EXHIBIT 4.4
MAGNUM HUNTER RESOURCES, INC.
$300,000,000
9.60% Senior Notes due 2012
PURCHASE AGREEMENT
March 13, 2002
DEUTSCHE BANC ALEX. BROWN INC.
LEHMAN BROTHERS INC.
CIBC WORLD MARKETS CORP.
BNP PARIBAS SECURITIES CORP.
SWS SECURITIES, INC.
MONNESS, CRESPI, HARDT & CO., INC.
RBC DOMINION SECURITIES CORPORATION
SAN JACINTO SECURITIES, INC.
FROST SECURITIES, INC.
RYAN BECK & CO., LLC
HARTSFIELD CAPITAL SECURITIES, INC.
c/o Deutsche Banc Alex. Brown Inc.
31 West 52nd Street
New York, New York 10019
Ladies and Gentlemen:
Magnum Hunter Resources, Inc. (the "Company"), a Nevada corporation,
hereby confirms its agreement with you (the "Initial Purchasers"), as set forth
below.
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1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchasers
$300,000,000 aggregate principal amount of the Company's 9.60% Senior Notes
due 2012 (the "Notes"). The Notes will be issued pursuant to an indenture
(the "Indenture"), to be dated the Closing Date (as defined herein), by and
among the Company, the Guarantors (as defined below) and Bankers Trust
Company, as trustee (the "Trustee"). The Company's obligations under the
Notes and the Indenture will be unconditionally guaranteed pursuant to the
terms of the Indenture (the "Guarantees") on an unsecured senior basis by
each of the entities listed on Schedule II hereto (each, a "Guarantor" and
collectively, the "Guarantors") and each of the entities listed on Schedule
III hereto (the "Additional Guarantors"), which Additional Guarantors will
become subsidiaries of the Company on the Closing Date. Each of the
Additional Guarantors will execute an instrument in substantially the form
attached hereto as Exhibit A (the "Joinder Agreement") pursuant to which
each of such entities will become a party to this Agreement as a Guarantor.
Prior to the execution of the Joinder Agreement by each of the entities
listed on Schedule III hereto, the term "Guarantors" as used herein shall
refer to all of the subsidiaries listed on Schedule II hereto. Following
the execution of the Joinder Agreement on the Closing Date by each of the
entities listed on Schedule III hereto, the term "Guarantors" as used
herein shall include all of the entities listed on Schedules II and III
hereto. The Notes and the Guarantees are collectively referred to herein as
the "Securities."
The Securities will be offered and sold to you without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum dated February 28, 2002 (the
"Preliminary Memorandum") and a final offering memorandum dated March 13, 2002
(the "Final Memorandum," the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") setting forth or including a
description of the terms of the Securities, the terms of the offering of the
Securities, a description of the Company and any material developments relating
to the Company occurring after the date of the most recent historical financial
statements included therein. Unless otherwise indicated, all references herein
to the Preliminary Memorandum or the Final Memorandum shall be deemed to include
any documents filed under the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act") which are incorporated
by reference therein. As used herein, the term "Incorporated Documents" means
the documents which at the time are incorporated by reference in the Preliminary
Offering Memorandum or the Final Memorandum or any amendment or supplement
thereto.
The Initial Purchasers and their direct and indirect transferees of
the Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form
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attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to
which the Company and the Guarantors have agreed, among other things, to file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Exchange Notes (as
defined in the Registration Rights Agreement) under the Act. This Agreement, the
Notes, the Exchange Notes, the Private Exchange Notes (as defined in the
Registration Rights Agreement), the Guarantees, the Indenture and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Note Documents."
The Securities are being offered in connection with (i) the execution
by the Company of an amended and restated credit agreement (the "Credit
Agreement") on the Closing Date (as defined in below) with Bankers Trust
Company, as the administrative agent, and the execution by the Guarantors of an
amended and restated subsidiary guaranty agreement relating to the Credit
Agreement (the "Guaranty Agreement") on the Closing Date and (ii) the
consummation of the merger contemplated by that certain Merger Agreement, dated
as of December 17, 2001, (as amended from time to time, the "Merger Agreement"),
by and among the Company, Pintail Energy, Inc. and Prize Energy Corp. ("Prize"),
pursuant to which Prize will, upon the terms and subject to the conditions set
forth therein, merge with and into Pintail Energy, Inc. (the "Merger").
The offering of the Notes, the entering into and borrowing under the
Credit Agreement and the guarantee thereof pursuant to the Guaranty Agreement
and the consummation of the Merger are collectively referred to as the
"Transactions." The Note Documents, the Credit Agreement, the Guaranty Agreement
and the Merger Agreement are collectively referred to herein as the "Transaction
Documents."
2. Representations and Warranties of the Company. The Company and each of
the Guarantors, jointly and severally, represents and warrants to and
agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date thereof
and at all times subsequent thereto up to and on the Closing Date contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 2(a) do not apply to
statements or omissions made in reliance upon and in conformity with information
relating to any of the Initial Purchasers furnished to the Company in writing by
the Initial Purchasers expressly for use in the Preliminary Memorandum, the
Final Memorandum or any amendment or supplement thereto.
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(b) The Incorporated Documents, to the extent filed by the Company
(the "Company Incorporated Documents") heretofore filed were filed in a timely
manner and, when they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed) conformed in all material
respects to the requirements of the Exchange Act and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
any further Company Incorporated Documents will, when so filed, be filed in a
timely manner and conform in all material respects to the requirements of the
Exchange Act and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
To the knowledge of the Company, the Incorporated Documents, to the
extent filed by Prize, heretofore filed were filed in a timely manner and,
when they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed) conformed in all
material respects to the requirements of the Exchange Act and did not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) All of the outstanding shares of capital stock of the Company and
each of its Subsidiaries (as defined below) have been, and as of the Closing
Date will be, duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights; as of the Closing Date, all of the outstanding shares of capital stock
of the Subsidiaries will be free and clear of all liens, encumbrances, equities
and claims or restrictions on transferability (other than those imposed by the
Act and the securities or "Blue Sky" laws of certain jurisdictions and other
than the security interests granted to the agent for the benefit of the lenders
under the Credit Agreement) or voting. Attached as Schedule IV is a true and
complete list of each entity in which the Company has a direct or indirect
majority equity or voting interest, their jurisdictions of incorporation or
formation, their equity holders and percentage equity ownership by the Company.
Prior to the consummation of the Merger, the term "Subsidiaries" as used herein
shall refer to all of the subsidiaries listed on Schedule IV hereto. Following
consummation of the Merger, the term "Subsidiaries" as used herein shall refer
to all of the subsidiaries listed on Schedule IV hereto and all of the entities
listed on Schedule III hereto. Except as set forth on Schedule V hereto and in
the Final Memorandum, there are no (i) options, warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests in the Company or any of the Subsidiaries
outstanding. Except for the Company's direct and indirect interests in the
Subsidiaries and as set forth on Schedule V hereto, the Company does not own,
directly or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm, partnership,
joint venture or other entity.
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(d) Each of the Company and the Guarantors is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite corporate or partnership power and authority to own its
properties and conduct its business as now conducted and as described in the
Final Memorandum; each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
management, business, condition (financial or otherwise), prospects or results
of operations of the Company and the Subsidiaries, taken as a whole (any such
event, a "Material Adverse Effect").
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes, the Private Exchange Notes. The Notes, when issued, will be in
the form contemplated by the Indenture. The Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by the Company
and (assuming the due authorization, execution and delivery of the Indenture by
the Trustee), when executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Indenture and, in the case of the Notes,
when delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will have been duly executed, issued and delivered 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 that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(f) Each of the Guarantors has all requisite corporate or partnership
power and authority to execute, deliver and perform each of its obligations
under the Guarantees. The Guarantees have been duly and validly authorized by
each Guarantor, and (assuming due authorization, execution and delivery of the
Indenture by the Trustee) when executed and delivered by such Guarantor, will
have been duly executed and delivered and will constitute the valid and legally
binding obligations of such Guarantor, entitled to the benefits of the
Indenture, enforceable against each of them in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
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(g) Each of the Company and the Guarantors has all requisite corporate
or partnership power and authority to execute, deliver and perform its
obligations under the Indenture. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The
Indenture has been duly and validly authorized by each of the Company and the
Guarantors and, when executed and delivered in accordance with its terms
(assuming the due authorization, execution and delivery by the Trustee), will
have been duly executed and delivered and will constitute a valid and legally
binding agreement of each of the Company and the Guarantors, enforceable against
each of them in accordance with its terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(h) Each of the Company and the Guarantors has all requisite corporate
or partnership power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The Registration Rights
Agreement has been duly and validly authorized by each of the Company and the
Guarantors and, when executed and delivered by the Company and each of the
Guarantors (assuming due authorization, execution and delivery by the other
parties thereto), will have been duly executed and delivered and will constitute
a valid and legally binding agreement of each of the Company and the Guarantors,
enforceable against each of them in accordance with its terms, except that (A)
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is considered in
a proceeding in equity or at law) and (B) any rights to indemnity or
contribution thereunder may be limited by federal and state securities laws and
public policy considerations.
(i) Each of the Company and the Guarantors has all requisite corporate
or partnership power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. This Agreement and the consummation by the Company and the Guarantors of
the transactions contemplated hereby have been duly and validly authorized by
each of the Company and the Guarantors. This Agreement has been duly executed
and delivered by each of the Company and the Guarantors.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Credit Agreement. Each
Guarantor has all requisite corporate or partnership power and authority to
execute, deliver and perform its obligations under the Guaranty Agreement. The
Credit Agreement and the Guaranty Agreement have been duly and validly
authorized by each of the Company and the Guarantors, to the ex-
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tent a party thereto, and, when executed and delivered by the Company and each
of the Guarantors, to the extent a party thereto (assuming due authorization,
execution and delivery by the other parties thereto), will have been duly
executed and delivered and will constitute valid and legally binding agreements
of each of the Company and the Guarantors, to the extent a party thereto,
enforceable against each of them in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is considered in
a proceeding in equity or at law).
(k) Assuming the accuracy of the representations of the Initial
Purchasers in Section 8, no consent, approval, authorization or order of any
court or governmental agency or body, or third party is required for the
issuance and sale by the Company and the Guarantors of the Securities to the
Initial Purchasers or the consummation by them of the other Transactions, except
such as have been obtained and such as may be required under state securities or
"Blue Sky" laws in connection with the purchase and resale of the Securities by
the Initial Purchasers and except (with respect to the Merger) as disclosed in
the Merger Agreement or the disclosure schedules relating thereto. Neither the
Company nor any of the Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws or similar organizational documents, (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to any of them or any of their respective properties or assets, except for any
such breach or violation which would not, individually or in the aggregate, have
a Material Adverse Effect, or (iii) in breach of or default under (nor has any
event occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which their respective
properties or assets are subject (collectively, "Contracts"), except for any
such breach, default, violation or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(l) The execution, delivery and performance by the Company and the
Guarantors of the Transaction Documents (to the extent a party thereto) and the
consummation of the Transactions, and the fulfillment of the terms hereof and
thereof, will not conflict with or constitute or result in a breach of or a
default under (or an event which with notice or passage of time or both would
constitute a default under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the obligation
to create or impose) a lien, charge, encumbrance or restriction (except liens
securing obligations under the Credit Agreement, the Guaranty Agreement and the
agreements related thereto) on any property or assets of the Company or any
Subsidiary with respect to (i) the terms or provisions of any Contract (other
than the credit facilities of the Company and Prize existing on the date of
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this Agreement which are being repaid in connection with the Transactions),
except for any such conflict, breach, violation, default or event which would
not, individually or in the aggregate, have a Material Adverse Effect, (ii) the
certificate of incorporation or bylaws or similar organizational documents of
the Company or any of the Subsidiaries, or (iii) (assuming compliance with all
applicable state securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in Section 8 hereof)
any statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to the Company, the Subsidiaries or any
of their respective properties or assets, except for any such conflict, breach
or violation which would not, individually or in the aggregate, have a Material
Adverse Effect.
(m) Each of the Indenture, the Notes, the Exchange Notes, the
Guarantees, the Registration Rights Agreement and the Credit Agreement conforms
in all material respects to the description thereof in the Final Memorandum.
(n) The consolidated financial statements of the Company and the
related notes thereto included in the Final Memorandum present fairly in all
material respects the financial position, results of operations and cash flows
of the Company at the dates and for the periods to which they relate and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein, and comply as
to form in all material respects with the applicable accounting requirements of
the Act and the rules and regulations thereunder. The summary and selected
financial and statistical data of the Company included in the Final Memorandum
present fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein, and comply as
to form in all material respects with the applicable accounting requirements of
the Act and the rules and regulations thereunder (except for the exclusion of
earnings per share data). Deloitte & Touche LLP is an independent public
accounting firm as required by the Act and the rules and regulations thereunder.
To the knowledge of the Company, the consolidated financial
statements of Prize and the related notes thereto included in the
Final Memorandum present fairly in all material respects the financial
position, results of operations, and cash flows of Prize at the dates
and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, except as otherwise stated therein. To the knowledge
of the Company, the summary and selected financial and statistical
data of Prize included in the Final Memorandum present fairly in all
material respects the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein, and
comply as to form in all material respects with the applicable
accounting requirements of the Act and the rules and regula-
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tions thereunder (except for the exclusion of earnings per share data).
Ernst & Young LLP is an independent accounting firm as required by the Act
and the rules and regulations thereunder.
(o) (i) The pro forma financial statements (including the notes
thereto) and other pro forma financial information included in the Final
Memorandum (A) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Exchange Act (except for
the exclusion of earnings per share data), (B) have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements and (C) have been properly computed on the bases described therein,
and (ii) the assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information included in the Final
Memorandum are reasonable and the adjustments used therein are appropriate to
give effect to the transactions or circumstances referred to therein.
(p) Except as described in the Final Memorandum, there is not pending
or, to the best knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation to which the Company or any of the
Guarantors is a party, or to which any of their properties or assets are
subject, before or brought by any court, arbitrator or governmental agency or
body, which, if determined adversely to the Company or any such Guarantor, would
have a Material Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the consummation of the other transactions described in the
Final Memorandum.
(q) Each of the Company and the Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Final Memorandum, and neither
the Company nor any of the Subsidiaries has received any notice of infringement
of or conflict with (or knows of no such infringement of or conflict with)
asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how which, if such assertion of
infringement or conflict were sustained, would, individually or in the
aggregate, have a Material Adverse Effect.
(r) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made or will have made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals presently required or necessary
to own or lease, as the case may be, and to operate its properties and to carry
on its business as now or proposed to be conducted as set forth in the Final
Memorandum ("Permits"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect; each of
the Company and the Subsidiaries has (r) fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred
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which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights of
the holder of any such Permit, except for the termination of drilling permits in
the ordinary course of business which would not have a Material Adverse Effect;
and neither the Company nor any Subsidiary has received any notice of any
proceeding relating to revocation or modification of any such Permit, except as
described in the Final Memorandum and except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(s) Since the date of the most recent audited financial statements
appearing in the Final Memorandum, except as described therein there has been no
material adverse change, and no fact has become known to the Company which could
reasonably be expected to result in a material adverse change, on the
management, business, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, or any loss of, or
damage to, properties (whether or not insured) which could reasonably be
expected to affect materially and adversely the management, business, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole. Since the date of the latest balance sheet
presented in the Final Memorandum, except as expressly disclosed in the Final
Memorandum and except as set forth on Schedule VI hereto, neither the Company
nor any of its Subsidiaries has (i) incurred or undertaken any liabilities or
obligations, direct or contingent, that are material to the Company and its
Subsidiaries taken as a whole, (ii) entered into any material transaction not in
the ordinary course of business and consistent with past practice or (iii)
declared or paid any dividend or made any distribution on any shares of its
capital stock or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or otherwise acquire any shares of its capital stock (other than any
dividends or distributions to the Company and as set forth on Schedule VI
hereto).
(t) Each of the Company and Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any of the Subsidiaries is
contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any Subsidiary that would have, individually or in the
aggregate, a Material Adverse Effect.
(u) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes to be
reliable and accurate.
(v) Neither Company nor any of the Subsidiaries nor any agent acting
on their behalf has taken or will take any action that might cause this
Agreement or the sale of the Securities to violate Regulation T, U or X of the
Board of Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
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(w) Each of the Company and the Subsidiaries has good title to all
personal property described in the Final Memorandum as being owned by it, good
and defensible title to all real property described in the Final Memorandum as
being owned by it and good and defensible title to a leasehold estate in the
real and personal property described in the Final Memorandum as being leased by
it, in each case, as of the Closing Date, free and clear of all liens, charges,
encumbrances or restrictions, except for liens securing obligations under the
Credit Agreement or the Guaranty Agreement, liens securing obligations relating
to the Master Lease Agreement between General Electric Capital Corporation and
Magnum Hunter Production, Inc., liens on assets of Redhead Energy, Inc. securing
indebtedness of Redhead Energy, Inc. and except as described in the Final
Memorandum or to the extent the failure to have such title or the existence of
such liens, charges, encumbrances or restrictions would not, individually or in
the aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which the Company or any Subsidiary is a party or by which the
Company or such Subsidiary is bound are valid and enforceable against the
Company or such Subsidiary, to the knowledge of the Company are valid and
enforceable against the other party or parties thereto and are in full force and
effect with only such exceptions as would not, individually or in the aggregate,
have a Material Adverse Effect.
(x) There are no legal or governmental proceedings involving or
affecting the Company, any of the Subsidiaries or any of their respective
properties or assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum, nor are
there any material contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described in the
Final Memorandum.
(y) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (A) each of the Company and the Subsidiaries is in
compliance with and not subject to liability under applicable Environmental Laws
(as defined below), (B) each of the Company and the Subsidiaries has made all
filings and provided all notices required under any applicable Environmental
Law, and has and is in compliance with all Permits required under any applicable
Environmental Laws and each of them is in full force and effect, (C) there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding, notice or demand letter or request for
information pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any Environmental Law with
respect to any assets, facility or property owned, operated, leased or
controlled by the Company or any Subsidiary, (E) neither the Company nor any
Subsidiary has received notice that it has been identified as a potentially
responsible party under the Compre(y) hensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable
state law and (F) no property or facility of the Company or any Subsidiary is
(i) listed or proposed for listing on the National Priorities List under
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CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation,
Liability Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or
employee health and safety or the environment, including, without
limitation, laws relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials, into the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of hazardous materials, and (iii) underground and aboveground
storage tanks, and related piping, and emissions, discharges, releases or
threatened releases therefrom.
(z) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or the Subsidiaries that is pending or, to the
knowledge of the Company, threatened.
(aa) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties.
(bb) Neither the Company nor any Subsidiary has any liability for any
prohibited transaction within the meaning of (S)406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or funding deficiency within
the meaning of (S)302 of ERISA or any complete or partial withdrawal liability
under (S)4201 of ERISA with respect to any pension, profit sharing or other plan
which is subject to ERISA to which the Company or any Subsidiary makes or ever
has made a contribution and in which any employee of the Company or any
Subsidiary is or has ever been a participant. With respect to such plans, each
of the Company and the Subsidiaries is in compliance in all material respects
with all applicable provisions of ERISA.
(cc) Each of the Company and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance (cc)
with management's authorization and (D) the reported accountability for its
assets is compared with existing assets at reasonable intervals.
-13-
(dd) Neither the Company nor any Subsidiary will be an "investment
company" or "promoter" or "principal underwriter" for an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(ee) As of the date hereof, (a) the only material assets of Hunter
Butcher International Limited Liability Company, Canvasback Energy, Inc. and
Redhead Energy, Inc. are set forth on Schedule VIII hereto and (b) the total
consolidated assets owned by Inseco Corporation, SPL Gas Marketing Inc., Midland
Hunter Petroleum Limited Liability Company and Pintail Oil & Gas, Inc. do not
exceed 2% of the total consolidated assets of the Company.
(ff) Except as set forth on Schedule VII hereto, no holder of
securities of the Company (other than the Registrable Notes (as defined in the
Registration Rights Agreement)) will be entitled to have such securities
registered under the registration statements required to be filed by the Company
pursuant to the Registration Rights Agreement.
(gg) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable value
of the assets of the Company and the Subsidiaries, on a consolidated basis, will
exceed the sum of their consolidated stated liabilities and identified
contingent liabilities; neither the Company nor any of the Subsidiaries is, or
will be after giving effect to the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, (a) left
with unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (b) unable to pay its debts (contingent or otherwise)
as they mature or (c) otherwise insolvent.
(hh) Neither the Company nor any of the Subsidiaries nor any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act)
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of any "security" (as defined in the
Act) that is or could be integrated with the sale of the Securities in a manner
that would require the registration under the Act of the Securities or (ii)
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) in connection with the offering of
the Securities or in any manner involving a public offering within the meaning
of Section 4(2) of the Act.
(ii) Assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchasers in
the manner contemplated by this Agreement to register any of the Securities
under the Act or to qualify the Indenture under the TIA.
(jj) No securities of the Company are of the same class (within the
meaning of Rule 144A under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system.
-14-
(kk) Neither the Company nor any Subsidiary has taken, nor will take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
the Securities.
(ll) Neither the Company nor the Subsidiaries, nor any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act)
or any person acting on any of their behalf (other than the Initial Purchasers
as to which the Company and the Subsidiaries make no representation) has engaged
in any directed selling efforts (as that term is defined in Regulation S under
the Act ("Regulation S")) with respect to the Securities; the Company and its
respective Affiliates and any person acting on any of their behalf (other than
the Initial Purchasers as to which the Company and the Subsidiaries make no
representation) have complied with the offering restrictions requirement of
Regulation S.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to any Initial Purchaser or to counsel for the Initial Purchasers
shall be deemed a joint and several representation and warranty by the Company
and each of the Subsidiaries to each Initial Purchaser as to the matters covered
thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company and the
Guarantors agree to issue and sell to the Initial Purchasers, and each of
the Initial Purchasers agrees, acting severally and not jointly, to
purchase the Securities, in the respective principal amounts set forth
opposite their names on Schedule I hereto, at 97.250% of their principal
amount.
One or more certificates in definitive form for the Securities that
the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 48 hours prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer of immediately available funds
payable to such account or account as the Company shall specify prior to the
Closing Date, or by such means as the parties hereto shall agree prior to the
Closing Date. Such delivery of and payment for the Securities shall be made at
the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York, at
10:00 A.M., New York time, on March 15, 2002, or at such other place, time or
date as the Initial Purchasers and the Company may agree upon, such time and
date of delivery against payment being herein referred to as the "Closing Date."
The Company will make such certificate or certificates for the Securities
available for checking and packaging by the Initial Purchasers at the offices of
Deutsche Banc Alex. Brown Inc. in New York, New York or such other place as
Deutsche Banc Alex. Brown Inc. may designate, at least 24 hours prior to the
Closing Date.
-15-
4. Offering by the Initial Purchasers. The Initial Purchasers propose to
make an offering of the Securities at the price and upon the terms set
forth in the Final Memorandum as soon as practicable after this Agreement
is entered into and as in the sole judgment of the Initial Purchasers is
advisable.
5. Covenants of the Company. The Company and the Guarantors covenant and
agree with each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers and counsel
to the Initial Purchasers shall not previously have been advised and furnished a
copy for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchasers shall not have given their
consent, which consent shall not be unreasonably withheld. The Company will
promptly, upon the reasonable request of the Initial Purchasers or counsel for
the Initial Purchasers, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Securities by the Initial Purchasers.
(b) The Company and the Guarantors will cooperate with the Initial
Purchasers in arranging for the qualification of the Securities for offering and
sale under the securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchasers may designate and will continue such qualification in effect
for as long as may be necessary to complete the resale of the Securities by the
Initial Purchasers; provided, however, that in connection therewith neither the
Company nor any Guarantor shall be required to qualify as a foreign corporation
or partnership or to execute a general consent to service of process in any
jurisdiction or subject itself to any tax in any such jurisdiction where it is
not then so subject.
(c) If, at any time prior to the completion of the distribution by the
Initial Purchasers of the Notes or the Private Exchange Notes, any event occurs
or information becomes known as a result of which the Final Memorandum as then
amended or supplemented would include an untrue statement of a material fact, or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if for
any other reason it is necessary at any time to amend or supplement the Final
Memorandum in order to comply with applicable law, the Company will promptly
notify the Initial Purchasers thereof and will prepare, at the Company's
expense, an amendment or supplement to the Final Memorandum that corrects such
statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
-16-
(e) The Company will apply the net proceeds from the sale of the
Securities substantially as set forth under "Use of Proceeds" in the Final
Memorandum.
(f) For so long as any Securities remain outstanding, the Company will
furnish to the Initial Purchasers copies of all reports and other communications
(financial or otherwise) furnished by the Company to the Trustee or the holders
of the Securities and, as soon as available, copies of any reports or financial
statements furnished to or filed by the Company with the Commission or any
national securities exchange on which any class of securities of the Company may
be listed.
(g) Prior to the Closing Date, the Company will furnish to the Initial
Purchasers, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim consolidated financial statements of
the Company for any period subsequent to the period covered by its most recent
financial statements appearing in the Final Memorandum.
(h) None of the Company, the Guarantors nor any of their respective
Affiliates will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act) that could be
integrated with the sale of the Securities in a manner that would require the
registration under the Act of the Securities.
(i) Neither the Company nor any Guarantor will, nor will the Company
permit any of the Subsidiaries to, engage in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Securities or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Company will make available, upon request, to any holder of such Securities and
any prospective purchasers thereof the information specified in Rule 144A(d)(4)
under the Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(k) Each of the Company and the Guarantors will use its best efforts
to (i) permit the Securities to be designated PORTAL securities in accordance
with the rules and regulations adopted by the NASD relating to trading in the
Portal Market and (ii) permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
-17-
6. Expenses. The Company agrees to pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 or 12 hereof, including all costs and
expenses incident to: (i) the printing, word processing or other production
of documents with respect to such transactions, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any
amendments or supplements thereto, and any "Blue Sky" memoranda, (ii) all
arrangements relating to the delivery to the Initial Purchasers of copies
of the foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Company, (iv) the preparation (including printing), issuance and delivery
to the Initial Purchasers of any certificates evidencing the Securities,
(v) the qualification of the Securities under state securities and "Blue
Sky" laws, including filing fees and reasonable fees and disbursements of
counsel for the Initial Purchasers relating thereto, (vi) the expenses of
the Company in connection with any meetings with prospective investors in
the Securities, (vii) the fees and expenses of the Trustee, including fees
and expenses of its counsel, and (viii) all expenses and listing fees
incurred in connection with the application for quotation of the Securities
on the Portal Market and (ix) any fees charged by investment rating
agencies for the rating of the Securities. If the issuance and sale of the
Securities provided for herein is not consummated because any condition to
the obligations of the Initial Purchasers set forth in Section 7 hereof is
not satisfied, because this Agreement is terminated pursuant to Section 12
hereof or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder (other than solely by reason of a
default by the Initial Purchasers of their obligations hereunder after all
conditions hereunder have been satisfied in accordance herewith), the
Company will promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including fees, disbursements and charges of Cahill
Gordon & Reindel, counsel for the Initial Purchasers) that shall have been
incurred by the Initial Purchasers in connection with the proposed purchase
and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The obligation of the
Initial Purchasers to purchase and pay for the Securities shall, in their
sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Thompson & Knight LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
-18-
(1) Each of the Guarantors is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to conduct its
business as described in the Final Memorandum. Each of the Company and
the Guarantors is duly qualified as a foreign corporation or limited
partnership and in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
(2) Giving effect to the Transactions, the Company has the
authorized capitalization, the issued and outstanding preferred stock
and, to the knowledge of such counsel, the issued and outstanding
common stock, in each case as set forth on a schedule attached to such
opinion. All of the outstanding shares of capital stock of the
Guarantors are owned, directly or indirectly, by the Company, free and
clear of all perfected security interests and, to the knowledge of such
counsel, free and clear of all other liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by
the Act and the securities or "Blue Sky" laws of certain jurisdictions
and other than the security interests granted to the agent for the
benefit of the lenders under the Credit Agreement) or voting.
(3) To the knowledge of such counsel, (A) except as set forth
on Schedule V hereto, no options, warrants or other rights to purchase
from the Company or any Subsidiary shares of capital stock or ownership
interests in the Company or any Subsidiary are outstanding, (B) except
as set forth on Schedule V hereto, no agreements or other obligations
of the Company or any Subsidiary to issue, or other rights to cause the
Company or any Subsidiary to convert, any obligation into, or exchange
any securities for, shares of capital stock or ownership interests in
the Company or any Subsidiary are outstanding and, (C) except as set
forth on Schedule VII hereto, no holder of securities of the Company or
any Subsidiary (other than the Registrable Notes) is entitled to have
such securities registered under a registration statement filed by the
Company pursuant to the Registration Rights Agreement.
(4) Each of the Guarantors has all requisite corporate or
partnership power and authority to execute, deliver and perform its
obligations under the Indenture and the Guarantees; the Indenture is in
sufficient form for qualification under the TIA; the Indenture has been
duly and validly authorized, executed and delivered by each of the
Company and the Guarantors, and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes the valid
and legally binding agreement of the Company and each of the
Guarantors, enforceable against each of them in accordance with its
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now
-19-
or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
(5) The Notes are in the form contemplated by the Indenture.
The Notes have each been duly and validly authorized, executed and
delivered by the Company and, when paid for by the Initial Purchasers
in accordance with the terms of this Agreement (assuming the due
authorization, execution and delivery of the Indenture by the Trustee
and due authentication and delivery of the Notes by the Trustee in
accordance with the Indenture), will constitute the 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 that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(6) The Guarantees are in the form contemplated by the
Indenture. The Guarantees have been duly and validly authorized,
executed and delivered by each Guarantor and (assuming the due
authorization, execution and delivery of the Indenture by the Trustee)
constitute the valid and legally binding obligations of each Guarantor,
entitled to the benefits of the Indenture, enforceable against each of
them in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
(7) The Exchange Notes and the Private Exchange Notes and the
guarantees to be endorsed on them have been duly and validly authorized
by the Company and each of the Guarantors, as the case may be, and when
the Exchange Notes and the Private Exchange Notes have been duly
executed and delivered by the Company and the related guarantees have
been duly executed and delivered by the Guarantors, each in accordance
with the terms of the Registration Rights Agreement and the Indenture
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Exchange Notes and the Private Exchange Notes by the Trustee in
accordance with the Indenture), will constitute the valid and legally
binding obligations of the Company and the Guarantors, respectively,
entitled to
-20-
the benefits of the Indenture, and enforceable against the Company and
the Guarantors, respectively, in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(8) Each of the Guarantors has all requisite corporate or
partnership power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement; the Registration
Rights Agreement has been duly and validly authorized, executed and
delivered by the Company and the Guarantors, and (assuming due
authorization, execution and delivery thereof by the Initial
Purchasers) constitutes the valid and legally binding agreement of the
Company and the Guarantors enforceable against each of them in
accordance with its terms, except that (A) the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and (B) any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(9) Each of the Guarantors has all requisite corporate or
partnership power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby; this Agreement and the consummation by the Company
and the Guarantors of the transactions contemplated hereby have been
duly and validly authorized by the Company and the Guarantors. This
Agreement has been duly executed and delivered by each of the Company
and the Guarantors.
(10) Each of the Guarantors has all requisite corporate or
partnership power and authority to execute, deliver and perform its
obligations under the Guaranty Agreement; the Credit Agreement and the
Guaranty Agreement have been duly and validly authorized, executed and
delivered by the Company and the Guarantors, to the extent a party
thereto, and (assuming due authorization, execution and delivery
thereof by the other parties thereto) constitute the valid and legally
binding agreements of the Company and the Guarantors, to the extent a
party thereto, enforceable against each of them in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally
-21-
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding in equity or at
law).
(11) The Indenture, the Notes, the Exchange Notes, the
Guarantees, the Registration Rights Agreement and the Credit Agreement
conform as to legal matters in all material respects to the
descriptions thereof contained in the Final Memorandum.
(12) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which the Company
or any Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary is subject which would be required under the
Act to be described in a registration statement or in a prospectus and
are not described in the Final Memorandum, or which seek to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
or sale of the Notes to be sold hereunder or the consummation of the
other transactions described in the Final Memorandum.
(13) The statements in the Final Memorandum under the headings
"Summary of the Prize Merger Agreement" and "Material United States
Federal Tax Consequences," insofar as they are descriptions of
contracts, agreements or other legal documents, or refer to statements
of law or legal conclusions, are accurate and present fairly the
information described therein.
(14) Neither the Company nor any Subsidiary is, to the
knowledge of such counsel, (i) in violation of its certificate of
incorporation or bylaws or similar organizational documents, or (ii) in
breach or violation of any statute, judgment, decree, order, rule or
regulation applicable to it or any of its properties or assets, except
for any such breach or violation which would not, individually or in
the aggregate, have a Material Adverse Effect (it being understood that
such counsel need express no opinion with respect to the regulations of
the Railroad Commission of the State of Texas).
(15) The execution, delivery and performance of the
Transaction Documents and the consummation of the Transactions
(including, without limitation, the issuance and sale of the Notes to
the Initial Purchasers) will not conflict with or constitute or result
in a breach or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation
of or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) a
lien on any property or assets of the Company or any Subsidiary with
respect to (i) the terms or provisions of any contract pursuant to
which the Company or a Subsidiary has incurred indebtedness, any
contract described in the Final Memorandum or any contract filed as an
exhibit to the Incorporated Documents (such contracts, the "Material
Contracts"), except for any such conflict, breach, violation, default
or event
-22-
which would not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the articles of incorporation or bylaws or similar
organizational documents of the Company or any Subsidiary, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 8 hereof) any statute, judgment,
decree, order, rule or regulation known to such counsel to be
applicable to the Company or any Subsidiary and to transactions of the
type contemplated by the Final Memorandum, except for any such
conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(16) To the knowledge of such counsel, no consent, approval,
authorization or order of any governmental authority is required for
the issuance and sale by the Company of the Notes to the Initial
Purchasers or the other transactions contemplated in this Agreement,
except such as may be required under state securities and Blue Sky
laws, as to which such counsel need express no opinion, and those which
have previously been obtained.
(17) To the knowledge of such counsel, the Company and the
Subsidiaries have obtained all Permits necessary to conduct the
businesses now or proposed to be conducted by them as described in the
Final Memorandum, the lack of which would, individually or in the
aggregate, have a Material Adverse Effect; each of the Company and the
Subsidiaries has fulfilled and performed all of its obligations with
respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of
the holder of any such Permit, except for any such revocation or
termination which would not have a Material Adverse Effect.
(18) None of the Company or the Subsidiaries is, or
immediately after the sale of the Notes to be sold hereunder and the
application of the proceeds from such sale (as described in the Final
Memorandum under the caption "Use of Proceeds") will be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(19) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the Initial Purchasers as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Notes in the initial
resale thereof are qualified institutional buyers as defined in Rule
144A promulgated un-
-23-
der the Act ("QIBs") or (B) that the offer or sale of the Notes is made
in an offshore transaction as defined in Regulation S, (ii) the
accuracy of the Initial Purchasers' representations in Section 8 and
those of the Company contained in this Agreement regarding the absence
of a general solicitation in connection with the sale of such Notes to
the Initial Purchasers and the initial resale thereof and (iii) the due
performance by the Initial Purchasers of the agreements set forth in
Section 8 hereof.
(20) Neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.
(21) Based upon Section 35.51 of the Uniform Commercial Code
of Texas, in a properly presented action or proceeding arising out of
or relating to the Note Documents in any court in the State of Texas or
in any federal court sitting in the State of Texas, such court would
give effect to the choice of substantive law of the State of New York
to govern such documents.
At the time the foregoing opinion is delivered, such counsel
shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants for the Company, representatives of
the Initial Purchasers and counsel for the Initial Purchasers, at which
conferences the contents of the Final Memorandum and related matters
were discussed, and, although it has not independently verified and is
not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final
Memorandum (except to the extent specified in subsections 7(a)(xi) and
7(a)(xiii)), no facts have come to its attention which lead it to
believe that the Final Memorandum, on the date thereof or at the
Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the
financial statements and related notes thereto and the other financial,
statistical, accounting, reserve and well data included in the Final
Memorandum). The opinion of such counsel described in this Section
shall be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in
accordance with the provisions of this Agreement at the Closing Date.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States and the laws of the State of Texas.
Such counsel may also state that, insofar as such opin-
-24-
ion involves factual matters, such counsel have relied, to the extent they
deem proper, upon certificates of officers of the Company and certificates
of public officials; provided that such certificates have been provided to
the Initial Purchasers.
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Woodburn & Wedge, special Nevada counsel for the Company, in form
and substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
(1) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Final Memorandum.
(2) None of the outstanding shares of capital stock of the Company has
been issued in violation of any preemptive or similar rights.
(3) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture, the
Notes, the Exchange Notes and the Private Exchange Notes; and the Indenture
has been duly and validly authorized, executed and delivered by the
Company.
(4) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement; and the Registration Rights Agreement has been duly and validly
authorized, executed and delivered by the Company.
(5) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; and this Agreement has
been duly and validly authorized, executed and delivered by the Company.
(6) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Credit Agreement;
and the Credit Agreement has been duly and validly authorized, executed and
delivered by the Company.
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Morgan Johnston, General Counsel of the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
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(1) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or
any Subsidiary is subject which would be required under the Act to be
described in a registration statement or in a prospectus and are not
described in the Final Memorandum, or which seek to restrain, enjoin,
prevent the consummation of or otherwise challenge the issuance or sale of
the Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(2) To the knowledge of such counsel, no Contract to which the Company
or any Subsidiary is a party would be required under the Act to be
described in a registration statement or prospectus that is not described
in the Final Memorandum.
(3) Neither the Company nor any Subsidiary is (i) in violation of its
certificate of incorporation or bylaws or similar organizational documents,
(ii) to the knowledge of such counsel, in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or
any of its properties or assets, except for any such breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) to the knowledge of such counsel, in breach or default
under (nor has any event occurred which, with notice or passage of time or
both, would constitute a default under) or in violation of any of the terms
or provisions of any Contract, except for any such breach, default,
violation or event which would not, individually or in the aggregate, have
a Material Adverse Effect.
(4) The execution, delivery and performance of the Transaction
Documents and the consummation of the Transactions (including, without
limitation, the issuance and sale of the Notes to the Initial Purchasers)
will not conflict with or constitute or result in a breach or a default
under (or an event which with notice or passage of time or both would
constitute a default under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) a lien on any property or assets of the
Company or any Subsidiary with respect to (i) the terms or provisions of
any Contract, except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws or similar
organizational documents of the Company or any Subsidiary, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof) any statute, judgment, decree,
order, rule or regulation known to such counsel to be applicable to the
Company or any Subsidiary and to transactions of the type contemplated by
the Final Memorandum, except for any such conflict, breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect.
-26-
(5) To the knowledge of such counsel, no consent, approval,
authorization or order of any governmental authority is required for the
issuance and sale by the Company of the Notes to the Initial Purchasers or
the other transactions contemplated in this Agreement, except such as may
be required under Blue Sky laws, as to which such counsel need express no
opinion, and those which have previously been obtained.
(6) To the knowledge of such counsel, the Company and the Subsidiaries
have obtained all Permits necessary to conduct the businesses now or
proposed to be conducted by them as described in the Final Memorandum, the
lack of which would, individually or in the aggregate, have a Material
Adverse Effect; each of the Company and the Subsidiaries has fulfilled and
performed all of its obligations with respect to such Permits and no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, except for any
such revocation or termination which would not have a Material Adverse
Effect.
At the time the foregoing opinion is delivered, such counsel shall
additionally state that he has participated in conferences with officers
and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the
Initial Purchasers and counsel for the Initial Purchasers, at which
conferences the contents of the Final Memorandum and related matters were
discussed, and, although he has not independently verified and is not
passing upon and assumes no responsibility for the accuracy, completeness
or fairness of the statements contained in the Final Memorandum, no facts
have come to his attention which lead him to believe that the Final
Memorandum, on the date thereof or at the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein,
in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and related notes thereto and the
other financial, statistical, accounting, reserve and well data included in
the Final Memorandum). The opinion of such counsel described in this
Section shall be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.
References to the Final Memorandum in this subsection (c) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction other than the federal laws of
the United States and the laws of the State of Texas. Such counsel may also
state that, insofar as such opinion involves factual matters, such counsel
has relied, to the extent they deem proper,
-27-
upon certificates of officers of the Company and certificates of public
officials; provided that such certificates have been provided to the
Initial Purchasers.
(d) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Cahill Gordon & Reindel, counsel for the Initial Purchasers,
with respect to certain legal matters relating to this Agreement, and such other
related matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received and may rely upon such
certificates and other documents and information as they may reasonably request
to pass upon such matters.
(e) The Initial Purchasers shall have received from Deloitte & Touche
LLP, independent public accountants for the Company, and Ernst & Young LLP,
independent public accountants for Prize, comfort letters, dated the date hereof
and the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers and counsel for the Initial Purchasers.
(f) The Initial Purchasers shall have received letters, dated the
Closing Date and addressed to the Initial Purchasers, from DeGolyer and
MacNaughton, Ryder Scott Company, L.P. and Cawley, Gillespie & Associates, Inc.,
each independent petroleum engineers for the Company, and Netherland, Sewell &
Associates, Inc., independent petroleum engineers for Prize, in form and
substance reasonably satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers.
(g) The representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date;
each of the Company and the Guarantors shall have performed all covenants and
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as set forth in the Final
Memorandum (exclusive of any amendment or supplement thereto after the date
hereof) subsequent to the date of the most recent financial statements in such
Final Memorandum, there shall have been no event or development that,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect.
(h) The issuance and sale of the Securities pursuant to this Agreement
shall not be enjoined (temporarily or permanently) and no restraining order or
other injunctive order shall have been issued or any action, suit or proceeding
shall have been commenced with respect to this Agreement before any court or
governmental authority.
(i) The Initial Purchasers shall have received certificates, dated the
Closing Date, signed on behalf of the Company by its Chief Executive Officer and
Chief Financial Officer to the effect that:
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(1) The representations and warranties of the Company and the
Guarantors in this Agreement are true and correct in all material respects
as if made on and as of the Closing Date, and each of the Company and the
Guarantors has performed in all material respects all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(2) At the Closing Date, since the date hereof or since the date of
the most recent financial statements in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date hereof), no event or
development has occurred and no information has become known that,
individually or in the aggregate, has or would be reasonably likely to have
a Material Adverse Effect; and
(3) The sale of the Securities hereunder has not been enjoined
(temporarily or permanently).
(j) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by the Company and the Guarantors and
such agreement shall be in full force and effect at all times from and after the
Closing Date.
(k) On or before the Closing Date, the Credit Agreement and the
Guaranty Agreement shall have been executed and delivered by the Company and the
Guarantors (to the extent a party thereto), and the other parties thereto.
(l) On or before the Closing Date, the Initial Purchasers and counsel
for the Initial Purchasers shall have received such further documents,
certificates and schedules or instruments relating to the business, corporate,
legal and financial affairs of the Company as they shall have heretofore
reasonably requested from the Company and the Guarantors.
(m) The Merger shall have been consummated, or shall be consummated
simultaneously with the closing of the offering of the Notes, on the terms and
conditions set forth in the Merger Agreement in the form previously made
available to the Initial Purchasers. All conditions to the Company's obligation
to consummate the Merger set forth in the Merger Agreement shall have been
satisfied, unless waived with the prior written consent of the Initial
Purchasers. The Merger Agreement shall be in full force and effect, and (unless
consented to in writing by the Initial Purchasers) there shall have been no
material amendments, alterations, modifications or waivers of any provision
thereof since the date of this Agreement (that have not been consented to in
writing by the Initial Purchasers). A certificate of merger evidencing the
merger shall have been filed with the Secretary of State of Delaware.
All such documents, opinions, certificates and schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial
-29-
Purchasers. The Company shall furnish to the Initial Purchasers such conformed
copies of such documents, opinions, certificates and schedules or instruments in
such quantities as the Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer.
(a) Each of the Initial Purchasers represents and warrants (as to
itself only) that it is a QIB. Each of the Initial Purchasers agrees with the
Company (as to itself only) that (i) it has not and will not solicit offers for,
or offer or sell, the Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the
Act; and (ii) it has and will solicit offers for the Securities only from, and
will offer the Securities only to (A) in the case of offers inside the United
States, persons whom the Initial Purchasers reasonably believe to be QIBs or, if
any such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that in the case of this clause (B), in
purchasing such Securities such persons are deemed to have represented and
agreed as provided under the caption "Notice to Investors" contained in the
Final Memorandum.
(b) Each of the Initial Purchasers represents and warrants (as to
itself only) with respect to offers and sales outside the United States that (i)
it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or has
in its possession or distributes any Memorandum or any other material, in all
cases at its own expense; (ii) the Securities have not been and will 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 under the Act or
pursuant to an exemption from the registration requirements of the Act; and
(iii) it has offered the Securities and will offer and 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, only in
accordance with Rule 903 of Regulation S. Accordingly, neither such Initial
Purchaser nor its affiliates, nor any persons acting on its behalf, have engaged
or will engage in any directed selling efforts with respect to the Securities,
and such Initial Purchaser, its affiliates and all per sons acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S.
-30-
9. Indemnification and Contribution. (a) The Company and the
Guarantors agree, jointly and severally, to indemnify and hold
harmless the Initial Purchasers and the affiliates, directors,
officers, agents, representatives and employees of the Initial
Purchasers, and each other person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which any Initial Purchaser or any such
affiliate, director, officer, agent, representative, employee or
controlling person may become subject under the Act, the Exchange Act
or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon:
(1) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Memorandum or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or any
Guarantor or based upon written information furnished by or on behalf
of the Company or any Guarantor filed in any jurisdiction in order to
qualify the Securities under the securities or "Blue Sky" laws thereof
or filed with any securities association or securities exchange (each,
an "Application"); or
(2) the omission or alleged omission to state, in any Memorandum
or any amendment or supplement thereto, or any Application, a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such affiliate,
director, officer, agent, representative and employee and each such controlling
person for any legal or other expenses reasonably incurred by the Initial
Purchasers, such affiliate, director, officer, agent, representative or employee
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and the
Guarantors will not be liable (i) in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto, or any Application, in
reliance upon and in conformity with written information furnished to the
Company by the Initial Purchasers specifically for use therein or (ii) with
respect to the Preliminary Memorandum, to the extent that any such loss, claim,
damage or liability arises solely from the fact that the Initial Purchasers sold
Securities to a person to whom there was not sent or given a copy of the Final
Memorandum (as amended or supplemented) at or prior to the written confirmation
of such sale if the Company shall have previously furnished copies
thereof to the Initial Purchasers in accordance with Section 5(d) hereof and the
Final Memorandum (as amended or supplemented) would have corrected any such
untrue statement or omission. The indemnity
-31-
agreement provided for in this Section 9 will be in addition to any liability
that the Company and the Guarantors may otherwise have to the indemnified
parties. The Company and the Guarantors shall not be liable under this paragraph
(a) for any settlement of any claim or action effected without their consent,
which consent shall not be unreasonably withheld or delayed.
The Initial Purchasers shall not, without the prior written consent of the
Company and the Guarantors, effect any settlement or compromise of any pending
or threatened proceeding in respect of which the Company and the Guarantors are
or could have been a party, or indemnity could have been sought hereunder by the
Company and the Guarantors, unless such settlement (A) includes an unconditional
written release of the Company and the Guarantors, in form and substance
reasonably satisfactory to the Company and the Guarantors, from all liability on
claims that are the subject matter of such proceeding and (B) does not include
any statement as to an admission of fault, culpability or failure to act by or
on behalf of the Company or the Guarantors.
(b) The Initial Purchasers agree, severally and not jointly, to indemnify
and hold harmless the Company and the Guarantors, their respective affiliates,
directors, officers, agents, representatives and employees and each other
person, if any, who controls the Company and the Guarantors within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company or any Guarantor or any such
affiliate, director, officer, agent, representative, employees or controlling
person may become subject under the Act, 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 (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendments or
supplement thereto, or any Application or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto, or any Application, or
necessary to make the statements therein 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 concerning such Initial Purchaser furnished
to the Company by such Initial Purchaser specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any Guarantor or any such affiliate, director, officer, agent,
representative, employee or controlling person in connection with investigating
or defending against or appearing as a third party witness in connection with
any such loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability that the Initial
Purchasers may otherwise have to the indemnified parties. The Initial Purchasers
shall not be liable under this Section 9 for any settlement of any claim or
action effected without their consent, which consent shall not be unreasonably
withheld or delayed.
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The Company and the Guarantors shall not, without the prior written
consent of the Initial Purchasers, effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Initial Purchaser is or
could have been a party, or indemnity could have been sought hereunder by any
Initial Purchaser, unless such settlement (A) includes an unconditional written
release of the Initial Purchasers, in form and substance reasonably satisfactory
to the Initial Purchasers, from all liability on claims that are the subject
matter of such proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any Initial
Purchaser.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (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 reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable
-33-
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by Deutsche Banc Alex. Brown Inc. in the case of paragraph (a) of
this Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 9, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Company and the Guarantors on the one hand and any
Initial Purchaser on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by the
Company bear to the total discounts and commissions received by such Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantors on the one
hand, or such Initial Purchaser on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company, the Guarantors and
the Initial Purchasers agree that it would not be just and equitable if the
amount of such contribution were determined by pro rata or per capita allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the first sentence of this paragraph
(d). Notwithstanding any other provision of this paragraph (d), no Initial
Purchaser shall be obligated to make contributions hereunder that in the
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aggregate exceed the total discounts, commissions and other compensation
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each affiliate, director,
officer, agent, representative and employee of an Initial Purchaser and each
person, if any, who controls an Initial Purchaser within the meaning of Section
15 of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Initial Purchasers, and each affiliate, director, officer,
agent, representative and employee of the Company and the Guarantors and each
person, if any, who controls the Company or an Guarantor within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company and the Guarantors.
-35-
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the
Company, the Guarantors, their officers and the Initial Purchasers set
forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the
Company, the Guarantors, any of their officers or directors, the
Initial Purchasers or any controlling person referred to in Section 9
hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set
forth in Sections 6, 9 and 16 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this
Agreement.
11. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities
agreed to be purchased by such Initial Purchaser hereunder and such
failure to purchase shall constitute a default in the performance of
its or their obligations under this Agreement, the remaining Initial
Purchasers shall be obligated severally to take up and pay for (in the
respective proportions which the amount of Securities set forth
opposite their names in Schedule 1 hereto bears to the aggregate
amount of Securities set forth opposite the names of all the remaining
Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase;
provided, however, that in the event that the amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed
but failed to purchase shall exceed 10% of the total aggregate amount
of Securities set forth in Schedule 1 hereto, the remaining Initial
Purchasers shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Securities, and if such
nondefaulting Initial Purchasers do not purchase all the Securities,
this Agreement will terminate without liability to any nondefaulting
Initial Purchaser or the Company except as provided in Section 10
hereof. In the event of a default by any Initial Purchaser as set
forth in this Section 11, the Closing Date shall be postponed for such
period, not exceeding five business days, as the nondefaulting Initial
Purchasers shall determine in order that the required changes in the
Final Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any
defaulting Initial Purchaser of its liability, if any, to the Company
or any nondefaulting Initial Purchaser for damages occasioned by its
default hereunder.
12. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given
prior to the Closing Date in the event that the Company or any of the
Guarantors shall have failed, refused or been unable to perform, in
all material respects, all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto
or, if at or prior to the Closing Date:
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(1) either (i) the Company or any Guarantor shall have sustained any
loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or (ii) there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the Company),
except in each case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto;
(2) trading in securities generally on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market shall have been
suspended or maximum or minimum prices shall have been established on any
such exchange or market;
(3) a banking moratorium shall have been declared by New York or
United States authorities;
(4) there shall have been (A) an outbreak or escalation of hostilities
between the United States and any foreign power, or (B) an outbreak or
escalation of any other insurrection or armed conflict involving the United
States or any other national or international calamity or emergency or (C)
any material change in the financial markets of the United States that, in
the case of (A), (B) or (C) above and in the sole judgment of the Initial
Purchasers, makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Securities as contemplated by the Final
Memorandum; or
(5) any securities of the Company shall have been downgraded or placed
on any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
(b) Termination of this Agreement pursuant to Section 11 or this
Section 12 shall be without liability of any party to any other party except as
provided in Section 10 or 11 hereof.
-37-
13. Information Supplied by the Initial Purchasers. The statements set
forth in the last paragraph of the cover page and in the third
sentence of the third paragraph and the third sentence of the fifth
paragraph of the section entitled "Private Placement" constitute the
only information furnished by the Initial Purchasers to the Company
for the purposes of Sections 2(a) and 9 hereof.
14. Notices. All communications hereunder shall be in writing and, if
sent to the Initial Purchasers, shall be mailed or delivered or
telecopied and confirmed in writing to Deutsche Banc Alex. Brown Inc.,
31 West 52nd Street, New York, New York 10019, Attention: Corporate
Finance Department, and if sent to the Company or the Guarantors,
shall be mailed, delivered or telecopied and confirmed in writing to
the Company at: 600 East Las Colinas Blvd., Suite 1100, Irving, Texas
75039, Attention: Vice President and General Counsel. All such notices
and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier.
15. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company, the Guarantors and
their respective successors, assigns and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the Initial Purchasers, the Company, the
Guarantors and their respective successors, assigns and legal
representatives and for the benefit of no other person except that (i)
the indemnities of the Company and the Guarantors contained in Section
9 of this Agreement shall also be for the benefit of the affiliates,
directors, officers, agents, representatives and employees of the
Initial Purchasers and any person or persons who control any of the
Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the indemnities of the Initial
Purchasers contained in Section 9 of this Agreement shall also be for
the benefit of the affiliates, directors, officers, agents,
representatives and employees of the Company and the Guarantors and
any person or persons who control the Company or any Guarantor within
the meaning of Section 15 of the Act or Section 20 of the Exchange
Act. No purchaser of any of the Securities from the Initial Purchasers
will be deemed a successor because of such purchase.
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16. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
S-1
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
the Guarantors and the Initial Purchasers.
Very truly yours,
MAGNUM HUNTER RESOURCES, INC.
By: /s/ GARY C. EVANS
------------------------------------------
Name: Gary C. Evans
Title: President and CEO
MAGNUM HUNTER PRODUCTION, INC.,
as Guarantor
By: /s/ GARY C. EVANS
------------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
GRUY PETROLEUM MANAGEMENT CO.,
as Guarantor
By: /s/ GARY C. EVANS
------------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
HUNTER GAS GATHERING, INC.,
as Guarantor
By: /s/ GARY C. EVANS
------------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
S-2
TRAPMAR PROPERTIES, INC., as Guarantor
By: /s/ GARY C. EVANS
--------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
CONMAG ENERGY CORPORATION,
as Guarantor
By: /s/ GARY C. EVANS
--------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
PINTAIL ENERGY, INC., as Guarantor
By: /s/ GARY C. EVANS
--------------------------------------
Name: Gary C. Evans
Title: Chief Executive Officer
S-3
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
DEUTSCHE BANC ALEX. BROWN INC.
LEHMAN BROTHERS INC.
CIBC WORLD MARKETS CORP.
BNP PARIBAS SECURITIES CORP.
SWS SECURITIES, INC.
MONNESS, CRESPI, HARDT & CO., INC.
RBC DOMINION SECURITIES CORPORATION
SAN JACINTO SECURITIES, INC.
FROST SECURITIES, INC.
RYAN BECK & CO., LLC
HARTSFIELD CAPITAL SECURITIES, INC.
By: Deutsche Banc Alex. Brown Inc.
By: /s/ CARL MAYER
--------------------------------
Name: Carl Mayer
Title: Managing Director
By: /s/ MARK FEDORCIK
--------------------------------
Name: Mark Fedorcik
Title: Director
SCHEDULE I
Principal Amount of
Initial Purchaser Securities To Be Purchased
- ----------------- --------------------------
Deutsche Banc Alex. Brown Inc. $153,000,000
Lehman Brothers Inc. 75,000,000
CIBC World Markets Corp. 48,000,000
BNP Paribas Securities Corp. 7,500,000
SWS Securities, Inc. 3,000,000
Monness, Crespi, Hardt & Co., Inc. 3,000,000
RBC Dominion Securities Corporation 3,000,000
San Jacinto Securities, Inc. 3,000,000
Frost Securities, Inc. 1,500,000
Ryan Beck & Co., LLC 1,500,000
Hartsfield Capital Securities, Inc. 1,500,000
_________________________
Total ............................................ $300,000,000
SCHEDULE II
Current Guarantors
1. Magnum Hunter Production, Inc.
2. Gruy Petroleum Management Co.
3. Hunter Gas Gathering, Inc.
4. Trapmar Properties, Inc.
5. Conmag Energy Corporation
6. Pintail Energy, Inc.
SCHEDULE III
Additional Guarantors
1. Prize Operating Company
2. PEC (Delaware), Inc.
3. Prize Energy Resources, L.P.
4. Oklahoma Gas Processing, Inc.
SCHEDULE IV
Current Subsidiaries
Name Jurisdiction Stockholder
---- ------------ -----------
1. Magnum Hunter Production, Inc. Texas Magnum Hunter Resources Inc. (100%)
2. Gruy Petroleum Management Co. Texas Magnum Hunter Resources Inc. (100%)
3. Hunter Gas Gathering, Inc. Texas Magnum Hunter Resources Inc. (100%)
4. Trapmar Properties, Inc. Texas Magnum Hunter Resources Inc. (100%)
5. Conmag Energy Corporation Texas Magnum Hunter Resources Inc. (100%)
6. Inesco Corporation Texas Magnum Hunter Resources Inc. (100%)
7. SPL Gas Marketing Inc. Texas Magnum Hunter Resources Inc. (100%)
8. Midland Hunter Petroleum Wyoming Magnum Hunter Resources Inc. (100%)
Limited Liability Company
9. Hunter Butcher International Wyoming Magnum Hunter Resources Inc. (51%)
Limited Liability Company Bill Butcher t(49%)
10. Canvasback Energy, Inc. Delaware Magnum Hunter Production, Inc. (100%)
11. Redhead Energy, Inc. Delaware Canvasback Energy, Inc. (100%)
12. Pintail Energy, Inc. Delaware Magnum Hunter Production, Inc. (100%)
13. Pintail Oil & Gas, Inc. Texas Magnum Hunter Production, Inc. (100%)
SCHEDULE V
Options, Warrants and Investments
WARRANTS OUTSTANDING:
Warrants to purchase an aggregate of 644,749 shares of the Company's common
stock were outstanding at December 31, 2001 (some may have been exercised since
that date). These warrants, which were issued by the Company to officers or
directors of the Company, are exercisable at a price of $6.50 per share until
December 31, 2003.
WARRANTS FOR WHICH RECORD DATE HAS BEEN DECLARED:
The Company approved the distribution to its stockholders of record on January
10, 2002, of one warrant for every five shares of common stock at an exercise
price of $15.00 per share. The Company has filed a registration statement with
the SEC covering the warrants and the shares underlying the warrants.
OPTIONS OUTSTANDING:
Options to purchase an aggregate of 5,217,584 shares of the Company's common
stock were outstanding at December 31, 2001 (some may have been exercised since
that date). These options, which were issued by the Company to directors,
officers or employees of the Company, have exercise prices ranging from $2.50
per share to $12.00 per share and expiration dates ranging from April 28, 2002
to December 12, 2011.
CONVERSION RIGHTS:
1996 Series A Convertible Preferred Stock ("TCW Preferred Stock") The shares of
TCW Preferred Stock are convertible into shares of common stock of the Company
at a conversion price of $5.875 per share (subject to various adjustments).
Beginning in December 1998, the Company has an option, if certain conditions are
satisfied, to exchange shares of the TCW Preferred Stock into convertible
subordinated debentures of equivalent value or into shares of Common Stock. The
holders also have the right to require the Company to redeem all or any part of
the TCW Preferred Stock upon certain sales of all or substantially all of the
Company's assets or upon changes in control.
INVESTMENTS:
The Company owns, directly or indirectly, the equity interests further described
below:
-2-
a. 1,833,771 Units of TEL Offshore Trust are owned by the Company or
by the Company's wholly-owned subsidiary, Canvasback Energy, Inc.
b. A 30% Membership Interest in NGTS, LLC, a Texas limited liability
company, is owned by the Company's wholly-owned subsidiary Hunter
Gas Gathering, Inc.
c. 9,706 shares of Swanson Consulting Services, Inc., a Texas
corporation, are owned by the Company's wholly-owned subsidiary
Magnum Hunter Production, Inc.
d. A 1% General Partnership interest in Mallard Hunter L.P. is owned
by the Company's wholly-owned subsidiary Magnum Hunter
Production, Inc.
e. 3.6 million shares of Aurion Technologies Inc., a Delaware,
corporation, are owned by the Company's wholly-owned subsidiary
Gruy Petroleum Management Company.
One or more wholly-owned subsidiaries of the Company owns common stock of
the Company, 10% Senior Notes due 2007 of the Company, and 1996 Series A
Convertible Preferred Stock of the Company.
SCHEDULE VI
Dividends and Distributions and Other Matters
The Company has paid dividends on its 1996 Series A Convertible Preferred Stock
in accordance with the terms thereof.
The Company approved the distribution to its stockholders of record on January
10, 2002, of one warrant for every five shares of common stock at an exercise
price of $15.00 per share. The Company has filed a registration statement with
the SEC covering the warrants and the shares underlying the warrants.
In March 2002, Bluebird Energy, Inc., a former subsidiary of the Company,
transferred its assets to a new wholly-owned subsidiary, Canvasback Energy, Inc.
Canvasback Energy, Inc. in turn transferred to a new wholly-owned subsidiary,
Redhead Energy, Inc., the 10% Senior Notes of the Company received by it from
Bluebird Energy, Inc. Also in March 2002, Redhead Energy, Inc. entered into a
credit facility and borrowed money thereunder, and pledged its assets as
security; Redhead's obligations were guaranteed by Canvasback Energy, Inc.
Redhead used proceeds of the credit facility borrowings to purchase additional
10% Senior Notes of the Company from Magnum Hunter Production, Inc.
SCHEDULE VII
Registration Rights
None
SCHEDULE VIII
Material Assets of Unrestricted Subsidiaries
1. 1,000,000 shares of 1996 Convertible Preferred Stock of the Company.
2. approximately $10.5 million principal amount 10% Senior Notes due 2007
of the Company
3. $2,500,000 Promissory Note from Durango Resources Corporation and
Swanson Consulting Services, Inc.
4. 302,950 shares of common stock of the Company
5. 1,725,471 units of beneficial interest in TEL Offshore Trust
Exhibit A
FORM OF JOINDER AGREEMENT
JOINDER AGREEMENT, dated as of March 15, 2002, by each of the
undersigned, pursuant to the Purchase Agreement, dated as of March 13, 2001,
among Magnum Hunter Resources, Inc., as Issuer, the guarantors party thereto and
Deutsche Banc Alex. Brown Inc. and the other initial purchasers named therein,
as initial purchasers (as amended from time to time, the "Purchase Agreement").
Terms defined in the Purchase Agreement and used herein without definition have
the meanings given to them in the Purchase Agreement.
B. Each of the undersigned hereby acknowledges that it has received
and reviewed a copy of the Purchase Agreement and acknowledges and agrees that,
pursuant to this Joinder Agreement, it hereby becomes party to Purchase
Agreement as a Guarantor, bound by all the covenants, agreements,
representations, warranties and acknowledgments applicable to a Guarantor in the
Purchase Agreement.
C. The address and jurisdiction of incorporation of each of the
undersigned is set forth below its name on the signature pages hereto.
D. This Joinder Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to the
principles of conflicts of laws thereof.
-2-
IN WITNESS WHEREOF, each of the undersigned has caused this
Joinder Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date set forth below.
PRIZE OPERATING COMPANY
By: ____________________________________
Name:
Title:
PEC (Delaware), INC.
By: ____________________________________
Name:
Title:
PRIZE ENERGY RESOURCES, L.P.
By: Prize Operating Company,
its General Partner
By: ____________________________________
Name:
Title:
OKLAHOMA GAS PROCESSING, INC.
By: ____________________________________
Name:
Title:
Exhibit B
[Form of Registration Rights Agreement]