Exhibit 1.1
$325,000,000
CHAPARRAL ENERGY, INC.
8 1 / 2
% Senior Notes due
2015
Purchase Agreement
November 22, 2005
J.P. Morgan Securities
Inc.
As Representative of the
several Initial Purchasers listed
in Schedule 1 hereto
c/o J.P. Morgan Securities Inc.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
Chaparral Energy, Inc., a Delaware
corporation (the “ Company ”), proposes to issue
and sell to the several Initial Purchasers listed in Schedule 1
hereto (the “ Initial Purchasers ”), for whom
you are acting as representative (the “ Representative
”), $325,000,000 principal amount of its 8
1
/ 2 % Senior Notes due 2015 (the “
Securities ”). The Securities will be issued pursuant
to an Indenture to be dated as of December 1, 2005 (the
“ Indenture ”) among the Company, the guarantors
listed in Schedule 2 hereto (the “ Guarantors
”) and Wells Fargo Bank, National Association, as trustee
(the “ Trustee ”) and will be guaranteed on an
unsecured senior basis by each of the Guarantors (the “
Guarantees ”).
The Securities will be sold to the
Initial Purchasers in a transaction not registered under the
Securities Act of 1933, as amended (the “ Securities
Act ”), in reliance upon an exemption therefrom. The
Company has prepared a preliminary offering memorandum dated
November 11, 2005 (the “ Preliminary Offering
Memorandum ”) and will prepare an offering memorandum
dated the date hereof (the “ Offering Memorandum
”) setting forth information concerning the Company and the
Securities. Copies of the Preliminary Offering Memorandum have
been, and copies of the Offering Memorandum will be, delivered by
the Company to the Initial Purchasers pursuant to the terms of this
Agreement. The Company hereby confirms that it has authorized the
use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in the manner contemplated by
this Agreement. Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Offering
Memorandum.
Holders of the Securities (including
the Initial Purchasers and their direct and indirect transferees)
will be entitled to the benefits of a Registration Rights
Agreement, to be dated the Closing Date (as defined below) and
substantially in the form attached hereto as Exhibit A (the “
Registration Rights Agreement ”), pursuant to which
the Company and the Guarantors will agree to file one or more
registration statements with the Securities and Exchange Commission
(the “ Commission ”) providing for the
registration under the Securities Act of the Securities or the
Exchange Securities referred to (and as defined) in the
Registration Rights Agreement.
The Company hereby confirms its
agreement with the several Initial Purchasers concerning the
purchase and resale of the Securities, as follows:
1. Purchase and Resale of the
Securities . (a) The Company agrees to issue and sell the
Securities to the several Initial Purchasers as provided in this
Agreement, and each Initial Purchaser, agrees, severally and not
jointly, to purchase from the Company, in each case, on the basis
of the representations, warranties and agreements set forth herein
and subject to the conditions set forth herein, the respective
principal amount of Securities set forth opposite such Initial
Purchaser’s name in Schedule 1 hereto at a price equal to
97.500% of the principal amount thereof plus accrued interest, if
any, from December 1, 2005 to the Closing Date. The Company
will not be obligated to deliver any of the Securities except upon
payment for all the Securities to be purchased as provided
herein.
(b) The Company understands that the
Initial Purchasers intend to offer the Securities for resale on the
terms set forth in the Offering Memorandum. Each Initial Purchaser,
severally and not jointly, represents, warrants and agrees
that:
(i) it is a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act (a
“ QIB ”) and an accredited investor within the
meaning of Rule 501(a) under the Securities Act;
(ii) neither it nor any Person
acting on its behalf has solicited offers for, or offered or sold,
or will solicit offers for, or offer or sell, the Securities by
means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the
Securities Act (“ Regulation D ”) or in any
manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; and
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(iii) it has not solicited offers
for, or offered or sold, and will not solicit offers for, or offer
or sell, the Securities as part of their initial offering
except:
(A) within the United States to
persons whom it reasonably believes to be QIBs in transactions
pursuant to Rule 144A under the Securities Act (“ Rule
144A ”) and in connection with each such sale, it has
taken or will take reasonable steps to ensure that the purchaser of
the Securities is aware that such sale is being made in reliance on
Rule 144A; or
(B) in accordance with the
restrictions set forth in Annex A hereto.
(c) Each Initial Purchaser
acknowledges and agrees that the Company and, for purposes of the
“no registration” opinions to be delivered to the
Initial Purchasers pursuant to Sections 5(g) and 5(h), Andrews
Kurth LLP as counsel for the Company, and Cahill Gordon &
Reindel LLP
as counsel for the Initial
Purchasers, respectively, may rely upon the accuracy of the
representations and warranties of the Initial Purchasers, and
compliance by the Initial Purchasers with their agreements,
contained in paragraph (b) above (including Annex A hereto),
and each Initial Purchaser hereby consents to such
reliance.
(d) The Company acknowledges and
agrees that the Initial Purchasers may offer and sell Securities to
or through any affiliate of an Initial Purchaser and that any such
affiliate may offer and sell Securities purchased by it to or
through any Initial Purchaser.
(e) The Company acknowledges and
agrees that the Initial Purchasers are acting solely in the
capacity of an arm’s length contractual counterparty to the
Company with respect to the offering of Securities contemplated
hereby (including in connection with determining the terms of the
offering) and not as a financial advisor or a fiduciary to, or an
agent of, the Company or any other person. Additionally, no Initial
Purchaser is advising the Company or any other person as to any
legal, tax, investment, accounting or regulatory matters in any
jurisdiction. The Company shall consult with its own advisors
concerning such matters and shall be responsible for making their
own independent investigation and appraisal of the transactions
contemplated hereby, and the Initial Purchasers shall have no
responsibility or liability to the Company with respect thereto.
Any review by the Initial Purchasers of the Company, the
transactions contemplated hereby or other matters relating to such
transactions will be performed solely for the benefit of the
Initial Purchasers and shall not be on behalf of the
Company.
2. Payment and Delivery .
(a) Payment for and delivery of the Securities will be made at
the offices of Cahill Gordon & Reindel LLP at
10:00 A.M., New York City time, on December 1, 2005, or at
such other time or place on the same or such other date, not later
than the fourth business day thereafter, as the Representative and
the Company may agree upon in writing. The time and date of such
payment and delivery is referred to herein as the “
Closing Date .”
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(b) Payment for the Securities shall
be made by wire transfer in immediately available funds to the
account(s) specified by the Company to the Representative against
delivery to the nominee of The Depository Trust Company (“
DTC ”), for the account of the Initial Purchasers, of
one or more global notes representing the Securities (collectively,
the “ Global Note ”), with any transfer taxes
payable in connection with the sale of the Securities duly paid by
the Company. The Global Note will be made available for inspection
by the Representative not later than 1:00 P.M., New York City time,
on the business day prior to the Closing Date.
3. Representations and Warranties
of the Company and the Guarantors . The Company and the
Guarantors jointly and severally represent and warrant to each
Initial Purchaser that:
(a) Offering Memorandum. The
Preliminary Offering Memorandum, as of its date, did not, and the
Offering Memorandum, as of its date and as of the Closing Date,
will not, contain any untrue statement of a material fact or omit
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; provided that the Company and the
Guarantors make no representation or warranty with respect to any
statements or omissions made in reliance upon and in conformity
with information furnished to the Company in writing by such
Initial Purchaser through the Representative expressly for use in
the Preliminary Offering Memorandum and the Offering
Memorandum.
(b) Financial Statements. The
historical financial statements and the related notes thereto of
the Company and its consolidated subsidiaries included in the
Preliminary Offering Memorandum and the Offering Memorandum present
fairly the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the results of their
operations and the changes in their cash flows for the periods
specified; such financial statements have been prepared in
conformity with generally accepted accounting principles in the
United States applied on a consistent basis throughout the periods
covered thereby; the assumptions used in preparing the pro
forma financial information (including the related notes
thereto) included in the Preliminary Offering Memorandum and the
Offering Memorandum provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or
events described therein, the related pro forma adjustments give
appropriate effect to those assumptions and the pro forma data
therein reflect the proper application of those adjustments to the
corresponding historical financial statement amounts; the other
financial information included in the Preliminary Offering
Memorandum and the Offering Memorandum has been derived from the
accounting records of the Company and its subsidiaries and presents
fairly the information shown thereby; and the “Summary
selected consolidated financial data” and “Selected
consolidated financial data” set forth in the Preliminary
Offering Memorandum and the Offering Memorandum is accurately
presented in all material respects and prepared on a basis
consistent with the audited and unaudited historical consolidated
financial statements from which it has been derived.
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(c) No Material Adverse
Change. Except as disclosed in the Preliminary Offering
Memorandum or the Offering Memorandum, since the date of the most
recent financial statements of the Company included in the
Preliminary Offering Memorandum and the Offering Memorandum,
(i) there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries (other
than borrowings under the Senior Credit Agreement (as defined
below)), or any dividend or distribution of any kind declared, set
aside for payment, paid or made by the Company on any class of
capital stock (other than a quarterly cash dividend of $350,000
paid on October 1, 2005), or any material adverse change, or
any development involving a prospective material adverse change, in
or affecting the business, properties, consolidated financial
position, stockholders’ equity or results of operations of
the Company and its subsidiaries taken as a whole;
(ii) neither the Company nor any of its subsidiaries has
entered into any transaction or agreement other than in the
ordinary course of business; and (iii) neither the Company nor
any of its subsidiaries has sustained any loss or interference
(including any liability or obligation) with its business,
including from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor disturbance or dispute
or any action, order or decree of any court or arbitrator or
governmental or regulatory authority that is material to the
Company and its subsidiaries, taken as a whole, except in the case
of each of clauses (i), (ii) and (iii) as otherwise
disclosed in the Preliminary Offering Memorandum or the Offering
Memorandum.
(d) Organization and Good
Standing. The Company and each of its subsidiaries have been
duly organized and are validly existing and in good standing under
the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each
other jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires
such qualification, and have all power and authority necessary to
own or lease their respective properties and to conduct the
businesses in which they are engaged, except where the failure to
be so qualified or have such power or authority would not,
individually or in the aggregate, have a material adverse effect on
the business, properties, consolidated financial position,
stockholders’ equity or results of operations of the Company
and its subsidiaries taken as a whole or on the performance by the
Company and the Guarantors of their obligations under the
Securities and the Guarantees (a “ Material Adverse
Effect ”). The subsidiaries listed in Schedule 2 to this
Agreement are the only direct or indirect subsidiaries of the
Company other than Oklahoma Ethanol L.L.C., which will not be a
Guarantor. The Company does not own, directly or indirectly, equity
securities of any entity other than its interests in such
subsidiaries.
(e) Capitalization. The
Company has an authorized capitalization as set forth in the
Preliminary Offering Memorandum and the Offering Memorandum under
the heading
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“Capitalization.” The limited
partnership agreements or limited liability company agreements
governing all outstanding limited partnership interests or limited
liability company interests of each Subsidiary Guarantor have been
validly executed and delivered, and all capital contributions
required under such limited partnership agreements or limited
liability company agreements have been paid in full, other than
with respect to Oklahoma Ethanol L.L.C., which will not be a
Guarantor; and, except as otherwise described in the Offering
Memorandum, the limited partnership interests or limited liability
company interests of each subsidiary owned by the Company, directly
or through subsidiaries, are owned directly or indirectly by the
Company, free and clear of any lien, charge, encumbrance or
security interest, except (i) as otherwise described in the
Offering Memorandum, including without limitation for liens under
or permitted by the Company’s Sixth Restated Credit
Agreement, dated June 22, 2005, as amended (the “
Senior Credit Agreement ”), and the Credit Agreement
among CEI Bristol Acquisition, L.P., CEI Acquisition LLC and
Chaparral Oil, L.L.C., and General Electric Capital Corporation as
a lender and the administrative agent for the lenders (the “
Bridge Loan ”) and (ii) encumbrances applicable
in the constitutive documents of Oklahoma Ethanol L.L.C., which
will not be a Guarantor.
(f) Due Authorization. The
Company and each of the Guarantors have full right, power and
authority to execute and deliver this Agreement, the Securities,
the Indenture (including each Guarantee set forth therein), the
Exchange Securities and the Registration Rights Agreement
(collectively, the “ Transaction Documents ”)
and to perform their respective obligations hereunder and
thereunder; and all action required to be taken for the due and
proper authorization, execution and delivery of each of the
Transaction Documents and the consummation of the transactions
contemplated thereby has been duly and validly taken.
(g) The Indenture . The
Indenture has been duly authorized by the Company and each of the
Guarantors and, when duly executed and delivered in accordance with
its terms by each of the parties thereto, will constitute a valid
and legally 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 enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws now or
hereafter in effect relating to or affecting creditors’
rights generally or by general equitable principles regardless of
whether enforcement is sought in law or equity (collectively, the
“ Enforceability Exceptions ”); and on the
Closing Date, the Indenture will conform in all material respects
to the requirements of the Trust Indenture Act of 1939, as amended
(the “ Trust Indenture Act ”), and the rules and
regulations of the Commission applicable to an indenture that is
qualified thereunder.
(h) The Securities and the
Guarantees . The Securities have been duly authorized by the
Company and, when duly executed, authenticated, issued and
delivered as provided in the Indenture and paid for as provided
herein, will be duly and validly issued and outstanding
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and will constitute valid and legally binding
obligations of the Company enforceable against the Company in
accordance with their terms, subject to the Enforceability
Exceptions, and will be entitled to the benefits of the Indenture;
and the Guarantees have been duly authorized by each of the
Guarantors and, when the Securities have been duly executed,
authenticated, issued and delivered as provided in the Indenture
and paid for as provided herein, will be valid and legally binding
obligations of each of the Guarantors, enforceable against each of
the Guarantors in accordance with their terms, subject to the
Enforceability Exceptions, and will be entitled to the benefits of
the Indenture.
(i) The Exchange Securities .
On the Closing Date, the Exchange Securities (including the related
guarantees) will have been duly authorized by the Company and each
of the Guarantors and, when duly executed, authenticated, issued
and delivered in accordance with the Indenture and as contemplated
by the Registration Rights Agreement, will constitute valid and
legally binding obligations of the Company, as issuer, and each of
the Guarantors, as guarantor, enforceable against the Company and
each of the Guarantors in accordance with their terms, subject to
the Enforceability Exceptions, and will be entitled to the benefits
of the Indenture.
(j) Purchase and Registration
Rights Agreements. This Agreement has been duly authorized,
executed and delivered by the Company and each of the Guarantors;
and the Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantors and, when duly executed and
delivered in accordance with its terms by each of the parties
thereto, will constitute a valid and legally binding agreement of
the Company and each of the Guarantors enforceable against the
Company and each of the Guarantors in accordance with its terms,
subject to the Enforceability Exceptions, and except that rights to
indemnity and contribution thereunder may be limited by applicable
law and public policy.
(k) Descriptions of Certain
Documents . Each of the Securities, the Indenture, the
Guarantees and the Registration Rights Agreement conforms in all
material respects to the descriptions thereof contained in the
Preliminary Offering Memorandum and the Offering
Memorandum.
(l) No Violation or Default .
Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws or similar organizational
documents; (ii) in default, and no event has occurred that,
with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant
or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject; or (iii) in violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority having jurisdiction
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over it or its properties, except, in the case
of clauses (ii) and (iii) above, for any such default or
violation that would not, individually or in the aggregate, have a
Material Adverse Effect.
(m) No Conflicts. The
execution, delivery and performance by the Company and each of the
Guarantors of each of the Transaction Documents to which each is a
party, the issuance and sale of the Securities (and the Guarantees)
and the consummation of the transactions contemplated by the
Transaction Documents will not (i) conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a 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 of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of
its subsidiaries is subject, (ii) result in any violation of
the provisions of the charter or by-laws or similar organizational
documents of the Company or any of its subsidiaries or
(iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except, in the case of
clauses (i) and (iii) above, for any such conflict,
breach or violation that would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) No Consents Required . No
consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or
regulatory authority is required for the execution, delivery and
performance by the Company and each of the Guarantors of each of
the Transaction Documents to which each is a party, the issuance
and sale of the Securities (and the Guarantees) and the
consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations,
orders and registrations or qualifications (i) as may be
required under applicable state securities laws in connection with
the purchase and resale of the Securities by the Initial
Purchasers, (ii) with respect to the Exchange Securities (and
the related guarantees) as may be required under the Securities Act
and applicable state securities laws as contemplated by the
Registration Rights Agreement, (iii) which have been, or prior to
the Closing Date will be, obtained and (iv) which, if not
obtained, would not, individually or in the aggregate, have a
Material Adverse Effect.
(o) Legal Proceedings. Except
as described in the Preliminary Offering Memorandum and the
Offering Memorandum, there are no legal, governmental or
regulatory, actions, suits or proceedings pending to which the
Company or any of its subsidiaries is or may be a party or to which
any property of the Company or any of its subsidiaries is or may be
the subject that, individually or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect; to the
Company’s and each of the Guarantors’ knowledge, no
such actions, suits or proceedings are threatened or contemplated
by any governmental or regulatory authority or threatened by
others.
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(p) Independent Accountants.
Grant Thornton LLP, who have certified certain financial statements
of the Company and its subsidiaries in the Offering Memorandum, are
independent public accountants with respect to the Company and its
subsidiaries and are independent public accountants within the
meaning of Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants and its
interpretations and rulings thereunder.
(q) Title to Real and Personal
Property. The Company and its subsidiaries have (1) good
and defensible title to oil and gas properties owned by the Company
and its subsidiaries, (2) good and indefeasable title in fee
simple to all other real property owned by the Company and its
subsidiaries and (3) good title to all items of personal
property owned by the Company and its subsidiaries, in each case
that are material to the respective businesses of the Company and
its subsidiaries, free and clear of all liens, encumbrances, claims
and defects and imperfections of title, except (i) those that
are described in the Preliminary Offering Memorandum and the
Offering Memorandum, (ii) those under the Senior Credit
Agreement and the Bridge Loan, (iii) those under oil and gas
leases, options to lease, operating agreements, utilization and
pooling agreements, participation and drilling concessions
agreements and gas sales contracts, securing payment of amounts not
yet due and payable and of a scope and nature customary in the oil
and gas industry, (iv) those that do not materially interfere
with the use made and proposed to be made of such property by the
Company and its subsidiaries or (v) those that could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made or
proposed to be made of such real property and buildings by the
Company or its subsidiaries.
(r) Title to Intellectual
Property. The Company and its subsidiaries own or possess or
are licensed to use adequate rights to use all material patents,
patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights,
licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their
respective businesses, except where the failure to own, possess or
license such rights would not, individually or in the aggregate,
have a Material Adverse Effect; the Company and its subsidiaries
have not received any notice of any claim of infringement of or
conflict with any such rights of others.
(s) Investment Company Act.
Neither the Company nor any of its subsidiaries is, and after
giving effect to the offering and sale of the Securities and the
application of the proceeds
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thereof as described in the Offering Memorandum
none of them will be, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder
(collectively, “ Investment Company Act
”).
(t) Taxes. The Company and
its subsidiaries have paid all federal, state, local and foreign
taxes and filed all tax returns required to be paid or filed
through the date hereof to the extent that such taxes have become
due and are not being contested in good faith with such exceptions
as would not, individually or in the aggregate, result in a
Material Adverse Effect; and except as otherwise disclosed in the
Preliminary Offering Memorandum and the Offering Memorandum, there
is no tax deficiency that has been asserted against the Company or
any of its subsidiaries or any of their respective properties or
assets, which has had, nor does the Company have any knowledge of
any tax deficiency, which if determined adversely to the Company or
its subsidiaries might, individually or in the aggregate, have a
Material Adverse Effect.
(u) Licenses and Permits. The
Company and its subsidiaries possess all licenses, certificates,
permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state,
local or foreign governmental or regulatory authorities that are
necessary for the ownership or lease of their respective
properties, the conduct of their respective businesses as described
in the Preliminary Offering Memorandum and the Offering Memorandum,
except where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect;
and except as described in the Preliminary Offering Memorandum and
the Offering Memorandum, neither the Company nor any of its
subsidiaries has received notice of any revocation or modification
of any such license, certificate, permit or authorization or has
any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course, except
for notices, modifications or non-renewals as would not,
individually or in the aggregate, have a Material Adverse
Effect.
(v) No Labor Disputes. No
labor disturbance by or dispute with employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company
and the Guarantors, is contemplated or threatened, which
disturbance or dispute would have a Material Adverse
Effect.
(w) Compliance With Environmental
Laws. The Company and its subsidiaries (i) are in
compliance with any and all applicable federal, state, local and
foreign laws, rules, regulations, decisions and orders relating to
the protection of human health and safety and the environment
including without limitation those imposing liability or standards
of conduct concerning any hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “ Environmental
Laws ”); (ii) have received and are in compliance
with all permits, licenses
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or other approvals currently required of them
under applicable Environmental Laws to conduct their respective
businesses; (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except in any such case as described in
the Preliminary Offering Memorandum and the Offering Memorandum or
for any such failure to comply with, or failure to receive required
permits, licenses or approvals, or liability as would not,
individually or in the aggregate, have a Material Adverse Effect.
None of the Company or any of its subsidiaries has received notice
that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (“ CERCLA ”),
or any comparable state law; and (v) no property or facility
of the Company or any of its subsidiaries is (x) listed or, to
the Company’s or any subsidiary’s knowledge, proposed
for listing on the National Priorities List under CERCLA or is
(y) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated
pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
(x) Compliance With ERISA.
Each employee benefit plan, within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
(“ ERISA ”), that is maintained, administered or
contributed to by the Company or any of its affiliates for
employees or former employees of the Company and its affiliates has
been maintained in all material respects in compliance with its
terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the “ Code
”); no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any such plan excluding transactions
effected pursuant to a statutory or administrative exemption; and
for each such plan that is subject to the funding rules of
Section 412 of the Code or Section 302 of ERISA, no
“accumulated funding deficiency” as defined in
Section 412 of the Code has been incurred, whether or not
waived, and the fair market value of the assets of each such plan
(excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan
determined using reasonable actuarial assumptions.
(y) Accounting Controls. The
Company and its subsidiaries maintain systems of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
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(z) Insurance. The Company
and its subsidiaries have insurance covering their respective
properties, operations, personnel and businesses, which insurance
is in amounts and insures against such losses and risks as are
reasonably adequate for the conduct by the Company and its
subsidiaries of their respective businesses as is customary for
companies engaged in similar businesses in similar industries; and
neither the Company nor any of its subsidiaries has
(i) received notice from any insurer or agent of such insurer
that any material capital improvements or other expenditures are
required or necessary to be made in order to continue such
insurance or (ii) any reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage at reasonable cost
from similar insurers as may be necessary to continue its
business.
(aa) Solvency. On and
immediately after the Closing Date, the Company (after giving
effect to the issuance of the Securities and the other transactions
related thereto as described in the Offering Memorandum) will be
Solvent. As used in this paragraph, the term “ Solvent
” means, with respect to a particular date, that on such date
(i) the present fair market value (or present fair saleable
value) of the assets of the Company is not less than the total
amount required to pay the liabilities of the Company on its total
existing debts and liabilities (including contingent liabilities)
as they become absolute and matured; (ii) the Company is able
to realize upon its assets and pay its debts and other liabilities,
contingent obligations and commitments as they mature and become
due in the normal course of business; (iii) assuming
consummation of the issuance of the Securities as contemplated by
this Agreement and the Offering Memorandum, the Company is not
incurring debts or liabilities beyond its ability to pay as such
debts and liabilities mature; (iv) the Company is not engaged
in any business or transaction, and does not propose to engage in
any business or transaction, for which its property would
constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which
the Company is engaged; and (v) the Company is not a defendant
in any civil action that would result in a judgment that the
Company is or would become unable to satisfy.
(bb) No Restrictions on
Subsidiaries . Except for the Bridge Loan that will be repaid
with the proceeds from the sale of the Securities and related
security agreements, and restrictions applicable to Oklahoma
Ethanol, L.L.C., which will not be a Guarantor, no subsidiary of
the Company is currently prohibited, directly or indirectly,
und
