EXHIBIT
10.1
Executed Version
ST. MARY LAND & EXPLORATION
COMPANY
(a Delaware corporation)
$250,000,000 3.50% Senior
Convertible Notes due 2027
PURCHASE AGREEMENT
Dated: March 29, 2007
Houston 3170177v.5
ST. MARY LAND & EXPLORATION
COMPANY.
(a Delaware corporation)
$250,000,000
Senior Convertible Notes due
2027
PURCHASE AGREEMENT
March 29, 2007
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
WACHOVIA CAPITAL MARKETS,
LLC
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as Representatives of the several
Initial Purchasers
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c/o Merrill Lynch, Pierce, Fenner
& Smith Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
St. Mary Land & Exploration
Company., a Delaware corporation (the “Company”),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated (“Merrill
Lynch”) and each of the other Initial Purchasers named in
Schedule A hereto (collectively, the “Initial
Purchasers,” which term shall also include any initial
purchaser substituted as provided in Section 11 hereof), for whom
Merrill Lynch and Wachovia Capital Markets, LLC are acting as
representatives (in such capacity, the “Representatives),
with respect to (i) the issue and sale by the Company and the
purchase by the Initial Purchasers, acting severally and not
jointly, of the respective principal amounts set forth in said
Schedule A of $250,000,000 aggregate principal amount of the
Company’s Senior Convertible Notes due 2027 (the
“Initial Securities”) and (ii) the grant by the Company
to the Initial Purchasers of the option described in Section 2(b)
hereof to purchase all or any part of an additional $37,500,000
aggregate principal amount of the Company’s Senior
Convertible Notes due 2027 to cover overallotments, if any (the
“Option Securities” and, together with the Initial
Securities, the “Securities”). The Securities are to be
issued pursuant to an indenture to be dated as of April 4, 2007
(the “Indenture”) between the Company and Wells Fargo
Bank, N.A., as trustee (the “Trustee”).
The Securities are convertible,
subject to certain conditions as described in the Final Offering
Memorandum (as described below), prior to maturity (unless
previously redeemed or otherwise purchased) into cash and shares of
common stock, par value $0.01 per share, of the Company (the
“Common Stock”) in accordance with the terms of the
Securities and the Indenture, at the initial conversion rate of
18.3757 shares of Common Stock per $1,000 principal amount of
Securities. Securities issued in book-entry form will be issued to
Cede & Co. as nominee of The Depository Trust Company
(“DTC”).
The Company understands that the
Initial Purchasers propose to make an offering of the Securities on
the terms and in the manner set forth herein and agrees that the
Initial Purchasers may resell, subject to the conditions set forth
herein, all or a portion of the Securities to purchasers
(“Subsequent Purchasers”) at any time after this
Agreement has been executed and delivered. The Securities are to be
offered and resold through the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the
“1933 Act”), in reliance upon exemptions therefrom.
Pursuant to the terms of the Securities and the Indenture,
investors that acquire Securities and any shares of Common Stock
acquired in connection with any conversion of Securities (solely
for purposes of this paragraph, “Securities”) may only
resell or otherwise transfer such Securities if such Securities are
hereafter registered under the 1933 Act or if an exemption from the
registration requirements of the 1933 Act is available (including
the exemption afforded by Rule 144A (“Rule 144A”) of
the rules and regulations promulgated under the 1933 Act by the
Securities and Exchange Commission (the “Commission”).
On or prior to the Initial Closing Time, the Company will enter
into a registration rights agreement with the Initial Purchasers
(the “Registration Rights Agreement”) pursuant to which
the Company will be required to file and use reasonable best
efforts to cause to become effective a registration statement under
the 1933 Act to register resales of the Securities.
Houston 3170177v.5
The Company has (a) prepared and
delivered to each Initial Purchaser copies of (i) a preliminary
offering memorandum dated March 28, 2007 and (ii) a pricing term
sheet dated March 29, 2007, attached hereto as Schedule B, which
includes the pricing terms and other information with respect to
the Securities and other matters not included in the Preliminary
Offering Memorandum (as defined below) (the “Pricing Term
Sheet”) and (b) has prepared and will deliver to each Initial
Purchaser, as promptly as practicable prior to the Initial Closing
Time, copies of a final offering memorandum dated March 29, 2007
(the “Final Offering Memorandum”), each for use by such
Initial Purchaser in connection with its solicitation of purchases
of, or offering of, the Securities. “Offering
Memorandum” means, with respect to any date or time referred
to in this Agreement, the most recent offering memorandum (whether
the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment or supplement to either such
document), including exhibits thereto and any documents
incorporated therein by reference, which has been prepared and
delivered by the Company to the Initial Purchasers in connection
with their solicitation of purchases of, or offering of, the
Securities.
All references in this Agreement to
financial statements and schedules and other information which is
“contained,” “included,”
“stated” or described in the Offering Memorandum (or
other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other
information which are incorporated by reference in the Offering
Memorandum; and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to mean and
include the filing of any document under the Securities Exchange
Act of 1934, as amended (the “1934 Act”), that is
incorporated by reference in the Offering Memorandum.
The preliminary offering memorandum
dated March 28, 2007, as amended and supplemented immediately prior
to the Applicable Time (as defined below), including any documents
filed under the 1934 Act prior to the Applicable Time and
incorporated by reference therein, is referred to herein as the
“Preliminary Offering Memorandum,” and the Preliminary
Offering Memorandum together with the Pricing Term Sheet are
collectively referred to herein as the “Disclosure
Package.” “Applicable Time” means 9:00 A.M.
(Eastern Time) on March 30, 2007 or such other time as agreed by
the Company and the Representatives.
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SECTION 1.
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Representations and Warranties by the
Company .
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(a)
Representations and Warranties . The Company represents and
warrants to each Initial Purchaser as of the Applicable Time and as
of the Closing Time referred to in Section 2(c) hereof, and agrees
with each Initial Purchaser, as follows:
(i)
Disclosure Package and Final Offering Memorandum . As of the
Applicable Time, neither (x) the Disclosure Package nor (y) any
individual Supplemental Offering Materials (as defined below), when
considered together with the Disclosure Package, included any
untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
“Supplemental Offering
Materials” means any “written communication”
(within the meaning of the 1933 Act Regulations (as defined below))
prepared by or on behalf of the Company, or used or referred to by
the Company, that constitutes an offer to sell or a solicitation of
an offer to buy the Securities other than the Offering Memorandum
or amendments or supplements thereto (including the Pricing Term
Sheet), including, without limitation, any road show materials
relating to the Securities that constitutes such a written
communication.
As of its issue date and as of the
Closing Time, the Final Offering 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, in the
light of the circumstances under which they were made, not
misleading.
The representation and warranties in
this subsection shall not apply to statements in or omissions from
the Disclosure Package or the Final Offering Memorandum made in
reliance upon and in conformity with written information furnished
to the Company by any Initial Purchaser through the Representatives
expressly for use therein. The Company has not distributed, and the
Company will not distribute, prior to the later of the Closing Time
and the completion of the Initial Purchasers’ distribution of
the Securities, which shall be deemed to be no later than the
Closing Time unless the Company otherwise receives notice from the
Representatives, any offering
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material in connection with the
offering and sale of the Securities other than the Disclosure
Package and the Final Offering Memorandum.
(ii)
Incorporated Documents . The Offering Memorandum as
delivered from time to time shall incorporate by reference the most
recent Annual Report of the Company on Form 10-K filed with the
Commission and each Quarterly Report of the Company on Form 10-Q
and each Current Report of the Company on Form 8-K filed with the
Commission since the end of the fiscal year to which such Annual
Report relates. The documents incorporated or deemed to be
incorporated by reference in the Offering Memorandum at the time
they were or hereafter are filed with the Commission complied and
will comply in all material respects with the requirements of the
1934 Act and the rules and regulations of the Commission thereunder
(the “1934 Act Regulations”), and, when read together,
at the Applicable Time with the other information in the Disclosure
Package, and at the Closing Time with the Disclosure Package and
the Final Offering Memorandum, did not and will not include an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(iii)
Independent Accountants . The accountants who certified the
financial statements and supporting schedules included in the
Disclosure Package and the Final Offering Memorandum are
independent registered public accountants with respect to the
Company and its subsidiaries within the meaning of the 1933 Act and
the rules and regulations thereunder (the “1933 Act
Regulations”).
(iv)
Financial Statements . The financial statements, together
with the related schedules and notes, included in the Disclosure
Package and the Final Offering Memorandum present fairly the
financial position of the Company and its consolidated subsidiaries
at the dates indicated and the results of operations,
stockholders’ equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles in the United States (“GAAP”)
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Disclosure Package
and the Final Offering Memorandum present fairly in accordance with
GAAP the information required to be stated therein. The selected
financial data and the summary financial information included in
the Disclosure Package and the Final Offering Memorandum present
fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements
included in the Disclosure Package and the Final Offering
Memorandum. There are no pro forma or as adjusted financial
statements that would be required to be included or incorporated by
reference in the Disclosure Package and the Final Offering
Memorandum if the Disclosure Package or the Offering Memorandum, as
the case may be, were included in a registration statement filed
pursuant to the 1933 Act.
(v)
No Material Adverse Change in Business . Since the
respective dates as of which information is given in the Disclosure
Package and the Final Offering Memorandum, except as otherwise
stated therein, (A) there has been no material adverse change in
the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the
ordinary course of business (a “Material Adverse
Effect”), (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C)
there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital
stock.
(vi)
Good Standing of the Company . The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Disclosure Package and the Final
Offering Memorandum and to enter into and perform its obligations
under, or as contemplated by, this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in
good standing in each other 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.
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(vii)
Good Standing of Subsidiaries . Each “significant
subsidiary” of the Company (as such term is defined in Rule
1-02 of Regulation S-X) (each a “Designated Subsidiary”
and, collectively, the “Designated Subsidiaries”) has
been duly organized 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 Disclosure Package and the Final 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; except as otherwise disclosed in the Disclosure
Package and the Final Offering Memorandum, all of the issued and
outstanding capital stock of each Designated Subsidiary has been
duly authorized and validly issued, is fully paid and
non-assessable and 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 Designated Subsidiary was issued in
violation of any preemptive or similar rights of any securityholder
of such Designated Subsidiary. The other subsidiaries of the
Company other than Designated Subsidiaries, considered in the
aggregate as a single subsidiary, do not constitute a
“significant subsidiary” as defined in Rule 1-02 of
Regulation S-X.
(viii)
Capitalization . The authorized, issued and outstanding
capital stock of the Company is as set forth in the financial
statements, including the schedules and notes, included in the
Disclosure Package and the Final Offering Memorandum (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant
to reservations, agreements, employee benefit plans referred to in
the Disclosure Package and the Final Offering Memorandum or
pursuant to the exercise of convertible securities or options
referred to in the Disclosure Package and the Final 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; 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.
(ix)
Corporate Power . The Company has full right, power and
authority to execute and deliver this Agreement, the Securities,
the Indenture and the Registration Rights Agreement (collectively,
the “Transaction Documents”) and to perform its
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.
(x)
Authorization of Agreement . This Agreement has been duly
authorized, executed and delivered by the Company.
(xi)
Authorization and Description of the Indenture . The
Indenture has been duly authorized by the Company and, when
executed and delivered by the Company and the Trustee, will
constitute 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). The Indenture will conform in all
material respects to the statements relating thereto contained in
the Disclosure Package and the Final Offering
Memorandum.
(xii)
Authorization and Description of the Registration Rights
Agreement . The Registration Rights Agreement has been duly
authorized by the Company and, when duly executed and delivered by
the Company and the Initial Purchasers, will constitute 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 other similar laws relating to or
affecting enforcement of creditors’ rights generally, by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and by public
policy limitations affecting the enforceability of indemnification
or contribution rights in connection with securities transactions,
to the extent applicable. The Registration
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Rights Agreement will conform in all
material respects to the statements relating thereto contained in
the Disclosure Package and the Final Offering
Memorandum.
(xiii)
Authorization and Description of the Securities . The
Securities have been duly authorized and, at the Closing Time, will
have been duly executed by the Company and, when authenticated,
issued and delivered in the manner provided for in the Indenture
and delivered against payment of the purchase price therefor as
provided in this Agreement, will 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
will be in the form contemplated by, and entitled to the benefits
of, the Indenture. The Securities will conform in all material
respects to the statements relating thereto contained in the
Disclosure Package and the Final Offering Memorandum. Except as
described in the Disclosure Package and the Final Offering
Memorandum, there are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities, commitments of
sale or rights related to or entitling any person to purchase or
otherwise acquire any shares of, or any security convertible into
or exercisable or exchangeable for, the capital stock of, or other
ownership interest in, the Company.
(xiv)
Authorization and Description of Common Stock . The Common
Stock conforms to all statements relating thereto included in the
Disclosure Package and the Final Offering Memorandum and such
description conforms to the rights set forth in the instruments
defining the same. The shares of Common Stock issuable upon
conversion of the Securities have been duly authorized and reserved
for issuance upon such conversion by all necessary corporate action
and such shares, when issued and delivered upon such conversion,
will be validly issued, fully paid and non-assessable; no holder of
such shares will be subject to personal liability by reason of
being such a holder; the issuance of any shares of Common Stock
issuable upon conversion of the Securities is not subject to
preemptive or other similar rights of any securityholder of the
Company.
(xv)
Absence of Defaults and Conflicts . Neither the Company nor
any of the Designated Subsidiaries is in violation of its charter
or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which or
any of them may be bound, or to which any of the property or assets
of the Company or any of its Designated Subsidiaries is subject
(collectively, “Agreements and Instruments”) except for
such violations or defaults that would not, singly or in the
aggregate, result in a Material Adverse Effect; and the execution,
delivery and performance of the Transaction Documents and any other
agreement or instrument entered into or issued or to be entered
into or issued by the Company in connection with the transactions
contemplated hereby or thereby or in the Disclosure Package and the
Final Offering Memorandum and the consummation of the transactions
contemplated herein and in the Disclosure Package and the Final
Offering Memorandum (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the
Securities as described in the Disclosure Package and the Final
Offering Memorandum under the caption “Use of Proceeds”
and the issuance of the shares of Common Stock issuable upon
conversion of the Securities) and compliance by the Company with
its obligations hereunder do not and will not, whether with or
without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of the Designated Subsidiaries pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not, singly
or in the aggregate, result in 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 of the Designated
Subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or any of their assets,
properties or operations. As used herein, a “Repayment
Event” means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any
person acting on such
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holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any of the Designated
Subsidiaries.
(xvi)
Absence of Labor Dispute . No labor dispute with the
employees of the Company or any of its subsidiaries exists or, to
the knowledge of the Company, is imminent.
(xvii)
Absence of Proceedings . There is no action, suit,
proceeding, inquiry or investigation before or brought by any court
or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against or
affecting the Company or any of its subsidiaries which is required
to be disclosed in the Disclosure Package or the Final Offering
Memorandum (other than as disclosed therein), or 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 of the Company or any of its
subsidiaries or the consummation of the transactions contemplated
by this Agreement or the performance by the Company of its
obligations hereunder. The aggregate of all pending legal or
governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective
property or assets is the subject which are not described in the
Disclosure Package and the Final Offering Memorandum, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse
Effect.
(xviii)
Accuracy of Exhibits . All of the descriptions of contracts
or other documents included in the Disclosure Package or the Final
Offering Memorandum are accurate and complete descriptions of such
contracts or other documents. There are no contracts or documents
which are required to be described in the documents incorporated by
reference in the Disclosure Package or Final Offering Memorandum or
to be filed as exhibits thereto which have not been so described
and filed as required.
(xix)
Possession of Intellectual Property . The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, “Intellectual
Property”) necessary to carry on the business now operated by
them, and neither the Company nor any of its subsidiaries has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect
the interest of the Company or any of its subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or
in the aggregate, would result in a Material Adverse
Effect.
(xx)
Absence of Further Requirements . No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company
of its obligations under the Transaction Documents, in connection
with the offering, issuance or sale of the Securities hereunder,
the issuance of shares of Common Stock upon conversion of
Securities or the consummation of the transactions contemplated by
the Transaction Documents or for the due execution, delivery or
performance of the Transaction Documents by the Company, except (A)
such as have been already obtained, (B) as may be required under
1933 Act or the 1933 Act Regulations in connection with the
transactions contemplated by the Registration Rights Agreement or
state securities laws and (C) for the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended (the
“1939 Act”).
(xxi)
Possession of Licenses and Permits . The Company and the
Designated Subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively,
“Governmental Licenses”) issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company
and the Designated Subsidiaries are in compliance with the terms
and conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, result
in a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except where the invalidity of
such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not have a Material
Adverse Effect; and neither the Company nor any of the Designated
Subsidiaries has received any notice of
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Houston 3170177v.5
proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse
Effect.
(xxii)
Title to Property . The Company and its subsidiaries have
good and marketable title to all real property owned by the Company
and its subsidiaries, including without limitation, all oil and gas
properties, and good title to all other properties owned by them
including, without limitation, all assets and facilities used by
the Company and its subsidiaries in the production and marketing of
oil and gas, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the
Disclosure Package and the Final Offering Memorandum or (b) do not,
singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries;
and all of the leases and subleases of the Company and its
subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in
the Disclosure Package and the Final Offering Memorandum,
including, without limitation, all oil and gas producing properties
of the Company and its subsidiaries and all assets and facilities
used by the Company and its subsidiaries in the production and
marketing of oil and gas, are in full force and effect, and neither
the Company nor any of its subsidiaries has any notice of any claim
of any sort that has been asserted by anyone adverse to the rights
of the Company or any of its subsidiaries under any of the leases
or subleases mentioned above, or affecting or questioning the
rights of the Company or any such subsidiary to the continued
possession of the leased or subleased premises under any such lease
or sublease, except where the failure of a lease or sublease to be
in full force and effect or the existence of any such claim would
not, singly or in the aggregate, result in a Material Adverse
Effect.
(xxiii)
Environmental Laws . Except as described in the Disclosure
Package and the Final Offering Memorandum and except such matters
as would not, singly or in the aggregate, result in a Material
Adverse Effect, (A) neither the Company nor any of its subsidiaries
is in violation of any federal, state, local or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos containing materials or
mold (collectively, “Hazardous Materials”) or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials
(collectively, “Environmental Laws”), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries
and (D) there are no events or circumstances that would reasonably
be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party
or governmental body or agency, against or affecting the Company or
any of its subsidiaries relating to Hazardous Materials or
Environmental Laws or the violation of any Environmental
Laws.
(xxiv)
Independent Petroleum Engineers . Ryder Scott Company, L.P.,
whose report as of January 15, 2007 is referenced in the
Offering Memorandum was, as of the date of such report, and is, as
of the date hereof, an independent petroleum engineer with respect
to the Company and its subsidiaries. Netherland, Sewell &
Associates, Inc., whose report as of January 12, 2007 is
referenced in the Offering Memorandum, was, as of the date of such
report, and is, as of the date hereof, an independent petroleum
engineer with respect to the Company and its
subsidiaries.
(xxv)
Accuracy of Reserve Information . The information underlying
the estimates of reserves of the Company and its subsidiaries,
which was supplied by the Company to Ryder Scott Company, L.P. and
Netherland, Sewell & Associates, Inc. for purposes of auditing
the reserve reports and estimates of the Company, or preparing
estimates of the Company’s reserves, and preparing the
respective letters (the
7
Houston 3170177v.5
“Reserve Report Letters”
and each a “Reserve Report Letter”) of each of Ryder
Scott Company, L.P. and Netherland, Sewell & Associates, Inc.,
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; other than normal
production of the reserves and intervening spot market product
price fluctuations described in the Disclosure Package and the
Final Offering Memorandum, neither the Company nor its subsidiaries
is aware of any facts or circumstances that would result in an
adverse change in the reserves, or the present value of future net
cash flows therefrom, as described in the Offering Memorandum and
as reflected in each Reserve Report Letter, that would reasonably
be expected to result in a Material Adverse Effect; estimates of
such reserves and present values as described in the Offering
Memorandum and reflected in each Reserve Report Letter comply in
all material respects with the applicable requirements of
Regulation S-X and Industry Guide 2 under the 1933 Act.
(xxvi)
Oil and Gas Agreements . The participation agreements, joint
development agreements, joint operating agreements, farm-out
agreements and other agreements described in the Disclosure Package
and the Final Offering Memorandum relating to the Company’s
or its subsidiaries’ rights with respect to the ownership,
lease or operation of oil and gas properties, the acquisition of
interests in oil and gas properties or the exploration for,
development of or production of oil and gas reserves thereon,
constitute valid and binding agreements of the Company and its
subsidiaries that are parties thereto and, to the best knowledge of
the Company, of the other parties thereto, enforceable 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).
(xxvii)
Accounting Controls and Disclosure Controls . The Company
and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that (A) transactions are executed in accordance with
management’s general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain
accountability for assets; (C) access to assets is permitted only
in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except
as described in the Disclosure Package and Final Offering
Memorandum, since the end of the Company’s most recent
audited fiscal year, there has been (1) no material weakness in the
Company’s internal control over financial reporting (whether
or not remediated) and (2) no change in the Company’s
internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting. The
Company and its consolidated subsidiaries employ disclosure
controls and procedures that are designed to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the
Commission’s rules and forms, and is accumulated and
communicated to the Company’s management, including its
principal executive officer or officers and principal financial
officer or officers, as appropriate, to allow timely decisions
regarding disclosure.
(xxviii)
Compliance with the Sarbanes-Oxley Act . There is and has
been no failure on the part of the Company or any of the
Company’s directors or officers, in their capacities as such,
to comply in all material respects with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “Sarbanes-Oxley
Act”), including Section 402 related to loans and Sections
302 and 906 related to certifications.
(xxix)
Statistical and Market-Related Data . Any statistical and
market-related data included in the Disclosure Package and the
Final Offering Memorandum are based on or derived from sources that
the Company believes to be reliable and accurate in all material
respects or represent the Company’s good faith estimates that
are made on the basis of data derived from such sources.
8
Houston 3170177v.5
(xxx)
Payment of Taxes . All United States federal income tax
returns of the Company and its subsidiaries required by law to be
filed have been filed and all taxes shown by such returns or
otherwise assessed, which are due and payable, have been paid,
except assessments against which appeals have been or will be
promptly taken and as to which adequate reserves have been
provided. The United States federal income tax returns of the
Company through the fiscal year ended December 31, 2005 have been
settled and no assessment in connection therewith has been made
against the Company. The Company and its subsidiaries have filed
all other tax returns that are required to have been filed by them
pursuant to applicable foreign, state, local or other law except
insofar as the failure to file such returns would not result in a
Material Adverse Effect, and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Company
and its subsidiaries, except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the
Company in respect of any income and corporation tax liability for
any years not finally determined are adequate to meet any
assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any
inadequacy that would not result in a Material Adverse
Effect.
(xxxi)
Insurance . The Company and its subsidiaries carry or are
entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts and covering such risks as is
generally maintained by companies of established repute engaged in
the same or similar business, and all such insurance is in full
force and effect. The Company has no reason to believe that it or
any subsidiary will not be able (A) to renew its existing insurance
coverage as and when such policies expire or (B) to obtain
comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a
cost that would not result in a Material Adverse Effect. Neither of
the Company nor any subsidiary has been denied any insurance
coverage which it has sought or for which it has
applied.
(xxxii)
Investment Company Act . The Company is not required, and
upon the issuance and sale of the Securities as herein contemplated
and the application of the net proceeds therefrom as described in
the Disclosure Package and the Final Offering Memorandum will not
be required, to register as an “investment company”
under the Investment Company Act of 1940, as amended (the
“1940 Act”).
(xxxiii)
Similar Offerings . Neither the Company nor any of its
affiliates, as such term is defined in Rule 501(b) under the 1933
Act (each, an “Affiliate”), has, directly or
indirectly, solicited any offer to buy, sold or offered to sell or
otherwise negotiated in respect of, or will solicit any offer to
buy, sell or offer to sell or otherwise negotiate in respect of, in
the United States or to any United States citizen or resident, any
security which is or would be integrated with the sale of the
Securities in a manner that would require the offered Securities to
be registered under the 1933 Act.
(xxxiv)
Rule 144A Eligibility . The Securities are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Time,
of the same class as securities listed on a national securities
exchange registered under Section 6 of the 1934 Act, or quoted in a
U.S. automated interdealer quotation system.
(xxxv)
No General Solicitation . None of the Company, its
Affiliates or any person acting on its or any of their behalf
(other than the Initial Purchasers and their Affiliates, as to whom
the Company makes no representation) has engaged or will engage, in
connection with the offering of the Securities, in any form of
general solicitation or general advertising within the meaning of
Rule 502(c) under the 1933 Act.
(xxxvi)
No Registration Required . Subject to compliance by the
Initial Purchasers with their representations and warranties set
forth in Section 6 hereof and the procedures set forth in Section 6
hereof, the compliance of the Initial Purchasers with the offering
and transfer procedures and restrictions described in the
Disclosure Package and Final Offering Memorandum and the accuracy
of the representations and warranties made in accordance with this
Agreement and the Final Offering Memorandum by purchasers to whom
the Initial Purchasers initially resell Securities, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by this Agreement and the
Final Offering Memorandum to register the Securities under the 1933
Act or to qualify the Indenture under the 1939 Act.
9
Houston 3170177v.5
(xxxvii)
Foreign Corrupt Practices Act . Neither the Company nor, to
the knowledge of the Company, any director, officer, agent,
employee, Affiliate or other person acting on behalf of the Company
or any of its subsidiaries is aware of or has taken any action,
directly or indirectly, that would result in a violation by such
persons of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the
payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any
“foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the
FCPA and the Company and, to the knowledge of the Company, its
Affiliates have conducted their businesses in compliance with the
FCPA and have instituted and maintain policies and procedures
designed to ensure, and which are reasonably expe
