission declaring the Exchange Offer Registration Statement or
the Shelf Registration Statement (each as defined in the Registration
Rights Agreement) effective.
(m) Neither the Company nor any of the Subsidiaries is in
violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and the
Subsidiaries, taken as a whole, to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries or their respective property is bound (collectively,
"AGREEMENTS AND INSTRUMENTS"), except for such defaults that would not
result in a Material Adverse Effect; the execution, delivery and
performance by the Company of its obligations under the Indenture, this
Agreement and the Registration Rights Agreement, and the issuance and
sale of the Offered Securities and compliance with the terms and
provisions thereof, do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of the Subsidiaries pursuant to, the Agreements and Instruments, nor
will such action result in any violation of (i) the provisions of the
charter or by-laws of the Company or any of the Subsidiaries or (ii)
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any of the
Subsidiaries or any of their assets, properties or operations, which
violations, in the case of clause (ii), would, individually or in the
aggregate, either have a Material Adverse Effect or a material adverse
effect on the consummation of the transactions contemplated herein; and
the Company has full power and authority to authorize, issue and sell
the Offered Securities as contemplated by this Agreement.
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As used herein, "REPAYMENT EVENT" means any event or condition that
gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any of the Subsidiaries.
(n) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
(o) The Company and the Subsidiaries have good and
indefeasible title to all of their interests in oil and gas properties
(other than interests earned under farm-out, participation or similar
agreements in which an assignment or transfer is pending) and all other
real property owned by the Company and the Subsidiaries and good title
to all other properties owned by them, in each case, free and clear of
all mortgages, pledges, liens, security interests, claims, restrictions
or encumbrances of any kind except such as (i) are described in the
Offering Document, (ii) liens and encumbrances under operating
agreements, unitization and pooling agreements, production sales
contracts, farm-out agreements and other oil and gas exploration
participation and production agreements, in each case that secure
payment of amounts not yet due and payable for the performance of other
unmatured obligations and are of a scope and nature customary in the
oil and gas industry or arise in connection with drilling and
production operations, or (iii) do not, individually or in the
aggregate, materially affect the value of the affected property and do
not interfere with the use made and proposed to be made of such
property by the Company or the Subsidiaries, as the case may be; all of
the leases and subleases of real property that are material to the
business of the Company or any of the Subsidiaries and under which the
Company or any of the Subsidiaries holds properties described in the
Offering Document, are in full force and effect, and neither the
Company nor any of the Subsidiaries has received notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of the Subsidiaries under any of such
leases or subleases, or affecting or questioning the rights of the
Company or such Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(p) The Company and the Subsidiaries possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"GOVERNMENTAL LICENSES") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct the
business in the manner described in the Offering Document, subject to
such qualifications as may be set forth in the Offering Document and
except for such Governmental Licenses which, if not obtained, would
not, individually or in the aggregate, have a Material Adverse Effect;
the Company and the Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, subject to such
qualifications as may be set forth in the Offering Document and except
for such noncompliance which would not, individually or in the
aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, subject to such
qualifications as may be set forth in the Offering Document and except
for such Governmental Licenses which, if not valid and in full force
and effect, would not, individually or in the aggregate, have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of the
Subsidiaries, would, individually or in the aggregate, have a Material
Adverse Effect.
(q) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that
could reasonably be expected to result in a Material Adverse Effect.
(r) The Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how (including unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), patents, copyrights, confidential information and other
intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of
or conflict with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the
Company or any of the Subsidiaries, would, individually or in the
aggregate, have a Material Adverse Effect.
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(s) (i) neither the Company nor any of the Subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating
to pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "HAZARDOUS MATERIALS") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "ENVIRONMENTAL
LAWS"); (ii) the Company and the Subsidiaries have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements;
(iii) to the knowledge of the Company, there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of the Subsidiaries; and (iv) there are
no events or circumstances that could reasonably be expected to form
the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of the Subsidiaries relating to
Hazardous Materials or any Environmental Laws, except in the case of
clauses (i), (ii), (iii) or (iv) where such violation, failure to
receive required permits, authorizations and approvals or failure to
comply with the requirements of such permits, authorizations and
approvals, action or liabilities related to Hazardous Materials or any
Environmental Laws would not, individually or in the aggregate, have a
Material Adverse Effect.
(t) As of the date hereof, (i) all royalties, rentals,
deposits and other amounts owed under the oil and gas leases
constituting the oil and gas properties of the Company and the
Subsidiaries have been properly and timely paid (other than amounts
held in routine suspense accounts pending payments), and no material
amount of proceeds from the sale or production attributable to the oil
and gas properties of the Company and the Subsidiaries are currently
being held in suspense by any purchaser thereof, except where such
amounts due could not, individually or in the aggregate, have a
Material Adverse Effect on the Company or any of the Subsidiaries, and
(ii) there are no claims under take-or-pay contracts pursuant to which
natural gas purchasers have any make-up rights affecting the interests
of the Company or the Subsidiaries in their oil and gas properties,
except where such claims could not, individually or in the aggregate,
have a Material Adverse Effect on the Company or any of the
Subsidiaries.
(u) There are no pending actions, suits or proceedings against
or affecting the Company, any of the Subsidiaries or any of their
respective properties that, if determined adversely to the Company or
any of the Subsidiaries, that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, or that might
reasonably be expected to materially and adversely affect the ability
of the Company or any Guarantor to perform its obligations under the
Indenture, this Agreement or the Registration Rights Agreement, or
which are otherwise material in the context of the sale of the Offered
Securities; to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated; and the aggregate of all
pending legal or governmental proceedings to which the Company or any
of the Subsidiaries is a party or of which any of their respective
properties or assets is the subject that are not described in the
Offering Document, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material
Adverse Effect.
(v) The financial statements included in the Offering
Document, together with the related schedules and notes thereto,
present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and, except as
otherwise disclosed in the Offering Document, such financial statements
have been prepared in conformity with the generally accepted accounting
principles in the United States ("GAAP") applied on a consistent basis
throughout the periods involved.
(w) Since the date of the latest audited financial statements
included in the Offering Document, there has been no material adverse
change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business,
properties, results of operations or business prospects of the Company
and the Subsidiaries taken as a whole; the Company and the Subsidiaries
have not incurred any
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liability or obligations, direct or contingent, nor entered into any
transaction, other than those in the ordinary course of business, which
are material with respect to the Company or the Subsidiaries; there has
been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock; and there has not been
any material adverse change in the capital stock, short-term debt or
long term debt of the Company or any of the Subsidiaries.
(x) The Company is subject to the reporting requirements of
either Section 13 or Section 15(d) of the Exchange Act and files
reports with the Commission on the Electronic Data Gathering, Analysis,
and Retrieval (XXXXX) system.
(y) Neither the Company nor any of the Guarantors is an
open-end investment company, unit investment trust or face-amount
certificate company that is, or is required to be, registered under
Section 8 of the United States Investment Company Act of 1940 (the
"INVESTMENT COMPANY ACT"); and the Company and each of the Guarantors
are not and, after giving effect to the offering and sale of the
Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be an "investment company"
as defined in the Investment Company Act.
(z) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities are
listed on any national securities exchange registered under Section 6
of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.
(aa) Neither the Company nor any of the Subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them
will take, any action that could reasonably be expected to cause this
Agreement or the issuance or sale of the Offered Securities to violate
Regulation T, Regulation U or Regulation X of the Board of Governors of
the Federal Reserve System.
(bb) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act (i) has imposed (or has informed the Company
or any Guarantor that it is considering imposing) any condition
(financial or otherwise) on the Company's or any Guarantor's retaining
any rating assigned to the Company or any Guarantor, any securities of
the Company or any Guarantor or (ii) has indicated to the Company or
any Guarantor that it is considering (A) the downgrading, suspension,
or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so
assigned or (B) any change in the outlook for any rating of the
Company, any Guarantor or any securities of the Company or any
Guarantor.
(cc) No form of general solicitation or general advertising
(as defined in Regulation D under the Securities Act) was used by the
Company, the Guarantors or any of their respective representatives
(other than the Purchasers, as to whom the Company and the Guarantors
make no representation or warranty) in connection with the offer and
sale of the Offered Securities contemplated hereby, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising.
(dd) The sale of the Offered Securities pursuant to Regulation
S under the Securities Act ("REGULATION S") is not part of a plan or
scheme to evade the registration provisions of the Securities Act.
(ee) No registration under the Securities Act of the Offered
Securities or the Subsidiary Guarantees is required for the sale of the
Offered Securities and the Subsidiary Guarantees to the Purchasers as
contemplated hereby or for the Exempt Resales assuming the accuracy of
the Purchaser's representations set forth in Section 4 hereof.
(ff) Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United States
or to any U.S. person (as such terms are defined in Regulation S under
the Securities Act) the Offered Securities or any security of the same
class or series as the Offered Securities or (ii) has offered or will
offer or sell the Offered Securities (A) in the United States by means
of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act or (B) with respect to
any such securities sold in reliance on Rule 903
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of Regulation S, by means of any directed selling efforts within the
meaning of Rule 902(c) of Regulation S. The Company, its affiliates and
any person acting on its or their behalf (other than the Purchasers, as
to whom the Company and the Guarantors make no representation) have
complied and will comply with the offering restrictions requirement of
Regulation S. The Company has not entered and will not enter into any
contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement.
(gg) Ernst & Young LLP, which is reporting on certain of the
audited financial statements of the Company included in the Offering
Document, are independent public accountants within the meaning of the
Securities Act; and Xxxxxx Xxxxxxxx LLP, who certified certain of the
financial statements included in the Offering Document, were at the
time of the certification of such reports independent public
accountants as required by the Securities Act.
(hh) There are no contracts or documents that are required to
be described in the Offering Document or the documents incorporated by
reference therein or to be filed as exhibits thereto that have not been
so described and filed as required.
(ii) The statistical and market-related data included or
incorporated by reference in the Offering Document are based on or
derived from sources that the Company believes to be reliable and
accurate or represent the Company's good faith estimates that are made
on the basis of data derived from such sources.
(jj) All United States federal income tax returns of the
Company and the Subsidiaries required by law to be filed have been
filed (or extensions with respect to such tax returns have been
obtained); all taxes shown by such filed tax returns or otherwise
assessed, that are due and payable, have been paid, except those which
are being contested in good faith and as to which adequate reserves
have been provided in accordance with generally accepted accounting
principles; the Company has not received any notice from the Internal
Revenue Service that it intends to audit the Company's federal income
tax returns for any year during the three year period ended December
31, 2003 and no audit proceeding by the Internal Revenue Service has
been conducted during such period; the Company and the Subsidiaries
have filed all other tax returns (or obtained extensions with respect
to such tax returns) that are required to have been filed by them
pursuant to applicable foreign, state, local or other law, and have
paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and the Subsidiaries, except those
which are being contested in good faith and as to which adequate
reserves have been provided in accordance with generally accepted
accounting principles; and the charges, accruals and reserves on the
books of the Company in respect of any income and corporation tax
liability for any years not finally determined are adequate in all
material respects to meet any assessments or reassessments for
additional income tax for any years not finally determined.
(kk) The Company and the Subsidiaries carry or are covered by
insurance, with financially sound and reputable insurers, in such
amounts and covering such risks as is generally maintained by companies
similar to the Company engaged in the same or similar business, and all
such insurance is in full force and effect.
(ll) No relationship, direct or indirect, exists between or
among any of the Company or any affiliate of the Company, on the one
hand, and any director, officer, stockholder, customer or supplier of
any of them, on the other hand, which is required by the Exchange Act
to be described in the Company's Annual Report on Form 10-K for the
year ended December 31, 2003, which is not so described or is not
described as required.
(mm) The written engineering report audited by Netherland,
Xxxxxx & Associates, Inc., an oil and gas engineering consulting firm
("NSAI"), dated February 19, 2004, setting forth the proved reserves
attributed to the oil and gas properties of the Company and the
Subsidiaries accurately reflect in all material respects the ownership
interests of the Company and the Subsidiaries in the properties therein
as of December 31, 2003, except as otherwise disclosed in the Offering
Document; the information furnished by the Company to NSAI for purposes
of conducting its audit, including, without limitation, production,
costs of operation and development, current prices for production,
agreements relating to current and future operations and sales of
production, was true, correct and complete in all material respects on
the date supplied and was prepared in accordance with customary
industry practices, as indicated in the letter of NSAI dated February
13, 2004; and NSAI is independent with respect to the Company.
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(nn) The principal executive officer and principal financial
officer of the Company have made all certifications required by the
Xxxxxxxx-Xxxxx Act of 2002 (the "XXXXXXXX-XXXXX ACT") or any related
rules and regulations promulgated by the Commission, and the statements
contained in any such certification are complete and correct; the
Company maintains "disclosure controls and procedures" (as defined in
Rule 13a-15(e) under the Exchange Act), and such controls and
procedures are designed (i) to ensure that material information
required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission's rules
and forms and (ii) to ensure that material information required to be
disclosed by the Company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the Company's
management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding
required disclosure; the Company does not have any material weaknesses
in internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act), and there has been no fraud, whether
or not material, that involves management or other employees who have a
significant role in the Company's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act); and
the Company is otherwise in compliance in all material respects with
all applicable effective provisions of the Xxxxxxxx-Xxxxx Act and the
rules and regulations promulgated by the Commission.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at a purchase price of 97.75% of the principal amount thereof
plus accrued interest from April 1, 2004 to the Closing Date (as defined below),
the respective principal amounts of the Offered Securities set forth opposite
the names of the several Purchasers in Schedule A hereto.
The Company will deliver against payment of the purchase price the
Offered Securities to be offered and sold by the Purchasers in reliance on
Regulation S (the "REGULATION S SECURITIES") in the form of one or more
permanent global Securities in registered form without interest coupons (the
"REGULATION S GLOBAL SECURITIES"), which will be deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. The Company will deliver against payment of the
purchase price the Offered Securities to be purchased by each Purchaser
hereunder and to be offered and sold by each Purchaser in reliance on Rule 144A
under the Securities Act (the "144A SECURITIES") in the form of one or more
permanent global securities in definitive form without interest coupons (the
"RESTRICTED GLOBAL SECURITIES") deposited with the Trustee as custodian for DTC
and registered in the name of Cede & Co., as nominee for DTC. The Regulation S
Global Securities and the Restricted Global Securities shall be assigned
separate CUSIP numbers. The Restricted Global Securities shall include the
legend regarding restrictions on transfer set forth under "Transfer
Restrictions" in the Offering Document.
Payment for the Regulation S Securities and the 144A Securities shall
be made by the Purchasers in Federal (same day) funds by wire transfer to an
account at a bank acceptable to CSFB drawn to the order of the Company at the
office of Xxxxxx & Xxxxxx L.L.P. at 9:00 A.M. (New York time), on April 1, 2004,
or at such other time not later than five full business days thereafter as CSFB
and the Company determine, such time being herein referred to as the "CLOSING
DATE," against delivery to the Trustee as custodian for DTC of (i) the
Regulation S Global Securities representing all of the Regulation S Securities
and (ii) the Restricted Global Securities representing all of the 144A
Securities. The Regulation S Global Securities and the Restricted Global
Securities will be made available for checking at the above office of Xxxxxx &
Xxxxxx L.L.P. at least 24 hours prior to the Closing Date.
4. Representations by Purchasers; Resale by Purchasers.
(a) Each Purchaser severally represents and warrants to the
Company that it is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may
not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with
Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser severally represents
and agrees that it has offered and sold the Offered Securities, and
will offer and sell the Offered Securities (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the
later of the commencement of the offering and the Closing Date, only in
8
accordance with Rule 903 or Rule 144A under the Securities Act ("RULE
144A"). Accordingly, neither such Purchaser nor its affiliates, nor any
persons acting on its or their behalf, have engaged or will engage in
any directed selling efforts with respect to the Offered Securities,
and such Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser severally
agrees that, at or prior to confirmation of sale of the Offered
Securities, other than a sale pursuant to Rule 144A, such Purchaser
will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the
Offered Securities from it during the restricted period a confirmation
or notice to substantially the following effect:
"The Securities covered hereby have not been registered
under the U.S. Securities Act of 1933 (the "Securities
Act") and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or
(ii) otherwise until 40 days after the later of the date
of the commencement of the offering and the closing date,
except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms
used above have the meanings given to them by Regulation
S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Purchasers or
affiliates of the other Purchasers with the prior written consent of
the Company.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio; or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising. Each Purchaser severally agrees, with respect
to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or
otherwise prior to settlement of such resale a notice to the effect
that the resale of such Offered Securities has been made in reliance
upon the exemption from the registration requirements of the Securities
Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the expiry of a period
of six months from the Closing Date, will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has only communicated or caused to be communicated and will
only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of
Section 21 of the Financial Services and Markets Act 2000 (the "FSMA"))
received by it in connection with the issue or sale of any Offered
Securities in circumstances in which Section 21(1) of the FSMA does not
apply to the Company or any of the Guarantors; and (iii) it has
complied and will comply with all applicable provisions of the FSMA
with respect to anything done by it in relation to the Offered
Securities in, from or otherwise involving the United Kingdom.
5. Certain Agreements of the Company and the Guarantors. The Company
and the Guarantors, jointly and severally, agree with the several Purchasers
that:
(a) The Company will advise CSFB promptly of any proposal to
amend or supplement the Offering Document and will not effect such
amendment or supplementation without CSFB's consent. If, at any time
prior to the completion of the resale of the Offered Securities by the
Purchasers, any event occurs as a result of which the Offering Document
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any such
time to amend
9
or supplement the Offering Document to comply with any applicable law,
the Company promptly will notify CSFB of such event and promptly will
prepare, at its own expense, an amendment or supplement which will
correct such statement or omission or effect such compliance. Neither
CSFB's consent to, nor the Purchasers' delivery to offerees or
investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to CSFB copies of any preliminary
offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as CSFB requests. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Company will
promptly furnish or cause to be furnished to CSFB and, upon request, to
each of the other Purchasers, and, upon request of holders and
prospective purchasers of the Offered Securities, to such holders and
purchasers, copies of the information required to be delivered to
holders and prospective purchasers of the Offered Securities pursuant
to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection
with resales by such holders of the Offered Securities. The Company
will pay the expenses of printing and distributing to the Purchasers
all such documents.
(c) The Company will arrange for the qualification of the
Offered Securities for sale and the determination of their eligibility
for investment under the laws of such jurisdictions in the United
States and Canada as CSFB designates and will continue such
qualifications in effect so long as required for the resale of the
Offered Securities by the Purchasers, provided that the Company will
not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such state.
(d) During the period of two years after the Closing Date, the
Company will, upon request, furnish to CSFB, each of the other
Purchasers and any holder of the Offered Securities a copy of the
restrictions on transfer applicable to the Offered Securities.
(e) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined
in Rule 144 under the Securities Act) to, resell any of the Offered
Securities that have been reacquired by any of them.
(f) During the period of two years after the Closing Date, the
Company will not be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act.
(g) The Company and the Guarantors, jointly and severally,
will pay all expenses incidental to the performance of its obligations
under this Agreement, the Indenture and the Registration Rights
Agreement, including (i) the fees and expenses of the Trustee and its
professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the
Offered Securities and, as applicable, the Exchange Securities, the
preparation and printing of this Agreement, the Registration Rights
Agreement, the Offered Securities, the Indenture, the Offering Document
and amendments and supplements thereto, and any other document relating
to the issuance, offer, sale and delivery of the Offered Securities
and, as applicable, the Exchange Securities; (iii) the cost of listing
the Offered Securities and qualifying the Offered Securities for
trading in The Portal(SM) Market and any expenses incidental thereto;
(iv) the cost of any advertising approved by the Company in connection
with the issue of the Offered Securities; (v) any expenses (including
fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities or the Exchange Securities for
sale under the laws of such jurisdictions in the United States and
Canada as CSFB designates and the printing of memoranda relating
thereto; (vi) any fees charged by investment rating agencies for the
rating of the Offered Securities or the Exchange Securities; and (vii)
expenses incurred in distributing preliminary offering circulars and
the Offering Document (including any amendments and supplements
thereto) to the Purchasers. The Company and the Guarantors on the one
hand and the Purchasers on the other will each pay half of the travel
expenses and any other expenses of the Purchasers and the Company
incurred in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities.
(h) In connection with the offering, until CSFB has notified
the Company and the other Purchasers of the completion of the resale of
the Offered Securities, neither the Company nor any of its affiliates
has or will,
10
either alone or with one or more other persons, bid for or purchase for
any account in which it or any of its affiliates has a beneficial
interest any Offered Securities or attempt to induce any person to
purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating
actual, or apparent, active trading in, or of raising the price of, the
Offered Securities.
(i) For a period of 90 days after the date of the initial
offering of the Offered Securities by the Purchasers, none of the
Company nor any of the Guarantors will offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file with
the Commission a registration statement under the Act (other than the
Exchange Offer Registration Statement or the Shelf Registration
Statement (each as defined in the Registration Rights Agreement))
relating to, any United States dollar-denominated debt securities
issued or guaranteed by the Company or any Guarantor and having a
maturity of more than one year from the date of issue; provided that
this provision shall not prohibit the issuance of the Exchange
Securities. Neither the Company nor any Guarantor will at any time
offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any securities under circumstances where such offer,
sale, pledge, contract or disposition would cause the exemption
afforded by Section 4(2) of the Securities Act or the safe harbor of
Regulation S thereunder to cease to be applicable to the offer and sale
of the Offered Securities.
(j) The Company will use its reasonable best efforts to cause
the Offered Securities to be eligible for The Portal(SM) Market.
(k) The Second Amendment to the Second Amended and Restated
Credit Agreement shall be in full force and effect.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Offered Securities on the
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and each of the Guarantors herein, to the
accuracy of the statements of officers of the Company and each of the Guarantors
made pursuant to the provisions hereof, to the performance by the Company and
each of the Guarantors of their respective obligations hereunder and to the
following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the
date of this Agreement, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Securities Act
and the applicable published rules and regulations thereunder ("RULES
AND REGULATIONS") and to the effect that:
(i) in their opinion, the financial statements
examined by them and included in the Offering Document and in
the Exchange Act Reports comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the related published Rules and
Regulations;
(ii) on the basis of a reading of the latest
available interim financial statements of the Company,
inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them
to believe that:
(A) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net current assets or net assets, as
compared with amounts shown on the latest balance
sheet included or incorporated by reference in the
Offering Document; or
(B) for the period from the closing date of
the latest income statement included or incorporated
by reference in the Offering Document to the closing
date of the latest available income statement read by
such accountants there were any decreases, as
compared with the corresponding period of the
previous year and with the period of corresponding
length ended the date of the latest income statement
included in the Offering Document, in consolidated
net sales, net operating income, consolidated net
income or in the ratio of earnings to fixed charges;
11
except in all cases set forth in clauses A and B
above for changes, increases or decreases which the
Offering Document disclose have occurred or may occur
or which are described in such letter; and
(iii) they have compared specified dollar
amounts (or percentages derived from such dollar
amounts) and other financial information contained in
the Offering Document and the Exchange Act Reports
(in each case to the extent that such dollar amounts,
percentages and other financial information are
derived from the general accounting records of the
Company and the Subsidiaries subject to the internal
controls of the Company's accounting system or are
derived directly from such records by analysis or
computation) with the results obtained from
inquiries, a reading of such general accounting
records and other procedures specified in such letter
and have found such dollar amounts, percentages and
other financial information to be in agreement with
such results, except as otherwise specified in such
letter.
(b) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or
any development or event involving a prospective change, in
the condition (financial or other), business, properties or
results of operations of the Company and the Subsidiaries
taken as one enterprise which, in the judgment of a majority
in interest of the Purchasers, including CSFB, is material and
adverse and makes it impractical or inadvisable to proceed
with completion of the offering or the sale of and payment for
the Offered Securities; (ii) any downgrading in the rating of
any debt securities of the Company by any "nationally
recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act), or any
public announcement that any such organization has under
surveillance or review its rating of any debt securities of
the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a
possible downgrading, of such rating) or any announcement that
the Company has been placed on negative outlook; (iii) any
change in U.S. or international financial, political or
economic conditions or currency exchange rates or exchange
controls as would, in the judgment of a majority in interest
of the Purchasers, including CSFB, be likely to prejudice
materially the success of the proposed issue, sale or
distribution of the Offered Securities, whether in the primary
market or in respect of dealings in the secondary market; (iv)
any material suspension or material limitation of trading in
securities generally on the New York Stock Exchange or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (v) any banking
moratorium declared by U.S. Federal or New York authorities;
(vi) any major disruption of settlements of securities or
clearance services in the United States; or (vii) any attack
on, outbreak or escalation of hostilities or act of terrorism
involving the United States, any declaration of war by
Congress or any other national or international calamity or
emergency if, in the judgment of a majority in interest of the
Purchasers, including CSFB, the effect of any such attack,
outbreak, escalation, act, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion
of the offering or sale of and payment for the Offered
Securities.
(c) The Purchasers shall have received an opinion,
dated the Closing Date, of Xxxxxxx Xxxxx LLP, counsel for the
Company, that:
(i) The Company is validly existing as a
corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has the corporate power and
authority to own or lease and operate its properties
and to conduct its business, in each case as
described in the Offering Circular.
(iii) Each of KCS Resources, Inc., Medallion
California Properties Company and KCS Energy
Services, Inc. is a validly existing corporation in
good standing under the laws of the jurisdiction of
its incorporation, with the corporate power and
authority to own or lease and operate its properties
and to conduct its business in each case as described
in the Offering Circular; and all of the issued and
outstanding capital stock of each such Subsidiary has
been duly authorized and validly issued and is owned
of record and, to such counsel's knowledge,
beneficially by the Company, directly or through
subsidiaries.
(iv) Each of this Agreement, the Indenture
and the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company,
KCS Resources, Inc., Medallion California Properties
Company and KCS Energy Services, Inc.; and, to the
extent such matters are governed by
12
the Applicable Laws (as defined in such counsel's
opinion) of the State of New York, each of this
Agreement, the Indenture and the Registration Rights
Agreement has been duly executed and delivered by
Proliq, Inc.
(v) The issuance and sale of the Offered
Securities has been duly authorized by the Company;
the Subsidiary Guarantee to be endorsed on the
Offered Securities has been duly authorized, executed
and delivered on behalf of each of KCS Resources,
Inc., Medallion California Properties Company and KCS
Energy Services, Inc.; to the extent such matters are
governed by the Applicable Laws of the State of New
York, the Subsidiary Guarantee has been duly executed
and delivered on behalf of Proliq, Inc.; the Exchange
Securities have been duly authorized by the Company;
and the Subsidiary Guarantee to be endorsed on the
Exchange Securities (the "EXCHANGE NOTES GUARANTEE")
has been duly authorized by each of KCS Resources,
Inc., Medallion California Properties Company and KCS
Energy Services, Inc.
(vi) Under the Applicable Laws of the State
of New York, the Indenture constitutes a valid and
legally binding obligation of the Company and the
Guarantors, enforceable against each of them in
accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to
general equity principles.
(vii) The Indenture conforms 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.
(viii) Under the Applicable Laws of the
State of New York, the Registration Rights Agreement
constitutes a valid and legally binding obligation of
the Company and the Guarantors, enforceable against
each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles.
(ix) Under the Applicable Laws of the State
of New York, when validly issued by the Company and
authenticated by the Trustee in the manner provided
in the Indenture and delivered to and paid for by the
Purchasers in accordance with this Agreement, the
Offered Securities will constitute valid and binding
obligations of the Company, entitled to the benefits
of the Indenture and enforceable against the Company
in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles;
and, under the Applicable Laws of the State of New
York, when the Offered Securities have been validly
issued by the Company and authenticated by the
Trustee in the manner provided in the Indenture and
delivered to and paid for by the Purchasers in
accordance with this Agreement and when the
Subsidiary Guarantee has been duly executed and
delivered by the Guarantors, the Subsidiary Guarantee
will constitute a valid and binding obligation of
each of the Guarantors, enforceable against each of
the Guarantors in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles.
(x) Under the Applicable Laws of the State
of New York, when validly issued by the Company and
authenticated by the Trustee in the manner provided
in the Indenture and delivered in exchange for the
Offered Securities pursuant to the exchange offer
contemplated by the Registration Rights Agreement,
the Exchange Securities will constitute valid and
binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the
Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles;
and, under the Applicable Laws of the State of New
York, when the Exchange Securities have been validly
issued by the Company and authenticated by the
Trustee in the manner provided in the Indenture and
delivered in exchange for the Offered Securities
pursuant to the exchange offer contemplated by the
Registration Rights Agreement and when the Exchange
Notes Guarantee has been duly executed and delivered
by the Guarantors, the Exchange Notes Guarantee will
constitute a valid and binding obligation of each of
the
13
Guarantors, enforceable against each of the
Guarantors in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights and to general equity principles.
(xi) To such counsel's knowledge, neither
the Company nor KCS Resources, Inc., Medallion
California Properties Company or KCS Energy Services,
Inc. is in violation of its charter or by-laws.
(xii) None of (i) the execution and delivery
on behalf of, or the incurrence or performance by the
Company, KCS Resources, Inc., Medallion California
Properties Company or KCS Energy Services, Inc. of
their respective obligations under, each of the
Transaction Agreements (as defined in such counsel's
opinion), each in accordance with its terms, (ii) the
offering, issuance, sale and delivery of the Offered
Securities pursuant to this Agreement, (iii) the
issuance of the Offered Notes Guarantee, (iv) the
offering, issuance, exchange and delivery of the
Exchange Securities pursuant to the exchange offer
contemplated by the Registration Rights Agreement in
the manner therein contemplated or (v) the issuance
of the Exchange Notes Guarantee at such time as the
Exchange Securities are issued pursuant to the
exchange offer contemplated by the Registration
Rights Agreement in the manner therein contemplated
(A) constituted, constitutes or will constitute a
violation of the organizational documents of the
Company, KCS Resources, Inc., Medallion California
Properties Company or KCS Energy Services, Inc., (B)
constituted, constitutes or will constitute a breach
or violation of, or a default (or an event which,
with notice or lapse of time or both, would
constitute such a default), under any Applicable
Agreement (as defined in such counsel's opinion), (C)
resulted, results or will result in the creation of
any security interest in, or lien upon, any of the
property or assets of the Company or any Subsidiary
pursuant to any Applicable Agreement, or (D)
resulted, results or will result in any violation of
(i) the Applicable Laws of the State of Texas, (ii)
the Applicable Laws of the State of New York, (iii)
the Applicable Laws of the United States of America,
(iv) Regulations T, U and X of the Federal Reserve
Board, (v) the General Corporation Law of the State
of Delaware, or (vi) the Texas Business Corporation
Act. Such counsel need not express any opinion,
however, as to whether the execution, delivery or
performance by the Company or the Guarantors of the
Transaction Agreements will constitute a breach or
violation of, or a default under or as a result of,
any covenant, restriction or provision with respect
to any financial ratio or test or any aspect of the
financial condition or results of operations of the
Company or the Guarantors. Such counsel calls to your
attention that certain of the Applicable Agreements
are governed by laws other than those as to which
such counsel expresses an opinion; such counsel
expresses no opinion as to the effect of such other
laws on the opinions herein stated.
(xiii) The statements in the Offering
Circular under the captions "Description of the
Notes" and "Material U.S. Federal Income Tax
Considerations," insofar as they constitute
descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal
conclusions, fairly summarize the matters referred to
therein in all material respects, subject to the
qualifications and assumptions stated therein.
(xiv) No Governmental Approval (as defined
in such counsel's opinion), which has not been
obtained or taken and is not in full force and
effect, is required to authorize, or is required for,
the execution and delivery by the Company or the
Subsidiaries of each of the Transaction Agreements,
or the incurrence or performance of their respective
obligations thereunder, or the enforceability of any
of such Transaction Agreements against the Company or
the Guarantors on the date hereof, except such as may
be required under state securities laws and except
for the order of the Commission declaring the
Exchange Offer Registration Statement or the Shelf
Registration Statement effective and qualification
under the Trust Indenture Act of 1939, as amended, in
each case as to which and to the extent we express
our opinion in clause (xv) below.
(xv) Assuming (i) the accuracy of the
representations and warranties of the Company set
forth in paragraphs (z), (cc), (dd) and (ff) of
Section 2 of this Agreement, (ii) the due performance
by the Company and the Purchasers of the covenants
and agreements set forth in this Agreement, (iii) the
compliance by the Purchasers with the offering and
transfer procedures and the restrictions described in
the Offering Circular, (iv) the accuracy of the
representations and warranties of the Purchasers set
forth
14
in Section 4 of this Agreement, and (v) the accuracy
of the representations and warranties made or deemed
to be made in accordance with the section in the
Offering Circular captioned "'Transfer Restrictions",
(A) the offer, issue, sale and delivery of the
Offered Securities, as guaranteed by the Guarantors,
to the Purchasers and the initial resale of the
Offered Securities, as guaranteed by the Guarantors,
by the Purchasers, each in the manner contemplated by
this Agreement and the Offering Circular, do not
require registration under the Securities Act, and
(B) prior to the consummation of the exchange offer
or the effectiveness of the Shelf Registration
Statement, such offer, issue, sale and delivery of
the Offered Securities and such initial resale of the
Offered Securities do not require qualification of
the Indenture under the Trust Indenture Act of 1939,
as amended; provided, however, that we express no
opinion as to any subsequent resale of any Initial
Note or any Exchange Note.
(xvi) The Company is not and, after giving
effect to the offering and sale of the Offered
Securities and the application of the proceeds
thereof as described in the Offering Document, will
not be an "investment company" as such terms are
defined in the Investment Company Act.
In addition, such counsel shall state they have
participated in conferences with officers and other
representatives of the Company and the Guarantors and the
independent public accountants for the Company and the
Guarantors, our representatives and our counsel at which the
contents of the Offering Circular and related matters were
discussed and, although such counsel has not independently
verified and are not passing upon, and do not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Offering Circular (except and
to the extent set forth in clause (xiii) above), on the basis
of the foregoing (relying with respect to factual matters to
the extent such counsel deem appropriate upon statements by
officers and other representatives of the Company and the
Guarantors), no facts have come to such counsel's attention
that have led such counsel to believe that the Offering
Circular, as of its date and as of the date hereof, contained
or contains an untrue statement of a material fact or omitted
or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading, it being understood that such counsel shall
express no statement or belief with respect to (a) the
financial statements and related schedules included therein,
including the notes and the auditor's report thereon, or
excluded therefrom, and (b) other financial, accounting or oil
and gas reserve data, in each case, included in the Offering
Circular or excluded therefrom.
In rendering its opinion pursuant to this Section
6(c), such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New
York, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the Underwriters. Such counsel may
also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its
Subsidiaries and certificates of public officials.
(d) The Purchasers shall have received from Xxxxxx &
Xxxxxx L.L.P., counsel for the Purchasers, such opinion or
opinions, dated the Closing Date, with respect to the
incorporation of the Company, the validity of the Offered
Securities, the Offering Circular, the exemption from
registration for the offer and sale of the Offered Securities
by the Company to the several Purchasers and the resales by
the several Purchasers as contemplated hereby and other
related matters as CSFB may require, and the Company shall
have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(e) The Purchasers shall have received a certificate,
dated the Closing Date, of the principal executive officer and
a principal financial or accounting officer of the Company in
which such officers, to the best of their knowledge after
reasonable investigation, state that the representations and
warranties of the Company and each of the Guarantors in this
Agreement are true and correct, that the Company and each of
the Guarantors have complied with all agreements and satisfied
all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date, and that,
subsequent to the date of the most recent financial statements
in the Offering Document there has been no material adverse
change, nor any development or event involving a prospective
material adverse change, in the condition (financial or
other), business, properties or results of operations of the
Company and the Subsidiaries taken as a whole except as set
forth in the Offering Document or as described in such
certificate.
15
(f) The Purchasers shall have received a letter,
dated the Closing Date, of Ernst & Young LLP that meets the
requirements of subsection (a) of this Section 6, except that
the specified date referred to in such subsection will be a
date not more than three days prior to the Closing Date for
the purposes of this subsection.
(g) The Purchasers shall have received a letter,
dated the Closing Date, of NSAI, in form and substance
satisfactory to the Purchasers, with respect to the reserve
information included in the Offering Circular.
(h) The Company and the Guarantors shall have
executed and delivered to the Purchasers the Registration
Rights Agreement.
The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFB may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder.
7. Indemnification and Contribution.
(a) The Company and each of the Guarantors, jointly and
severally, will indemnify and hold harmless each Purchaser, its
partners, directors and officers and each person, if any, who controls
such Purchaser within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several,
to which such Purchaser may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Offering Document, or any amendment or
supplement thereto, or any related preliminary offering circular or the
Exchange Act Reports, or arise out of or are based upon 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 light
of the circumstances under which they were made, not misleading,
including any losses, claims, damages or liabilities arising out of or
based upon the Company's or such Guarantor's failure to perform its
obligations under Section 5(a) of this Agreement, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by
such Purchaser in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company and each Guarantor will not be
liable in any such case to the extent that any such loss, claim, damage
or liability 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 written
information furnished to the Company by any Purchaser through CSFB
specifically for use therein, it being understood and agreed that the
only such information consists of the information described as such in
subsection (b) below; provided, further, however, that the foregoing
indemnity agreement with respect to losses, claims, damages or
liabilities shall not inure to the benefit of any Purchaser (or any
person controlling any Purchaser) with respect to any losses, claims,
damages arising out of or based upon (i) any untrue statement or
alleged untrue statement of any material fact in the preliminary
offering circular or (ii) the omission or alleged omission to state in
the preliminary offering circular a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, if: (A) the Company furnished
sufficient copies of the offering circular on a timely basis to permit
delivery of the offering circular to all persons purchasing notes from
the Purchasers in the initial resale of such notes (such persons
"INITIAL RESALE PURCHASERS") at or prior to the written confirmation of
the sale of the Offered Securities to such person; (B) the Initial
Resale Purchaser asserting such losses, claims, damages or liabilities
purchased Offered Securities in the initial resale from the Purchasers
and a copy of the offering circular was not sent or given by or on
behalf of such Purchaser to such Initial Resale Purchaser; and (C) the
offering circular would have cured the defect giving rise to such
losses, claims, damages or liabilities.
(b) Each Purchaser will severally and not jointly indemnify
and hold harmless the Company and each Guarantor, their directors and
officers and each person, if any, who controls the Company or such
Guarantor within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities to which the Company
or such Guarantor may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular, or arise out of
or are based upon the omission or the 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
16
were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Purchaser through CSFB specifically for use therein, and will reimburse
any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Purchaser consists of the sixth paragraph and the tenth paragraph under
the caption "Plan of Distribution"; provided, however, that the
Purchasers shall not be liable for any losses, claims, damages or
liabilities arising out of or based upon the Company's or such
Guarantor's failure to perform its obligations under Section 5(a) of
this Agreement.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof, but the failure to
notify the indemnifying party shall not relieve it from any liability
that it may have under subsection (a) or (b) above except to the extent
that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further
that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to an indemnified party otherwise
than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party,
be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes (i) an unconditional
release of such indemnified party from all liability on any claims that
are the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or failure to act
by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Guarantors on the one hand and the Purchasers on the other from the
offering of the Offered 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 and the Guarantors on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by
the Company and the Guarantors on the one hand and the Purchasers on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company and the Guarantors bear to the total discounts and commissions
received by the Purchasers from the Company and the Guarantors 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 information supplied by the Company and the Guarantors
or the Purchasers and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the
first sentence of this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any action or claim which
is the subject of this subsection (d). Notwithstanding the provisions
of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total discounts, fees
and commissions received by such Purchaser exceeds the amount of any
damages which such Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or
17
omission or alleged omission. The Purchasers' obligations in this
subsection (d) to contribute are several in proportion to their
respective purchase obligations and not joint.
(e) The obligations of the Company and the Guarantors under
this Section 7 shall be in addition to any liability which the Company
and the Guarantors may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Securities Act or the Exchange Act;
and the obligations of the Purchasers under this Section 7 shall be in
addition to any liability which the several Purchasers may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or any Guarantor within the
meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase the Offered Securities hereunder on the Closing
Date and the aggregate principal amount of the Offered Securities that such
defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed
10% of the total principal amount of the Offered Securities, CSFB may make
arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Purchasers, but if no such
arrangements are made by the Closing Date, the non-defaulting Purchasers shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Offered Securities that such defaulting Purchasers agreed but
failed to purchase. If any Purchaser or Purchasers so default and the aggregate
principal amount of the Offered Securities with respect to which such default or
defaults occur exceeds 10% of the total principal amount of the Offered
Securities and arrangements satisfactory to CSFB and the Company for the
purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Purchaser or the Company or any of the Guarantors,
except as provided in Section 9. As used in this Agreement, the term "PURCHASER"
includes any person substituted for a Purchaser under this Section 8. Nothing
herein will relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company and the Guarantors or their respective officers and of the several
Purchasers set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Purchaser, the Company, the
Guarantors or any of their respective representatives, officers or directors or
any controlling person, and will survive delivery of and payment for the Offered
Securities . If this Agreement is terminated pursuant to Section 8 or if for any
reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Company and each of the Guarantors shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company and the Purchasers pursuant to Section 7
shall remain in effect. If the purchase of the Offered Securities by the
Purchasers is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the occurrence of any
event specified in clause (iii), (iv), (v), (vi) or (vii) of Section 6(b), the
Company will reimburse the Purchasers for all out-of-pocket expenses (including
fees and disbursements of counsel) reasonably incurred by them in connection
with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or faxed and confirmed to the
Purchasers c/o Credit Suisse First Boston LLC, Eleven Madison Avenue, New York,
N.Y. 10010-3629, Attention: Transactions Advisory Group (Fax: 000-000-0000), or,
if sent to the Company, will be mailed, delivered or faxed and confirmed to it
at 0000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000, Attention: Secretary (Fax:
000-000-0000); provided, however, that any notice to a Purchaser pursuant to
Section 7 will be mailed, delivered or faxed and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of the Offered Securities
shall be entitled to enforce the agreements for their benefit contained in the
second and third sentences of Section 5(b) hereof against the Company as if such
holders were parties hereto.
12. Representation of Purchasers. You will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by you jointly or by CSFB will be binding upon all the Purchasers.
18
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company and each Guarantor hereby submit to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
19
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Company, the
Guarantors and the several Purchasers in accordance with its terms.
Very truly yours,
KCS ENERGY, INC.
By:
-------------------------------------
Name:
Title:
KCS RESOURCES, INC.
By:
-------------------------------------
Name:
Title:
MEDALLION CALIFORNIA PROPERTIES COMPANY
By:
-------------------------------------
Name:
Title:
KCS ENERGY SERVICES, INC.
By:
-------------------------------------
Name:
Title:
PROLIQ, INC.
By:
-------------------------------------
Name:
Title:
Signature Page to the Purchase Agreement
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON LLC
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
XXXXXXXXX & COMPANY, INC.
XXXXXX XXXXXXX CORP.
BANC ONE CAPITAL MARKETS, INC.
BNP PARIBAS SECURITIES CORP.
Acting on behalf of themselves
and as the Representatives of
the several Purchasers
By: CREDIT SUISSE FIRST BOSTON LLC
By:
--------------------------------
Name:
Title:
Signature Page to the Purchase Agreement
SCHEDULE A
PRINCIPAL AMOUNT OF
PURCHASERS OFFERED SECURITIES
---------- --------------------
Credit Suisse First Boston LLC......................................... $ 78,750,000
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated..................... 26,250,000
Xxxxxxxxx & Company, Inc............................................... 26,250,000
Xxxxxx Xxxxxxx Corp.................................................... 17,500,000
Banc One Capital Markets, Inc.......................................... 13,125,000
BNP Paribas Securities Corp............................................ 13,125,000
-------------
Total........................................ $ 175,000,000
=============
Schedule A
SCHEDULE B
KCS Resources Inc., a Delaware corporation
Medallion California Properties Company, a Texas corporation
KCS Energy Services, Inc., a Delaware corporation
Proliq, Inc., a New Jersey corporation
Schedule B
