EXHIBIT 10.1
Execution Copy
GOTHIC ENERGY CORPORATION
100,000 UNITS CONSISTING OF
$100,000,000 PRINCIPAL AMOUNT OF
12 1/4% SENIOR NOTES DUE 2004
AND
1,400,000 WARRANTS TO PURCHASE COMMON STOCK
PURCHASE AGREEMENT
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September 2, 1997
Oppenheimer & Co., Inc.
Banc One Capital Corporation
Paribas Corporation
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Gothic Energy Corporation, an Oklahoma corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchasers"), upon the terms set
forth herein ("this Agreement"), 100,000 units ("Units") consisting of an
aggregate $100,000,000 principal amount of the Company's 12 1/4% Senior Notes
due 2004 (the "Notes") and 1,400,000 warrants to purchase common stock, par
value $.01 per share (the "Common Stock"), of the Company, exercisable on or
before September 1, 2004 (the "Warrants"). The Notes will be issued pursuant to
an indenture, to be dated as of September 9, 1997 (the "Indenture") by and among
the Company, Gothic Gas Corporation, an Oklahoma corporation ("Gothic Gas") and
Gothic Energy of Texas, Inc., an Oklahoma corporation ("GE-Tx") (Gothic Gas and
GE-Tx being collectively referred to as the "Guarantors"), and The Bank of New
York, as trustee (the "Trustee"), substantially in the form previously furnished
to you. The Warrants are to be issued pursuant to a warrant agreement, to be
dated as of September 9, 1997 (the "Warrant Agreement") by and between the
Company and American Stock Transfer & Trust Company, as warrant agent (the
"Warrant Agent"), substantially in the form previously furnished to you.
Concurrently herewith, the Company, the Guarantors and each of the Initial
Purchasers will enter into a Registration Rights Agreement, of even date
herewith (the "Registration Rights Agreement"), substantially in the form
attached hereto as Exhibit A. Pursuant to the Registration Rights Agreement,
the Company and the Guarantors have agreed, among other things, to file with,
and cause to be
declared effective by, the Securities and Exchange Commission (the "Commission")
(i) a registered exchange offer relating to an offer to exchange the Notes for a
like principal amount of debt securities of the Company which have been
registered under the Securities Act identical in all material respects to the
Notes and (ii) one or more shelf registration statements pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
resales of the Notes, the Warrants and the Warrant Shares (as defined below).
Capitalized terms not specifically defined herein are defined in the
Offering Memorandum referred to below, and used herein as so defined.
References to Notes shall include the Guarantees (as defined in the Indenture)
of the Guarantors. Warrant Shares means the shares of Common Stock issuable
upon exercise of the Warrants. Each Unit shall consist of $1,000 principal
amount of the Notes and 14 Warrants. The Notes and the Warrants shall be
detachable and separately transferable on or after the Separation Date (as
defined in the Registration Rights Agreement).
1. Representations and Warranties of the Company and the Guarantors
. The Company and the Guarantors, jointly and severally, represent and
warrant to each of the Initial Purchasers as follows:
(a) The Company has prepared and furnished to the Initial Purchasers a
preliminary offering memorandum, dated August 12, 1997, with respect to the
Units, the Notes and the Warrants that is subject to completion (hereafter, the
"Preliminary Memorandum") and is also preparing and furnishing to the Initial
Purchasers a final offering memorandum, dated September the date hereof, with
respect to the Units, the Notes and the Warrants that includes information with
respect to the rate of interest on the Notes and other data (hereafter, the
"Definitive Memorandum" and, collectively with the Preliminary Memorandum, the
"Offering Memorandum"). The Definitive Memorandum, at the date thereof and at
all times thereafter to and including the Closing Date (as hereinafter defined)
does not and will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
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representation or warranty as to information contained in or omitted from the
Offering Memorandum, as amended or supplemented, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any of the Initial Purchasers specifically for inclusion in the Offering
Memorandum. The Preliminary Memorandum, at the date thereof and at all times
subsequent thereto to the date hereof, did not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No stop order preventing the use of the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Securities Act, has been issued.
(b) Subsequent to the respective dates as of which information is
given in the
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Definitive Memorandum, except as set forth in the Definitive Memorandum, there
has not been any material adverse change in the business, prospects, properties,
operations, condition (financial or other) 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, and since the date of the
latest balance sheet included in the Definitive Memorandum, neither the Company
nor any of its subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, that are material to the Company and its
subsidiaries taken as a whole, except for liabilities or obligations that were
incurred or undertaken in the ordinary course of business or that are fully
reflected in the Definitive Memorandum.
(c) This Agreement and the Registration Rights Agreement have been
duly and validly authorized, executed and delivered by the Company and the
Guarantors and each is a valid and binding agreement of the Company and the
Guarantors enforceable against them in accordance with their terms, except
insofar as (i) such enforcement may be subject to (A) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and (B)
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (ii) rights to indemnification and
contribution may be limited by federal or state securities laws or public policy
relating thereto. This Agreement and the Registration Rights Agreement conform
in all material respects to the description thereof contained in the Offering
Memorandum.
(d) The execution, delivery, and performance of this Agreement, the
Registration Rights Agreement, the Indenture, the Notes, the Guarantees, the
Warrant Agreement and the Warrants and the consummation of the transactions
contemplated hereby and thereby, including the issuance, sale and delivery of
the Units, the Notes, the Guarantees, the Warrants and the Warrant Shares, and
application of the proceeds of the sale thereof as set forth in the Offering
Memorandum, will not (i) conflict with or result in a material breach of any of
the terms and provisions of, or constitute a default (or an event that with
notice or lapse of time, or both, would constitute a default) or require consent
under, or, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Guarantors,
pursuant to the terms of any agreement, instrument, franchise, license or permit
to or by which the Company or the Guarantors is a party or may be bound (other
than those as to which requisite waivers or consents have been obtained by the
Company or the Guarantors), subject, in the case of the performance of the
Indenture, to the conflict with or breach of or consent required under the
Amended Credit Facility in the event the Company makes a Net Proceeds Offer or a
Change of Control Offer under the terms of the Indenture, or (ii) violate or
conflict with any provision of the certificate of incorporation, by-laws, or
equivalent instruments of the Company or the Guarantors or any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or the Guarantors
or any of their respective properties or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or the
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Guarantors or any of their respective properties or assets is required for the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Indenture, the Notes, the Guarantees, the Warrant Agreement and
the Warrants, except as may be required for compliance with federal and state
securities laws in connection with the purchase of the Units by the Initial
Purchasers and performance of the Company's and the Guarantors' obligations
under the Registration Rights Agreement.
(e) Each of the Company and the Guarantors has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, and has the corporate power and authority
required to carry on its business as described in the Offering Memorandum and to
own, lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect").
(f) All of the outstanding shares of capital stock of the Guarantors
have been duly and validly authorized and issued and are fully paid and non-
assessable, and are owned beneficially and of record by the Company, free and
clear of any security interest, claim, lien, or encumbrance. On the Closing
Date, there will not be any rights granted to or in favor of any person to
acquire, at present or in the future, any such capital stock or other equity
interests of the Guarantors. The Guarantors are the only the subsidiaries of
the Company. Except for the shares of capital stock of each of the Guarantors
owned by the Company, neither the Company nor any subsidiary of the Company owns
any shares of stock or any other equity securities of any corporation or has any
equity interest in any corporation, partnership, association or other entity.
(g) The authorized, issued and outstanding capital stock of the
Company, as of June 30, 1997, was (i) 100,000,000 shares of Common Stock
authorized, of which 13,606,511 shares are issued and outstanding and (ii)
500,000 shares of preferred stock, par value $.05 per share authorized (the
"Preferred Stock"), of which 4,490 shares of Cumulative Convertible Preferred
Stock, are issued and outstanding. Except for 1,500,000 shares issued to HS
Resources, Inc. which shares are to be redeemed on the Closing Date, no
additional shares of capital stock of the Company have been authorized or issued
since June 30, 1997 except as described in a schedule to Exhibit B attached
hereto. As of the Closing Date, all of the outstanding shares of Common Stock
will have been duly authorized and validly issued, fully paid and non-assessable
and will not have been issued in violation of any preemptive or similar rights.
As of the Closing Date, except as disclosed in the Offering Memorandum or as set
forth in a schedule to Exhibit B attached hereto, there will be no outstanding
securities of the Company convertible into or evidencing the right to purchase
or subscribe for any shares of capital stock of the Company (other than the
outstanding options and warrants hereafter mentioned); there will be no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character obligating the Company to
issue any shares of its capital stock or any securities convertible into or
evidencing the right to
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purchase or subscribe for any shares of such stock; and there will be no
agreements with respect to the voting, sale or transfer of any shares of capital
stock of the Company to which the Company is a party.
(h) The Notes have been duly and validly authorized by all necessary
corporate action and, when authenticated by the Trustee and issued, sold and
delivered by the Company pursuant to this Agreement against payment therefor,
will have been duly and validly executed, authenticated, issued and delivered
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms, except insofar as such enforcement may be subject to (i) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity) and (iii) limitation of
provisions of indemnity and contribution by Federal and state securities laws or
by the public policy underlying such laws. The Guarantees has been duly
authorized by the Guarantors and, upon the due authentication, execution,
issuance and delivery of the Notes, will have been duly executed, issued and
delivered by the Guarantors and will constitute a valid and binding obligation
of the Guarantors, enforceable against the Guarantors in accordance with its
terms and entitled to the benefits provided by the Guarantees, except insofar as
such enforcement may be subject to (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii) general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (iii) limitation of provisions of indemnity
and contribution by Federal and state securities laws or by the public policy
underlying such laws. The Notes and the Guarantees, when issued, will conform
in all material respects to the description thereof set forth in the Offering
Memorandum.
(i) The Indenture conforms in all material respects to the description
thereof set forth in the Offering Memorandum, conforms in all material respects
with the requirements of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), applicable to indentures to be qualified thereunder, has been
duly and validly authorized by all necessary corporate action and, when executed
and delivered by the Company, the Guarantors and the Trustee, will constitute a
valid and binding agreement of the Company and the Guarantors, enforceable
against the Company and the Guarantors in accordance with its terms, except
insofar as such enforcement may be subject to (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(j) The Warrants have been duly and validly authorized by all
necessary corporate action, and when countersigned by the Warrant Agent and
issued, sold and delivered by the Company pursuant to this Agreement against
payment therefor, will have been duly and validly executed, countersigned,
issued and delivered and will constitute valid and binding obligations of the
Company entitled to the benefits of the Warrant Agreement, enforceable
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against the Company in accordance with their terms, except insofar as such
enforcement may be subject to (i) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). The Warrants, when issued, will conform in all material respects to
the description thereof set forth in the Offering Memorandum. The Warrant
Shares have been duly authorized and reserved for issuance by the Company, and
when issued, sold and delivered by the Company pursuant to the Warrant Agreement
against payment therefor, will be duly and validly issued, fully paid and non-
assessable, and free of preemptive rights, and will conform in all material
respects to the description of the Warrant Shares contained in the Offering
Memorandum.
(k) The Warrant Agreement conforms in all material respects to the
description thereof contained in the Offering Memorandum, has been duly and
validly authorized by all necessary corporate action and, when executed and
delivered by the Company and the Warrant Agent, will constitute a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except insofar as such enforcement may be subject to (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(l) Neither the Company nor the Guarantors is in violation of its
charter or by-laws or other governing instrument or in default in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other agreement,
indenture or instrument to which it is a party or by which it or any of its
property is bound, except for those defaults that, individually or in the
aggregate, would not have a Material Adverse Effect.
(m) Except as disclosed in the Offering Memorandum, there are no legal
or governmental proceedings pending to which the Company or the Guarantors is a
party or of which any of their respective properties or assets is the subject,
and, to the best of the Company's knowledge, no such proceedings are threatened
or contemplated, which, in each case, if adversely decided, would have,
individually or in the aggregate, a Material Adverse Effect. There is no
contract, document, statute or regulation material to the Company and its
subsidiaries, taken as a whole, that would be required to be described in the
Offering Memorandum if it were a prospectus included in a registration statement
on Form S-1 under the Securities Act that is not so described.
(n) Each of the Company and the Guarantors has all necessary licenses,
consents, authorizations, approvals, orders, certificates and permits
(collectively, "Licenses") of and from, and has made all declarations and
filings with and satisfied all eligibility and other similar requirements
imposed by all federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, in each case
as required for the
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conduct of the business in which it is engaged, and each such License is in full
force and effect, except to the extent that the failure to obtain any such
License or to make any such declaration or filing or satisfy any such
requirement would not have a Material Adverse Effect. Neither the Company nor
the Guarantors has received any notice of proceedings relating to, or has any
reason to believe that any governmental body or agency is considering limiting,
suspending, modifying or revoking, any such License that would have a Material
Adverse Effect.
(o) Neither the Company nor the Guarantors has received any notice of
infringement of or conflict with asserted rights of any third party under any
trademark, copyright, patent or license as a consequence of the activities of
the Company or any of its subsidiaries, except for infringements or conflicts
the remediation of or compensation for which would not have a Material Adverse
Effect.
(p) Coopers & Lybrand L.L.P., whose reports are included in the
Offering Memorandum, is an independent public accountant (as defined in the
Securities Act) with respect to the Company and the Guarantors.
(q) The consolidated financial statements of the Company and notes
thereto included in and part of the Offering Memorandum present fairly in all
material respects the consolidated financial position, results of operations,
cash flows and stockholders' equity of the Company and its consolidated
subsidiaries (as reflected in such financial statements) in conformity with
generally accepted accounting principles ("GAAP") on the basis stated therein at
the respective dates or for the respective periods to which they apply; such
statements and notes have been prepared in accordance with GAAP consistently
applied throughout the periods involved, except as disclosed therein; the
financial statements and notes thereto relating to the HS Properties included in
the Offering Memorandum comply as to form with all requirements of the rules
promulgated under the Securities Act by the Commission and applicable published
policies of the staff of the Commission with respect to financial statements of
acquired businesses that would be required in a registration statement on Form
SB-2 and present fairly in all material respects the gross revenues and direct
operating expenses of the HS Properties in conformity with GAAP on the basis
stated therein for the periods presented; and the summary and selected financial
data set forth in the Offering Memorandum, in all material respects, present
fairly the information purported to be shown thereby at the respective dates or
for the respective periods to which they apply and have been prepared on a basis
consistent with such financial statements and the books and records of the
Company and the other entities as to which such information is shown. The pro
forma financial statements of the Company and its subsidiaries included in the
Definitive Memorandum have been prepared in accordance with the published rules
and regulations of the Commission applicable to pro forma financial statements
and have been properly compiled on the basis described therein, and the
assumptions used in the preparation thereof are reasonable and appropriate to
give pro forma effect in all material respects to the transactions or
circumstances described therein.
(r) On June 30, 1997, after giving pro forma effect to the issuance
and sale of the Notes pursuant hereto, the Company and the Guarantors would have
had an authorized and
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outstanding capitalization as set forth in the Offering Memorandum under
"Capitalization."
(s) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (an "Investment Company").
(t) Neither the Company nor any person acting on its behalf (provided
that no representation is made as to the Initial Purchasers or any other person
acting on their behalf) has offered the Units, the Notes, the Guarantees or the
Warrants for sale by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. Neither the Company
nor any of its Affiliates has offered the Units, the Notes, the Guarantees or
the Warrants to any person except through the Initial Purchasers. Neither the
Company nor any person acting on its behalf (provided that no representation is
made as to the Initial Purchasers or any other person acting on their behalf)
has offered the Units, the Notes, the Guarantees or the Warrants or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than the Initial Purchasers and not more than 35 other institutional investors.
Neither the Company nor any affiliate (as defined in Rule 501(b) under the
Securities Act) thereof has, directly or indirectly, or through any agent,
within the six months preceding the date hereof, sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of the sale of any
security of the same or a similar class as the Units, the Notes, the Guarantees
or the Warrants, other than to the Initial Purchasers pursuant to this
Agreement. With respect to those Units sold in reliance on Regulation S, (A)
none of the Company, its affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S and (B) each of the Company and its
affiliates and any person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has complied and
will comply with the offering restrictions requirement of Regulation S.
(u) Since the date of the Preliminary Memorandum, none of the Company,
the Guarantors or any affiliate has (i) sold, bid or, purchased or paid any
person any compensation for soliciting purchases of the Notes or (ii) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company, the Guarantors or any of their respective
subsidiaries, other than to the Initial Purchasers pursuant to this Agreement.
(v) Assuming the accuracy and completeness of the Initial Purchasers'
representations contained in Section 3 hereof and the Initial Purchasers'
compliance with their covenants therein set forth, it is not necessary, in
connection with the sale and delivery of the Notes to the Initial Purchasers and
the offer and resale of the Notes by the Initial Purchasers, in each case in the
manner contemplated by this Agreement and the Offering Memorandum, to register
the Notes under the Securities Act or to qualify the Indenture under the Trust
Indenture Act.
(w) Neither the Company nor the Guarantors (i) has violated any
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environmental, safety, health or similar law or regulation applicable to its
business relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants,
including, without limitation, the Clean Air Act, as amended, the Clean Water
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Federal Water Pollution Control Act, as amended,
the Resource Conservation and Recovery Act, as amended, the Toxic Substances
Control Act, as amended, the Oil Pollution Act, as amended, the Occupational
Safety and Health Act, as amended, and comparable state and local laws and other
safety, health and environmental conservation or protection laws ("Environmental
Laws"), the effect of which would be to cause, individually or in the aggregate,
a Material Adverse Effect, or (ii) lacks any notices, permits, licenses or other
approvals required of them under applicable Environmental Laws or is violating
any terms and conditions of any such notice, permit, license or approval, the
effect of which would be to cause, individually or in the aggregate, a Material
Adverse Effect. Without limitation of the foregoing, there is as of the date
hereof no litigation or action pending or, to the best knowledge of the Company,
threatened against the Company or the Guarantors relating to any violation of
any Environmental Laws with respect to the assets or business of the Company or
the Guarantors which is required to be disclosed in the Offering Memorandum, or
which might result, individually or in the aggregate, in a Material Adverse
Effect.
(x) Neither the Company nor any of its subsidiaries has violated any
Federal, state or local law relating to discrimination in the hiring, promotion
or pay of employees nor any applicable wage or hour laws, nor any provisions of
ERISA or the rules and regulations promulgated thereunder, nor has the Company
or the Guarantors engaged in any unfair labor practice, which in each case might
result, singly or in the aggregate, in a Material Adverse Effect. There is (i)
no significant unfair labor practice complaint pending against the Company or
the Guarantors or, to the best knowledge of the Company, threatened against any
of them, before the National Labor Relations Board or any state or local labor
relations board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Company or the Guarantors or, to the best knowledge of the
Company, threatened against any of them, (ii) no significant strike, labor
dispute, slowdown or stoppage pending against the Company or the Guarantors or,
to the best knowledge of the Company, threatened against the Company or the
Guarantors and (iii) to the best knowledge of the Company, no union
representation question currently exists with respect to the employees of the
Company or the Guarantors and, to the best knowledge of the Company, no union
organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, individually or in the aggregate)
such as could not have a Material Adverse Effect.
(y) All material tax returns required to be filed by the Company and
the Guarantors in any jurisdiction (including foreign jurisdictions) have been
so filed (except to the extent that the failure to make any such filing would
not have a Material Adverse Effect), and all taxes, assessments, fees and other
charges shown thereon to be due and payable have been paid, other than those
being contested in good faith or those currently payable without penalty or
interest. The Company does not know of any actual or proposed material
additional tax
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assessments for any fiscal period against it or the Guarantors. None of the
Company's nor the Guarantors's tax returns are under audit, and no waivers of
the statute of limitations or extensions of time with respect to any tax returns
have been granted to the Company or the Guarantors, except such as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(z) The Company and the Guarantors maintain insurance covering their
properties, operations, personnel and businesses. In the Company's reasonable
judgment, such insurance insures against such losses and risks as are adequate
in accordance with customary industry practice to protect the Company and the
Guarantors and their businesses. Neither the Company nor the Guarantors has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in force on
the date hereof and will be outstanding and duly in force on the Closing Date.
(aa) The Company and the Guarantors have good and defensible title to
their interests in oil and gas properties and good and marketable title to all
other real and personal property owned by them, in each case free and clear of
all liens and defects except such as are described in the Offering Memorandum or
would not result in a Material Adverse Effect and do not materially interfere
with the use made or proposed to be made of such properties by the Company and
the Guarantors; and any real property and buildings held under lease by the
Company and the Guarantors (other than oil and gas leases) are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect and do not materially interfere with the use made
or proposed to be made of such property and buildings by the Company and the
Guarantors. Except to the extent described in the Offering Memorandum, the
leases, options to lease, drilling concessions or other arrangements held by the
Company and the Guarantors reflect in all material respects the rights of the
Company and the Guarantors to develop the unexplored and undeveloped acreage to
produce undeveloped oil and natural gas reserves, as described in the Offering
Memorandum. The Company and the Guarantors have exercised reasonable diligence,
with respect to acquiring or otherwise procuring such leases, options to lease,
drilling concessions and other arrangements, although the investigation of
record title made by the Company and the Guarantors generally involved no more
than a preliminary review of local records, as is customary in the industry.
(bb) The information which was supplied by the Company to Lee Keeling
and Associates, Inc. ("LKA"), independent petroleum engineers, for purposes of
evaluating the oil and gas reserves of the Company and the HS Properties as of
December 31, 1996 and June 30, 1997, including, without limitation, production,
costs of operation and development, current prices for production, agreements
relating to current and future operations and sales of production, was true and
correct in all material respects on the dates such estimates were made and such
information was supplied and was prepared in accordance with customary industry
practices, as indicated in the letters of LKA included in the Definitive
Memorandum at Annexes A (the "LKA Letter"); LKA was, as of the date of the LKA
Letters, and is, as of the date hereof, independent with respect to the Company
and the Guarantors; other than normal production of
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the reserves and intervening product price fluctuations, the Company is not
aware of any facts or circumstances that would result in a materially adverse
change in the reserves, or the present value of future net cash flows therefrom,
as described in the Definitive Memorandum and as reflected in the LKA Letter and
the reserve reports referenced therein; estimates of such reserves and present
values as described in the Definitive Memorandum and reflected in the LKA Letter
and the reserve report referenced therein comply in all material respects to the
applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act. Except as set forth in the Definitive Memorandum, to the
knowledge of the Company, there has been no event, trend or condition that would
have the effect of materially revising downward the estimates of pro forma
proved reserves of the Company as of June 30, 1997.
(cc) Except as (i) disclosed to the Initial Purchasers in writing,
(ii) disclosed in or contemplated by the Definitive Memorandum or (iii) not
required to be disclosed in the Definitive Memorandum, the Company is not
engaged in any negotiations, nor is it a party to any existing agreements,
arrangements or understandings, with respect to any acquisitions, combinations
or dispositions of assets or securities that would be material to the Company
and its subsidiaries, taken as a whole.
(dd) In reliance upon and subject to the accuracy of the
representations of the Initial Purchasers contained in Section 3 hereof, neither
the execution and delivery of this Agreement and the Registration Rights
Agreement nor the sale of the Units to be purchased by the Initial Purchasers is
a prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code), with respect to any employee benefit plans sponsored by the
Company or the Guarantors, that is not exempt by statute, regulation or class
exemption. The Company is in compliance in all material respects with all
presently applicable provisions of ERISA; no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any material liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 (whether or not waived) or 4971 of the Code; and each "pension
plan" for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, that
would cause the loss of such qualification except, in each case, for any such
event as would not have a Material Adverse Effect.
(ee) Other than discounts and commissions of the Initial Purchasers as
described in the Definitive Memorandum, no fees or commissions will be payable
by the Company to any broker, finder or investment banker with respect to the
issuance and sale of any of the Units, the Notes, the Guarantees or the
Warrants, pursuant to the terms of this Agreement.
(ff) No statement, representation or warranty made by the Company or
the Guarantors in this Agreement, the Registration Rights Agreement or the
Warrant Agreement or made in any certificate or document required by any of the
foregoing agreements to be delivered by the Company or the Guarantors (or their
agents, attorneys or representatives) to the Initial
-11-
Purchasers, is, was or will be, when made, inaccurate, untrue or incorrect in
any material respect.
(gg) Neither the Company nor any agent thereof acting on its behalf
has taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Notes, the Warrants or the Exchange
Notes or the application of proceeds thereof to violate Section 7 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
regulation issued pursuant thereto, including, without limitation, Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System, in each case
as in effect now or as the same may hereafter be in effect on the Issue Date.
(hh) The Notes, when issued, will not be of the same class (within the
meaning of Rule 144A under the Securities Act) as other securities of the
Company that are listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer
quotation system of a registered national securities association.
(ii) The Warrants, when issued, will not be of the same class (within
the meaning of Rule 144A under the Securities Act) as other securities of the
Company that are listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer
quotation system of a registered national securities association.
(jj) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Units or prevents or suspends the use of the
Offering Memorandum; no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction has been issued that prevents
the issuance of the Units or prevents or suspends the sale of the Units in any
jurisdiction referred to in Section 4(e) hereof; and every request of any
securities authority or agency of any jurisdiction for additional information
has been complied with in all material respects.
(kk) There are no holders of securities of the Company, the Guarantors
or any of their respective subsidiaries who, by reason of the execution by the
Company and the Guarantors of this Agreement, the Registration Rights Agreement,
the Indenture, the Notes, the Warrant Agreement or the Warrants, or the
consummation by the Company and the Guarantors of the transactions contemplated
hereby and thereby, have the right to request or demand that the Company, the
Guarantors or any of their respective subsidiaries register, under the
Securities Act or analogous foreign laws and regulations, securities held by
them in connection with the Exchange Offer or the registration of the Warrants
or Warrant Shares.
(ll) None of the Company, the Guarantors or any of their respective
subsidiaries intends to, nor does it believe that it will, incur debts beyond
its ability to pay such debts as they mature. The present fair saleable value
(if sold on reasonably commercial terms) of the assets of the Company, the
Guarantors and their respective subsidiaries, taken as a whole, exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of the Company, the
Guarantors and their
-12-
respective subsidiaries as they become absolute and matured. The assets of the
Company, the Guarantors and their respective subsidiaries, taken as a whole, do
not constitute unreasonably small capital to carry out the business of the
Company, the Guarantors and their respective subsidiaries, taken as a whole, as
conducted or as proposed to be conducted. Upon the issuance of the Units, the
present fair saleable value (if sold on reasonably commercial terms) of the
assets of the Company, the Guarantors and their respective subsidiaries, taken
as a whole, will exceed the amount that will be required to be paid on or in
respect of the existing debts and other liabilities (including contingent
liabilities) of the Company, the Guarantors and their respective subsidiaries,
taken as a whole, as they become absolute and matured. Upon the issuance of the
Units, the assets of the Company, the Guarantors and their respective
subsidiaries, taken as a whole, will not constitute unreasonably small capital
to carry out their businesses as now conducted, including the capital needs of
the Company, the Guarantors and their respective subsidiaries, taking into
account the projected capital requirements and capital availability of the
Company and its subsidiaries, taken as a whole.
(mm) Each certificate signed by any officer of the Company and the
Guarantors and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company
and the Guarantors, as the case may be, to the Initial Purchasers as to the
matters covered thereby.
2. Purchase, Sale and Delivery of the Units
(a) Subject to the terms and conditions and in reliance upon the
representations, warranties and covenants of the Company, the Guarantors and the
Initial Purchasers herein set forth, (i) the Company agrees to sell to the
Initial Purchasers and the Initial Purchasers agree to purchase from the Company
the number of Units set forth opposite their names on Schedule I hereto, at a
price of $965.00 per Unit and (ii) the Guarantors agree to execute and deliver
the Guarantees with respect to all Notes sold hereby to the Initial Purchasers.
The obligations of the Initial Purchasers under this Section 2(a) are several
and not joint.
(b) Delivery of the Units against payment of the purchase price
therefor shall be made at the offices of Andrews & Kurth L.L.P. located at 425
Lexington Avenue, New York, New York 10017, or such other location as may be
mutually acceptable to the Initial Purchasers and the Company and the
Guarantors. Such delivery and payment shall be made at 8:00 a.m., New York
time, on the fifth full business day next following the date of this Agreement,
or at such other time as shall be agreed upon by the Initial Purchasers and the
Company and the Guarantors. The time and date of such delivery and payment are
herein called the "Closing Date." One or more (i) certificates evidencing the
Notes registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), or in the name of such other eligible nominee of DTC identified
by the Initial Purchasers to the Company and the Guarantors in writing at least
two full business days prior to the Closing Date, in the principal amounts
corresponding to the aggregate principal amount of the Notes (the "Global
Notes") sold to (a) Qualified Institutional Buyers (as defined in Section 3
below) and (b) non-U.S. Persons in offshore transactions within the meaning of
Regulation S promulgated under the Securities Act
-13-
and certificates evidencing one or more individually denominated Notes
registered in such names and in such denominations as the Initial Purchasers may
request in writing at least two full business days prior to the Closing Date, in
the principal amounts corresponding to the aggregate principal amount of the
Notes (the "Individual Notes") sold to Accredited Institutions (as defined in
Section 3 below) that are not Qualified Institutional Buyers, shall be delivered
to the Initial Purchasers by the Company, against payment of the purchase price
therefor by wire transfer of immediately available funds to an account at a bank
acceptable to Oppenheimer & Co., Inc. previously designated to Oppenheimer &
Co., Inc. by the Company.
(c) The Company and the Guarantors will permit the Initial Purchasers
to examine the Global Notes, the Individual Notes and the Warrant certificates
at least one full business day prior to the Closing Date.
(d) It is understood that each certificate evidencing a Note shall
bear a legend substantially to the following effect:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH
IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IS NOT A
U.S. PERSON AND IS PURCHASING IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT AND HAS NOT ENGAGED IN, AND PRIOR TO THE EXPIRATION OF THE
40-DAY RESTRICTED PERIOD PROVIDED FOR IN RULE 903 OF REGULATION S, WILL NOT
OFFER OR SELL THESE SECURITIES OR TO A U.S. PERSON OR FOR THE ACCOUNT OF A
U.S. PERSON WITHIN THE MEANING OF RULE 902(O) OF REGULATION S IN THE UNITED
STATES, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS
(OR SUCH SHORTER PERIOD AS COMPLIES WITH RULE 144 UNDER THE SECURITIES ACT)
AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS SECURITY AND THE
LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") RESELL, PLEDGE
OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER, (B) TO A
PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE
-14-
WITH THE RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(COPIES OF SUCH FORM CAN BE OBTAINED FROM THE TRUSTEE), PROVIDED THAT
CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY
PURSUANT TO THIS CLAUSE (C) PRIOR TO THE EXPIRATION OF THE "40-DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S
UNDER THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES TO A PERSON OTHER
THAN A U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, AND, IF SUCH TRANSFER IS
BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE PRIOR TO
THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" DESCRIBED ABOVE, A
CERTIFICATE (WHICH MAY BE OBTAINED FROM THE TRUSTEE) IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (E) PURSUANT TO THE RESALE
LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES
TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS
NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY
SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE.
(e) It is understood that each certificate evidencing a Warrant shall
bear a legend substantially to the following effect:
-15-
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH
IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IS NOT A
UNDER THE SECURITIES ACT AND HAS NOT ENGAGED IN, AND PRIOR TO THE
EXPIRATION OF THE 40-DAY RESTRICTED PERIOD PROVIDED FOR IN RULE 903 OF
REGULATION S, WILL NOT OFFER OR SELL THESE SECURITIES OR TO A U.S. PERSON
OR FOR THE ACCOUNT OF A U.S. PERSON WITHIN THE MEANING OF RULE 902(O) OF
REGULATION S IN THE UNITED STATES, (2) AGREES THAT IT WILL NOT PRIOR TO THE
DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD AS COMPLIES WITH RULE 144
UNDER THE SECURITIES ACT) AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE
OF THIS SECURITY AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF
THE ISSUER WAS THE OWNER OF THIS SECURITY (THE "RESALE RESTRICTION
TERMINATION DATE") RESELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY,
EXCEPT (A) TO THE ISSUER, (B) TO A PERSON THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE
RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE WARRANT AGENT A WRITTEN CERTIFICATION CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY (COPIES OF SUCH FORM CAN BE OBTAINED FROM THE WARRANT AGENT),
PROVIDED THAT CERTAIN HOLDERS SPECIFIED
-16-
IN THE WARRANT AGREEMENT MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (C) PRIOR TO THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD"
(WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES TO A PERSON OTHER THAN A U.S. PERSON IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT, AND, IF SUCH TRANSFER IS BEING EFFECTED BY
CERTAIN TRANSFERORS SPECIFIED IN THE WARRANT AGREEMENT PRIOR TO THE
EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" DESCRIBED ABOVE, A CERTIFICATE
(WHICH MAY BE OBTAINED FROM THE WARRANT AGENT) IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE WARRANT AGENT, (E) PURSUANT TO THE RESALE
LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES
TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS
NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WARRANT AGENT AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE
WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE.
3. Offering and Resale of the Units
The Initial Purchasers have advised the Company and the Guarantors that it
is their intention, as promptly as they deem appropriate after the Company and
the Guarantors shall have furnished them with copies of the Definitive
Memorandum (as specified in Section 4(b) hereof), to resell the Units but only
pursuant to the procedures and upon the terms and subject to the conditions set
forth in this Agreement and the Definitive Memorandum. Each Initial Purchaser
represents and warrants to the Company and the Guarantors that it is a Qualified
Institutional Buyer and an Accredited Investor (within the meaning of Rule
501(a) of Regulation D under the Securities Act). In connection therewith, each
Initial Purchaser, severally and not jointly, represents and warrants to and
agrees with the Company and the Guarantors (A) that the Units have been and will
be offered for sale and will be sold by it solely to (i) persons reasonably
believed by it to be "Qualified Institutional Buyers" purchasing for their own
account or for the account of other Qualified Institutional Buyers within the
meaning of Rule 144A under the Securities Act and that, in connection with each
such sale, it has taken or will take reasonable steps to ensure that the
purchaser of such Units is aware that such sale is being made in reliance
-17-
on Rule 144A, (ii) a limited number of persons that are "Accredited Investors"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
that are institutions (each, an "Accredited Institution"), and each of which
provides to such Initial Purchaser a letter in the form of Annex B to the
Offering Memorandum and/or (iii) persons who are not "U.S. Persons" in "offshore
transactions" (as such terms are defined in Regulation S) in reliance on
Regulation S promulgated under the Securities Act, and (B) that such Initial
Purchaser has not offered and will not offer the Units for sale by means of any
general solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act or in any manner involving a public
distribution or offering of the Units within the meaning of the Securities Act.
The Initial Purchasers agree to use their reasonable efforts to deliver a
Definitive Memorandum to each person to whom the Units are resold by the Initial
Purchasers substantially contemporaneously with the Closing Date.
4. Agreements of the Company and the Guarantors
The Company and the Guarantors agree with the Initial Purchasers as
follows:
(a) The Company and the Guarantors will advise the Initial Purchasers
promptly (and, if so requested by the Initial Purchasers, will confirm such
advice in writing) of (i) the occurrence, during the period referred to in
paragraph (d) below, of any event of which the Company and the Guarantors have
knowledge that makes any statement of a material fact made in the Definitive
Memorandum untrue or that requires the addition of any statement of a material
fact to, or other material change in, the Definitive Memorandum in order to make
the statements therein, in light of the circumstances existing when it is
delivered to a purchaser, not misleading and (ii) the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of the Units, the Notes or the Warrants for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any state securities commission or other regulatory authority.
(b) The Company and the Guarantors will furnish to the Initial
Purchasers and to those persons whom the Initial Purchasers identify to the
Company and the Guarantors such number of copies of the Definitive Memorandum,
and any amendments thereof or supplements thereto, as the Initial Purchasers may
reasonably request.
(c) The Company and the Guarantors (i) will not make any amendment of
or supplement to the Offering Memorandum regarding which the Initial Purchasers
shall not previously have been consulted or use any such proposed amendment or
supplement to which the Initial Purchasers shall reasonably and in good faith
object and (ii) shall promptly prepare, upon the Initial Purchasers' request,
any amendment or supplement to the Offering Memorandum that in the opinion of
counsel to the Initial Purchasers may be necessary or advisable in connection
with resales by the Initial Purchasers pursuant to the procedures and upon the
terms and subject to the conditions set forth in the Offering Memorandum.
(d) If, during the period from the date of the Definitive Memorandum
through
-18-
the Closing Date, and for so long thereafter as in the opinion of the Initial
Purchasers' counsel the Definitive Memorandum is required to be delivered in
connection with resales of the Units by the Initial Purchasers, any event shall
occur as a result of which it becomes necessary to amend or supplement the
Definitive Memorandum in order that the Definitive Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances existing when the Definitive Memorandum is or is to be delivered
to a purchaser, or if it becomes necessary to amend or supplement the Definitive
Memorandum to comply with any law, the Company and the Guarantors promptly will
prepare an appropriate amendment of or supplement to the Definitive Memorandum
so that the Definitive Memorandum, as so amended or supplemented, does not
include such untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading, in light
of the circumstances existing when it is so delivered, or so that the Definitive
Memorandum will comply with law, and the Company and the Guarantors will furnish
to the Initial Purchasers such number of copies thereof as they reasonably may
request.
(e) The Company and the Guarantors will cooperate with the Initial
Purchasers and their counsel in connection with the registration or
qualification of the Units, the Notes, the Guarantees, the Warrants and the
Warrant Shares under the securities or "Blue Sky" laws of such jurisdictions as
they may request, will continue such qualification in effect for so long as
required to permit the continuance of sales of and dealings in those securities
within such jurisdictions to complete the resale by them of all of the Units as
specified in Section 3 hereof, and will file such consents to service of process
or other documents as may be necessary in order to effect such registration or
qualification; provided, however, that in connection therewith neither the
Company nor the Guarantors shall be required to qualify as a foreign corporation
or broker-dealer or to file any general consent to service of process in any
jurisdiction in which it is not already so qualified or subject.
(f) So long as any of the Units, the Notes, the Guarantees, the
Warrants and the Warrant Shares are outstanding but in any event for a period of
not more than five years from the date hereof, the Company and the Guarantors
will furnish to the Initial Purchasers as soon as available a copy of each
report mailed by the Company and the Guarantors to holders of Common Stock of
the Company and the Guarantors or filed by the Company and the Guarantors with
the Commission, whether such report or filing is required by the Indenture or
otherwise, and such other publicly available information concerning the Company
and the Guarantors as the Initial Purchasers reasonably may request.
(g) So long as and at any time that any of the Units, the Notes, the
Guarantees, the Warrants and the Warrant Shares are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act and the Company (or the Guarantors, if applicable) is not subject
to Section 13 or 15(d) of the Exchange Act, the Company and the Guarantors, upon
request of any holder of any of the Units, the Notes, the Guarantees, the
Warrants and the Warrant Shares will furnish to such holder, and to any
prospective purchaser or purchasers of any of the Units, the Notes, the
Guarantees, the Warrants and the Warrant Shares,
-19-
designated by such holder, information satisfying the requirements of subsection
(d)(4)(i) of Rule 144A under the Securities Act.
(h) The Company and the Guarantors will use their best efforts, and
will cooperate with the Initial Purchasers, to cause the Units, Notes and
Warrants to be eligible for inclusion in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market of the National Association
of Securities Dealers, Inc. ("NASD").
(i) The Company and the Guarantors will not, and will not authorize or
knowingly permit any person acting on their behalf to, offer to sell or solicit
offers to buy any of the Units, the Notes, the Guarantees, the Warrants or the
Warrant Shares by means of any form of general solicitation or general
advertising within the meaning of Section 502(c) under Regulation D under the
Securities Act or in any manner involving a public offering or distribution of
the Units, the Notes, the Guarantees, the Warrants or the Warrant Shares within
the meaning of the Securities Act.
(j) The Company and the Guarantors shall not take any action or omit
to take any action, which taking or omission, as the case may be, would result
in the Company and the Guarantors, or any of them, becoming an "investment
company" or a company controlled by an "investment company" within the meaning
of, or require any or all of the Company and the Guarantors to register as an
"investment company" under, the Investment Company Act.
(k) Whether or not the transaction contemplated by this Agreement is
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company and the Guarantors hereunder, including in connection with: (i)
the preparation, printing, filing and distribution of the Offering Memorandum
(including, without limitation, financial statements) and all amendments and
supplements thereto required pursuant hereto, (ii) the preparation (including,
without limitation, duplication costs) and delivery of all preliminary and final
Blue Sky Memoranda and all other agreements, memoranda, correspondence and all
other documents prepared and delivered in connection herewith and with resales
by the Initial Purchasers (other than the cost of preparation of this Agreement
and the Registration Rights Agreement), (iii) the issuance, transfer and
delivery of the Units, the Notes, the Guarantees, the Warrants and the Warrant
Shares to the Initial Purchasers, (iv) the qualification or registration of the
Units, the Notes, the Guarantees, the Warrants and the Warrant Shares for offer
and sale under the securities or Blue Sky laws of the several states (including,
without limitation, the cost of printing and mailing a preliminary and final
Blue Sky Memorandum and the reasonable fees and disbursements of counsel for the
Initial Purchasers relating thereto), (v) furnishing such copies of the Offering
Memorandum, and all amendments and supplements thereto, as may be requested for
use in connection with resales by the Initial Purchasers, (vi) the preparation
of certificates for the Units, the Notes, the Guarantees, the Warrants and the
Warrant Shares (including, without limitation, printing and engraving thereof),
(vii) the fees, disbursements and expenses of the Company's and the Guarantors's
counsel and accountants, (viii) all fees and expenses (including fees and
expenses of counsel) of the Company and the Guarantors in connection with the
-20-
approval of the Notes by DTC for "book entry" transfer, (ix) rating the Notes by
the rating agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel, (xi) the reasonable fees and expenses of the Warrant Agent and its
counsel, (xii) the performance by the Company and the Guarantors of their other
obligations under this Agreement, the Registration Rights Agreement, the
Indenture, the Notes, the Warrant Agreement and the Warrants and the
consummation of the transactions contemplated hereby and thereby and (xiii)
"road show" travel and other expenses incurred in connection with the marketing
and sale of the Units, the Notes, the Guarantees, the Warrants and the Warrant
Shares; provided that, except as provided in this Section 4(k) and in Section
-------- ----
8(c), the Initial Purchasers shall pay their own costs and expenses, including
the costs and expenses of their counsel.
(l) The Company and the Guarantors will apply the net proceeds from
the sale of the Units as set forth under the caption "Use of Proceeds" in the
Definitive Memorandum.
(m) The Company and the Guarantors will not (and will direct their
affiliates not to) take, directly or indirectly, any action that is designed, or
might reasonably be expected, to cause or result in the stabilization or
manipulation of the price of any security of the Company and the Guarantors to
facilitate the sale or resale of the Units.
(n) During the period beginning from the date hereof and continuing to
and including the date which is 180 days after the Closing Date, neither the
Company nor any affiliate thereof shall sell, offer for sale, solicit offers to
buy or otherwise negotiate in respect of the sale of any "security" (as defined
in Section 2(1) of the Securities Act) of the same or a similar class as the
Units, the Notes, the Guarantees, the Warrants and the Warrant Shares, other
than as contemplated by the Registration Rights Agreement.
(o) The Company and the Guarantors will use their reasonable best
efforts to do and perform all things required or necessary to be done and
performed under this Agreement by them prior to the Closing Date and to satisfy
all conditions precedent to the delivery of the Units.
(p) The Company will not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Units, the Notes, the
Guarantees, the Warrants and the Warrant Shares, in a manner that would require
the registration under the Securities Act of the sale to the Initial Purchasers
or the resale by the Initial Purchasers to the Qualified Institutional Buyers or
the Accredited Investors of the Units, the Notes, the Guarantees, the Warrants
and the Warrant Shares or to take any action that would result in the resales by
the Initial Purchasers not being exempt from registration under the Securities
Act.
(q) To comply with all of their agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representations letter of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
-21-
(r) Prior to the Closing Date, to furnish to the Initial Purchasers,
as soon as they have been prepared in the ordinary course by the Company and the
Guarantors, copies of any unaudited interim financial statements for any period
subsequent to the periods covered by the financial statements appearing in the
Offering Memorandum.
5. Indemnification
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Initial Purchaser, its directors, officers and
employees and each person, if any, who controls such Initial Purchaser, now or
hereafter, and their directors, officers and employees within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (the Initial
Purchasers and each such person being sometimes hereafter referred to as an
"Indemnified Person"), from and against any and all losses, claims, damages,
awards, liabilities and judgments (collectively, "Losses") arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Offering Memorandum or in any amendments thereof or supplements
thereto (including, without limitation, the financial statements, accounting and
statistical data included therein and the related notes thereto), or by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
Losses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission based upon the information relating to such
Initial Purchaser furnished by it to the Company and the Guarantors expressly
for use therein and used in conformity therewith. This indemnity is and will be
in addition to any liability which the Company and the Guarantors otherwise may
have.
(b) In case any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Person, or notice of any such claim is received, with respect to which indemnity
may be sought against the Company or the Guarantors, such Indemnified Person
shall promptly notify the Company and the Guarantors in writing and the Company
and the Guarantors shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person and the payment of
all reasonable fees and expenses of such defense; provided that the failure by
--------
any such Indemnified Person to so notify the Company and the Guarantors shall
not relieve the Company and the Guarantors of their indemnification obligations
under Sections 5(a) and (b) hereof, except to the extent that the Company and
the Guarantors are materially prejudiced or forfeit substantive rights and
defenses by reason of such failure. Such Indemnified Person shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
has been authorized in writing by the Company and the Guarantors, (ii) the
Company and the Guarantors have failed promptly to assume the defense and employ
counsel (reasonably satisfactory to such Indemnified Person), or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnified Person and the Company or the Guarantors, and such Indemnified
Person shall have been advised by such counsel that there may be one or more
legal defenses available to such
-22-
Indemnified Person that are different from or additional to those available to
the Company or the Guarantors, as the case may be, and in the reasonable
judgment of such counsel it is advisable for such Indemnified Party to employ
separate counsel (in all of which cases, if such Indemnified Person notifies the
Company and the Guarantors in writing that it elects to employ separate counsel
at the expense of the Company and the Guarantors, the Company and the Guarantors
shall not have the right to assume the defense of such action on behalf such
Indemnified Person; it being understood, however, that the Company and the
Guarantors shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for such Indemnified Person and any other Indemnified Persons,
which firm shall be designated in writing by such Indemnified Persons (which
shall be reasonably satisfactory to the Company and the Guarantors) and that all
such fees and expenses shall be reimbursed promptly as they are billed. The
Company and the Guarantors shall not be liable for any settlement of any such
action or proceeding effected without their written consent (not to be
unreasonably withheld) and if settled with their written consent or if there is
a final, unappealable judgment for the plaintiff, the Company and the Guarantors
agree to jointly and severally indemnify and hold harmless such Indemnified
Persons from and against any loss or liability by reason of such settlement or
judgment. Without limiting the generality of the foregoing, the Company and the
Guarantors shall not effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or has been threatened
to be made a party where indemnity could have been sought hereunder by such
Indemnified Person unless the Company and the Guarantors shall have obtained the
prior written consent of such Indemnified Person (not to be unreasonably
withheld); provided, however, that the Company and the Guarantors may effect
such a settlement without the consent of such Indemnified Person if such
settlement includes an unconditional release of such Indemnified Person from all
liability for claims that are the subject matter of such proceeding or the
Company and the Guarantors indemnify such Indemnified Person in writing and post
a bond for an amount equal to the maximum liability for all such claims as
contemplated above or provide other security for such indemnity as shall be
reasonably satisfactory to such Indemnified Person.
(c) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Guarantors, their directors,
officers and employees and each person, if any, controlling the Company and the
Guarantors within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all Losses to the same extent as
the foregoing indemnity from the Company and the Guarantors to the Initial
Purchasers but only with respect to information relating to such Initial
Purchaser furnished in writing by such Initial Purchaser expressly for use in
the Offering Memorandum or any amendment thereof or supplement thereto and used
in conformity therewith; provided, however, that in no case shall any Initial
Purchaser be liable or responsible for any amount in excess of the discounts and
commissions received by the Initial Purchaser in connection with the sale of the
Notes, as set forth on the cover page of the Offering Memorandum. In case any
action or proceeding shall be brought against the Company and the Guarantors,
any of their directors, any
-23-
of their officers or any such controlling person based on the Offering
Memorandum or any amendment thereof or supplement thereto and in respect of
which indemnity may be sought against an Initial Purchaser, such Initial
Purchaser shall have the same rights and duties as are given to the Company and
the Guarantors by Section 5(b) hereof (except that if the Company and the
Guarantors shall have assumed the defense thereof, such Initial Purchaser shall
not be required to do so, and in such case such Initial Purchaser may employ
separate counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at such Initial Purchaser's expense), and the
Company and the Guarantors, their directors, officers and employees and each
such controlling person shall have the same rights and duties as are given to
such Initial Purchaser by Section 5(b) hereof.
(d) If the indemnification provided for in this Section 5 is
unavailable to or otherwise insufficient to hold harmless an indemnified party
in respect of any Losses (other than by reason of exceptions provided in such
Section), then the party who would otherwise be responsible for such
indemnification, in lieu of, or in addition to, indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such Losses (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other hand from the offering of the Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party and the indemnified party in connection with the statements or omissions
which resulted in such Losses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Guarantors
and an Initial Purchaser shall be deemed to be in the same proportion as the
total net proceeds from the Offering (before deducting expenses) received by the
Company and the Guarantors, and the total discounts and commissions received by
such Initial Purchasers, bear to the total price of the Notes to investors, in
each case as set forth in the table on the cover page of the Definitive
Memorandum. The relative fault of the Company and the Guarantors and such
Initial Purchaser shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Guarantors or such Initial Purchaser and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 5(d)
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of Losses shall be deemed to include, subject to the
limitations set forth above, any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 5,
each Initial Purchaser shall not be required to contribute any amount in excess
of the amount of the total discount applicable to the Units
-24-
purchased by such Initial Purchaser. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5(d), each director,
officer and employee of an Initial Purchaser or the Company and the Guarantors,
and each person, if any, who controls an Initial Purchaser or the Company and
the Guarantors within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, shall have the same rights to contribution as such
Initial Purchaser or the Company and the Guarantors, as the case may be.
6. Conditions of the Initial Purchasers' Obligations
The Initial Purchasers' obligations to purchase and pay for the Units shall
be subject to (i) the accuracy of the representations and warranties of the
Company and the Guarantors herein contained as of the date hereof and as of the
Closing Date, (ii) the absence in any certificates, opinions, written statements
or letters furnished pursuant to this Section 6 to the Initial Purchasers or to
their counsel, of any qualification or limitation not previously approved by the
Initial Purchasers, (iii) the performance by the Company and the Guarantors of
their obligations hereunder required to be performed on or prior to the Closing
Date, and (iv) the following additional conditions:
(a) Since the date of the latest balance sheet included in the
Definitive Memorandum: (i) there shall not have been any material adverse
change, or any development involving a prospective material adverse change, in
the capital stock or in the long-term debt of the Company or the Guarantors from
that set forth in or contemplated by the Definitive Memorandum, (ii) the Company
shall have no liability or obligation, direct or contingent, that is material to
the Company and the Guarantors, taken as a whole, other than those reflected in
the Definitive Memorandum; and (iii) there shall not have been any material
adverse change, or any development involving a prospective material adverse
change, in the financial condition, business, properties, prospects, oil and gas
reserves, net worth or results of operations of the Company and the Guarantors
taken as a whole, except, in each case, as expressly described in the Definitive
Memorandum.
(b) The representations and warranties made by the Company and the
Guarantors herein shall be true and correct on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of the Closing Date; and the Company and the Guarantors shall have
complied in all material respects with all agreements hereunder required to be
performed by the Company and the Guarantors.
(c) As to each Initial Purchaser, the purchase of and payment for the
Units to be purchased by such Initial Purchaser hereunder shall not be
prohibited or enjoined (temporarily or permanently) by any applicable law or
governmental regulation, order or other restriction.
(d) The Definitive Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York time,
on the day
-25-
following the date of this Agreement or at such later date and time as to which
the Initial Purchasers may agree, and no stop order suspending the qualification
or exemption from qualification of the Notes in any jurisdiction referred to in
Section 4(e) shall have been issued and no proceeding for that purpose shall
have been commenced or shall be pending or threatened.
(e) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Notes; no
action, suit or proceeding shall have been commenced and be pending against or
affecting or, to the best knowledge of the Company and the Guarantors,
threatened against, the Company, the Guarantors or any of their respective
subsidiaries before any court or arbitrator or any governmental body, agency or
official that, if adversely determined, could reasonably be expected to result
in a Material Adverse Effect; and no stop order shall have been issued
preventing the use of the Offering Memorandum, or any amendment or supplement
thereto, or which could reasonably by expected to have a Material Adverse
Effect, on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole.
(f) On the Closing Date, the Initial Purchasers shall have received
the opinions of each of William S. Clarke, P.A. and Pray, Walker, Jackman,
Williamson & Marlar, counsel to the Company, dated the Closing Date, addressed
to the Initial Purchasers, and in each in form and scope reasonably satisfactory
to the Initial Purchasers' counsel, substantially as set forth in Exhibits C-1
and C-2 hereto, respectively.
(g) On the Closing Date, the Initial Purchasers shall have received a
certificate, dated the Closing Date, signed by each of the Chairman of the Board
and Chief Financial Officer or the President and the Chief Financial Officer of
the Company and the Guarantors, and such other certificates of executive
officers as the Initial Purchasers may specify confirming the matters set forth
in paragraphs (a) and (b) of this Section 6.
(h) On the Closing Date, the Initial Purchasers shall have received
from Andrews & Kurth l.l.p., an opinion, dated the Closing Date, addressed to
the Initial Purchasers, with respect to the Company, the Guarantors, the
Offering Memorandum, the offer, sale and resale of the Units and other related
matters as the Initial Purchasers reasonably may require, and the Company shall
have furnished to such firm such documents as they may reasonably request for
the purpose of enabling them to pass upon such matters.
(i) Concurrently with the execution and delivery of this Agreement,
the Initial Purchasers shall have received from Coopers & Lybrand L.L.P., and on
the Closing Date, the Initial Purchasers shall have received from Coopers &
Lybrand L.L.P., a letter addressed to the Initial Purchasers, dated the date of
its delivery, substantially in the form and to the effect and with respect to
such matters as shall have been previously agreed upon by the Initial
Purchasers.
(j) Concurrently with the execution and delivery of this Agreement,
the Initial
-26-
Purchasers shall have received from LKA, and on the Closing Date, the Initial
Purchasers shall have received from LKA, a letter addressed to the Initial
Purchasers, dated the date of its delivery, substantially in the form and to the
effect and with respect to such matters as shall have been previously agreed
upon by the Initial Purchasers.
(k) On the Closing Date, the Company and the Guarantors shall have
executed and delivered the Registration Rights Agreement and the Indenture; and
the Company shall have executed the Warrant Agreement.
(l) On or prior to the Closing Date, the Amended Credit Facility shall
have been executed and delivered by the Company and the banks executing same,
and providing for an available borrowings in an amount of at least $30 million
after the Closing.
(m) Simultaneously with the Closing, the HS Acquisition shall have
been consummated as described in the Offering Memorandum.
(n) On the Closing Date, the Notes shall be rated at least B3 by
Moody's and B by S&P, and the Company shall have delivered to the Initial
Purchasers a letter dated the Closing Date, from each such rating agency, or
other evidence satisfactory to the Initial Purchasers, confirming that the Notes
have such ratings; and since the date of this Agreement, there shall not have
occurred a downgrading in the rating assigned to the Notes or any of the
Company's other securities by any nationally recognized securities rating
agency, and no such securities rating agency shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of the Notes or any of the Company's other securities.
(o) Prior to the Closing Date, the Company shall have furnished to the
Initial Purchasers such further information, certificates and documents as the
Initial Purchasers reasonably may request in writing.
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Initial Purchasers or
to their counsel pursuant to this Section 6 shall not be reasonably satisfactory
in form and scope in all material respects to the Initial Purchasers and to
their counsel, all of the Initial Purchasers' obligations hereunder may be
canceled by them at, or at any time prior to, the Closing Date. Notice of such
cancellation shall be given to the Company and the Guarantors in writing or by
telephone, telecopy, telex or telegraph, confirmed in writing.
7. Effective Date of Agreement of Termination
(a) This Agreement shall become effective upon its execution by all
parties hereto.
(b) This Agreement may be terminated in the absolute discretion of the
Initial Purchasers at any time prior to the Closing Date by the Initial
Purchasers upon notice to the
-27-
Company and the Guarantors if (a) any of the following has occurred: (i) since
the respective dates as of which information is provided in the Definitive
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries, taken as a whole, whether or not arising in the
ordinary course of business, which would, in the Initial Purchasers' reasonable
judgment, make it impracticable to market the Notes on the terms and in the
manner contemplated in the Offering Memorandum; (ii) if on or prior to such
date, any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Initial Purchasers will in the future
materially disrupt, the securities markets; (iii) if there has occurred any new
outbreak or material escalation of hostilities or other calamity or crisis the
effect of which on the financial markets of the United States is such as to make
it, in the judgment of the Initial Purchasers, inadvisable to proceed with the
offering; (iv) if there shall be such a material adverse change in general
financial, political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as to make it,
in the judgment of the Initial Purchasers, inadvisable or impracticable to
market the Notes; (v) if trading in the Common Stock of the Company has been
suspended by the Commission or trading generally on the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. or the Nasdaq Stock Market has been
suspended or limited, or minimum or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities have been
required, by said exchanges or by order of the Commission, the National
Association of Securities Dealers, Inc., or any other governmental or regulatory
authority; (vi) if a banking moratorium has been declared by any state or
Federal authority; or (vii) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs that in
the Initial Purchasers' reasonable judgment could have a material adverse effect
on the financial markets in the United States; or (b) at or before the Closing
Date, that any of the conditions specified in Section 6 shall not have been
fulfilled when and as required by this Agreement.
(c) If this Agreement is terminated pursuant to any of its
provisions, the Company shall not be under any liability to any Initial
Purchaser, and no Initial Purchaser shall be under any liability to the Company,
except that (y) if this Agreement is terminated by the Initial Purchasers
because of any failure, refusal or inability on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, the
Company will reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and disbursements of their counsel) incurred by
them in connection with the proposed purchase and sale of the Units or in
contemplation of performing their obligations hereunder and (z) no Initial
Purchaser who shall have failed or refused to purchase the Units agreed to be
purchased by it under this Agreement, without some reason sufficient hereunder
to justify cancellation or termination of its obligations under this Agreement,
shall be relieved of liability to the Company or to the other Initial Purchasers
for damages occasioned by its failure or refusal.
8. Miscellaneous
(a) Notices given pursuant to any provision of this Agreement shall
be given
-28-
by facsimile transmission or by notice in writing hand delivered or by certified
mail, postage prepaid, return receipt requested. All such notices shall be sent
to the facsimile transmission number or address (as the case may be) as follows:
(a) if to the Company or any Guarantor, to:
Gothic Energy Corporation
5727 South Lewis Avenue, Suite 700
Tulsa, Oklahoma 74105-7148
Attention: President
Fax Number: (918) 749-5882
with copies to:
William S. Clarke, P.A.
457 North Harrison Street, Suite 103
Princeton, New Jersey 08540
Fax Number: (609) 921-3933
Pray, Walker, Jackman Williamson & Marlar
100 West 5th Street
Oneok Plaza
Tulsa, Oklahoma 74103-4218
Attention: C. Brett Crane
Fax Number: (918) 581-5599
(b) if to the Initial Purchasers, to:
Oppenheimer & Co., Inc.
1600 Smith, Suite 3100
Houston, Texas 77002
Attention: William H. Bauch
Fax Number: (713) 650-7670
Banc One Capital Corporation
300 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention; Earle J. Bensing
Fax Number: (214) 979-4355
and
-29-
Paribas Corporation
787 Seventh Avenue, 30th Floor
New York, New York 10019
Attention: Robert Howard
Fax Number: (212) 841-3187
with a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: James M. Prince, Esq.
Fax Number: (713) 220-4285
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the
Guarantors and the Initial Purchasers set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Units, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the officers or
directors of any of the Company and the Guarantors or any controlling person of
the Company and the Guarantors and (ii) acceptance of the Notes and payment for
them hereunder. The respective agreements, indemnities and other statements set
forth in Sections 4(k) and 5 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
(c) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company and the
Guarantors, their respective directors and officers, the Initial Purchasers, any
controlling persons referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include a purchaser of any of the
Units from the Initial Purchasers merely because of such purchase.
Notwithstanding the foregoing it is expressly understood and agreed that each
purchaser of the Units from the Initial Purchasers is intended to be a
beneficiary of the Company's and the Guarantors's covenants contained in the
Registration Rights Agreement to the same extent as if the Units were sold and
those covenants were made directly to such purchaser by the Company and the
Guarantors, and each such purchaser shall have the right to take action against
either of the Company and the Guarantors to enforce, and obtain monetary
recovery for damages resulting from any breach of, those covenants.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to instruments made and
performed wholly in such state and without regard to the choice of law
provisions of such state.
(e) This Agreement may be signed in counterparts, all of which taken
together shall constitute but one and the same original instrument.
Please confirm that the foregoing correctly sets forth the mutual agreement
and
-30-
understanding between the Company, the Guarantors and the Initial Purchasers as
to the subject matter herein set forth.
-31-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above:
Very truly yours,
GOTHIC ENERGY CORPORATION
By:
------------------------------------
Michael K. Paulk
President
Guarantors:
GOTHIC GAS CORPORATION
By:
------------------------------------
Michael K. Paulk
President
GOTHIC ENERGY OF TEXAS,
INC.
By:
------------------------------------
Michael K. Paulk
President
Accepted and agreed to as of
the first date written above
OPPENHEIMER & CO. INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BANC ONE CAPITAL CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PARIBAS CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SCHEDULE I
Number of Units..........
Oppenheimer & Co., Inc........................................ 82,500
Banc One Capital Corporation.................................. 12,500
Paribas Corporation........................................... 5,000
-------
Total.......................................... 100,000
EXHIBIT A
[Form of Registration Rights Agreement]
A-1
EXHIBIT B
GOTHIC ENERGY CORPORATION
CERTAIN EQUITY INTERESTS
1. Warrants held by Norse Exploration, Inc. and Norse Pipeline, Inc. to
purchase 200,000 shares of Common Stock at $2.50 per share expiring February 18,
1999.
A-2
EXHIBIT C-1
FORM OF OPINION OF WILLIAM S. CLARKE, P.C.
(i) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Offering Memorandum in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to the Purchase Agreement or pursuant to reservations, agreements
or employee benefit plans referred to in the Offering Memorandum or pursuant to
the exercise of convertible securities or options referred to in the Offering
Memorandum); the shares of issued and outstanding capital stock of the Company
have been duly authorized and validly issued and are fully paid and non-
assessable; and none of the outstanding shares of capital stock of the Company
was issued in violation of the preemptive or other similar rights of any
securityholder of the Company; all of the issued and outstanding capital stock
of each Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and, to the best of our knowledge, is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
(ii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(iii) The Indenture has been duly authorized, executed and delivered
by each of the Company and the Guarantors and assuming the due authorization,
execution and delivery thereof by the Trustee, the Indenture constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(iv) The Guarantees are in the form contemplated in the Indenture,
and assuming the due authorization, execution and delivery of the Indenture by
the Trustee and the notation of the Guarantees on the Unit certificates,
including the Notes by the Guarantors and the due authentication of the Unit
certificates, including the Notes and the Guarantee notation thereon by the
Trustee, each of the Guarantees have been duly authorized, executed and
delivered by each of the respective Guarantors and (assuming the due
authorization, the respective Guarantor, enforceable against such Guarantor in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
EXHIBIT C-1
(v) The Unit certificates are in the form contemplated by the
Indenture, have been duly authorized by the Company and, assuming that the Unit
certificates have been duly authenticated by the Trustee in the manner described
in its certificate delivered to you today (which fact such counsel need not
determine by an inspection of the Notes), the Notes evidenced by the Unit
certificates have been duly executed, issued and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and the holders
of the Notes will be entitled to the benefits of the Indenture.
(vi) The Units, the Notes, the Guarantees and the Indenture conform
as to legal matters in all material respects to the descriptions thereof
contained in the Offering Memorandum and the statements set forth under the
headings "Description of the Units" and "Description of Notes" in the Offering
Memorandum, insofar as such statements purport to summarize certain provisions
of the Notes and the Indenture, provide a fair summary of such provisions.
(vii) The Warrants have been duly and validly authorized by all
necessary corporate action, and when the Unit certificates have been duly
issued, sold and delivered by the Company in the manner contemplated in the
Indenture, the Unit certificates will evidence ownership of Warrants that will
constitute valid and binding obligations of the Company entitled to the benefits
of the Warrant Agreement and enforceable against the Company in accordance with
their terms, except insofar as the enforcement thereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws now or hereafter in effect relating to creditors'
rights and remedies generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). The Warrants conform in all material respects
to the description thereof set forth in the Definitive Memorandum.
(viii) The Warrant Agreement has been duly and validly authorized,
executed and delivered by the Company and, upon execution and delivery by the
Warrant Agent thereunder, will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
insofar as the enforcement thereof may be subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity). The Warrant Agreement conforms in all material respects to the
description thereof set forth in the Definitive Memorandum.
EXHIBIT C-1
(ix) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and each of the Guarantors (assuming the
due authorization, execution and delivery thereof by parties thereto other than
the Company and the Guarantors) and constitutes a valid and binding agreement of
the Company and each of the Guarantors, enforceable against the Company and each
of the Guarantors in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(x) Assuming the accuracy and completeness of the representations
and warranties and compliance with the agreements contained herein, no
registration of the Units, the Notes or the Warrants under the Securities Act is
required for the offer and sale by the Initial Purchaser of the Units, the Notes
or the Warrants in the manner contemplated by this Agreement.
(xi) To the best of my knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(xii) The information in the Offering Memorandum under "Description
of the Notes," "Description of the Units," "Description of the Warrants" and
"Description of Capital Stock," to the extent that they constitute matters of
law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
(xiii) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of my knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described or referred to in the
Offering Memorandum that are not described therein if the Offering Memorandum
were filed as a prospectus constituting a part of a registration statement of
the Company under the 1933 Act, and the descriptions thereof or references
thereto are correct in all material respects.
(xiv) To the best of our knowledge, no default by the Company or any
EXHIBIT C-1
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Offering Memorandum.
(xv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the Securities Act
and the regulations promulgated thereunder, which have been obtained, or as may
be required under the securities or blue sky laws of the various states) is
necessary or required in connection with the due authorization, execution and
delivery of the Purchase Agreement or the due execution, delivery or performance
of the Indenture, the Registration Rights Agreement, and the Warrant Agreement
by the Company and each of the Guarantors or for the offering, issuance, sale
or delivery of the Units.
(xvi) The execution, delivery and performance of the Purchase
Agreement, the Registration Rights Agreement, the Indenture, the Warrant
Agreement and the Warrants and the consummation of the transactions contemplated
thereby (including the issuance and sale of the Units and the use of the
proceeds from the sale of the Units as described in the Offering Memorandum
under the caption "Use Of Proceeds") and compliance by the Company and each of
the Guarantors with their obligations under the Purchase Agreement, the Notes,
the Guarantees, the Warrant Agreement, the Warrants and the Registration Rights
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default under
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to me, to which the Company or
any subsidiary is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, or any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
(xvii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
Nothing has come to my attention that would lead me to believe that the
Offering Memorandum or any amendment or supplement thereto (except for financial
statements and schedules, proved reserve information and other financial and
reserve data included therein or omitted therefrom, as to which we need make no
statement) contained an untrue statement of a
EXHIBIT C-1
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the Offering
Memorandum or any amendment or supplement thereto (except for financial
statements and schedules, proved reserve information and other financial data
included or incorporated by reference therein or omitted therefrom, as to which
I need make no statement), at the time the Offering Memorandum was issued, at
the time any such amended or supplemented Offering Memorandum was issued or at
the time of Closing, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely (i) as to matters of fact
(but not as to legal conclusions), to the extent deemed proper, on certificates
of responsible officers of the Company and public officials and (ii) as to
matters of Oklahoma law, on the opinion of Pray, Walker, Jackman, Williamson &
Marlar, issued pursuant to this Agreement. Such opinion shall not state that it
is to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
EXHIBIT C-2
FORM OF OPINION OF
PRAY, WALKER, JACKMAN, WILLIAMSON & MARLAR
(i) Each of the Company and the Guarantors has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Oklahoma.
(ii) Each of the Company and the Guarantors has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and to enter into and perform its
obligations under the Purchase Agreement.
(iii) Each of the Company and the Guarantors is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect.
(iv) The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and non-
assessable; and none of the outstanding shares of capital stock of the Company
was issued in violation of the preemptive or other similar rights under the
certificate of incorporation or bylaws of the Company.
(v) The Warrant Shares have been duly authorized and reserved for
issuance by the Company, and when issued, sold and delivered by the Company
pursuant to the Warrant Agreement against payment therefor, will be validly
issued, fully paid and non-assessable and will not have been issued in violation
of or subject to any preemptive rights and will conform to the description of
the Common Stock contained in the Definitive Memorandum.
(vi) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) In a properly presented action or proceeding arising out of or
related to the Indenture in any court in the State of Oklahoma or in any federal
court sitting in the State of Oklahoma, such court should recognize, honor and
give effect to the choice of the substantive law of the State of New York to
govern the Indenture. We are unaware of any Oklahoma court
decisions finding terms and provisions similar to those set forth in the
Indenture to be offensive to the public policy of the State of Oklahoma, but we
have not reviewed the laws of the State of New York to determine if any
particular law therein would be offensive to the public policy of the State of
Oklahoma.
(viii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(ix) The information in the Offering Memorandum under "Business and
Properties --Regulation" to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
(x) To the best of our knowledge, there are no statutes or
regulations that would required to be described in the Offering Memorandum that
are not described therein if the Offering Memorandum were filed as a prospectus
constituting a part of a registration statement of the Company under the 1933
Act.
(xi) All descriptions in the Offering Memorandum of contracts and
other documents under "Business and Properties --Regulation" to which the
Company or its subsidiaries are a party are accurate in all material respects;
to the best of our knowledge, there are no franchises, contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments that would be
required to be described or referred to in the Offering Memorandum that are not
described therein if the Offering Memorandum were filed as a prospectus
constituting a part of a registration statement of the Company under the 1933
Act, and the descriptions thereof or references thereto are correct in all
material respects.
(xii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Offering Memorandum.
(xiii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the Securities Act
and the regulations promulgated thereunder, which have been obtained, or as may
be required under the securities or blue sky laws of the
various states) is necessary or required in connection with the due
authorization, execution and delivery of the Purchase Agreement or the due
execution, delivery or performance of the Indenture and the Registration Rights
Agreement by the Company and each of the Guarantors or the due execution,
delivery or performance of the Warrant Agreement by the Company or for the
offering, issuance, sale or delivery of the Units.
(xiv) The execution, delivery and performance of the Purchase
Agreement, the Indenture and the Notes and the consummation of the transactions
contemplated in the Purchase Agreement, the Warrant Agreement and the
Registration Rights Agreement (including the issuance and sale of the Notes and
the use of the proceeds from the sale of the Notes as described in the Offering
Memorandum under the caption "Use Of Proceeds") and compliance by the Company
and each of the Guarantors with their obligations under the Purchase Agreement,
the Notes, the Warrant Agreement, the Warrants and the Registration Rights
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default under
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to us, to which the Company or
any subsidiary is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, or any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
Nothing has come to our attention that would lead us to believe that the
Offering Memorandum or any amendment or supplement thereto (except for financial
statements and schedules, proved reserve information and other financial and
reserve data included therein or omitted therefrom, as to which we need make no
statement) 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 therein not misleading or that the Offering Memorandum or any
amendment or supplement thereto (except for financial statements and schedules,
proved reserve information and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no statement),
at the time the Offering Memorandum was issued, at the time any such amended or
supplemented Offering Memorandum was issued or at the time of Closing, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the
Company and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).