GOODRICH PETROLEUM
CORPORATION
5.375% SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK
(Liquidation Preference $50.00 per
share)
BEAR, STEARNS
& CO. INC.
BNP PARIBAS SECURITIES CORP.
c/o Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, New York 10179
Goodrich Petroleum
Corporation, a Delaware corporation (the “Company”),
hereby confirms its agreement with Bear, Stearns & Co. Inc. and
BNP Paribas Securities Corp. (collectively, the “Initial
Purchasers”), as set forth below.
1. The
Transactions . Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial
Purchasers an aggregate of 1,650,000 shares (the “Firm
Shares”) of its 5.375% Series B Cumulative Convertible
Preferred Stock, par value $1.00 per share (liquidation preference
$50.00 per share) (the “Series B Convertible Preferred
Stock”). In addition, the Company has granted to the Initial
Purchasers an option to purchase up to an additional 600,000 shares
of its Series B Convertible Preferred Stock (the
“Optional Shares” and, together with the Firm Shares,
the “Purchased Shares”). The Purchased Shares shall be
convertible into shares (the “Conversion Shares”) of
common stock, par value $0.20 per share, of the Company (the
“Common Stock”), subject to and in accordance with the
terms of the Company’s Certificate of Designation of the
Series B Convertible Preferred Stock (the “Certificate
of Designation”). The Purchased Shares and the Conversion
Shares are hereinafter referred to collectively as the
“Securities.”
The sale of the
Purchased Shares to the Initial Purchasers (the
“Offering”) will be made without registration of the
Securities under the Securities Act of 1933, as amended (together
with the rules and regulations of the Securities and Exchange
Commission (the “Commission”) promulgated thereunder,
the “Securities Act”), in reliance upon the exemption
therefrom provided by Section 4(2) of the Securities
Act.
In connection with
the sale of the Purchased Shares, the Company has prepared a
preliminary offering memorandum dated December 15, 2005 (the
“Preliminary Offering Memorandum”) and an offering
memorandum dated the date hereof, along with the term sheet to the
offering memorandum (collectively the “Offering
Memorandum”), each setting forth
information regarding the Company, the Securities and the terms of
the Offering and the transactions contemplated by the Offering
Documents (as defined below). The Preliminary Offering Memorandum
and the Offering Memorandum will incorporate by reference the
Company’s (i) Annual Report on Form 10-K for the year
ended December 31, 2004, (ii) Annual Report on Form 10-K/A for
the year ended December 31, 2003, (iii) Quarterly Report
on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 2005; (iii) Definitive Proxy Statement for
the annual meeting of stockholders of the Company held on
May 24, 2005 and (iv) Current Reports on Form 8-K filed with
the Commission on February 15, 2005, April 1, 2005, April
21, 2005, May 3, 2005, May 13, 2005 (but only as to
Item 8.01) and November 23, 2005 (other than information
in the documents that is deemed not to be “filed” with
the Commission) (all such documents listed in clauses
(i) through (iv) referred to herein as the
“Incorporated Documents”). Any references herein to the
Preliminary Offering Memorandum or the Offering Memorandum shall be
deemed to include, in each case, all amendments and supplements
thereto and the Incorporated Documents and any amendments thereto.
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 Purchased Shares by
the Initial Purchasers.
The Company
understands that the Initial Purchasers propose to make an offering
of the Purchased Shares only on the terms and in the manner set
forth in the Offering Memorandum and Sections 3, 4 and 10
hereof as soon as the Initial Purchasers deem advisable after this
Agreement has been executed and delivered, to persons in the United
States whom the Initial Purchasers reasonably believe to be
qualified institutional buyers (“QIBs”) as defined in
Rule 144A under the Securities Act, as such rule may be
amended from time to time (“Rule 144A”), in
transactions under Rule 144A.
The Initial
Purchasers and their respective direct and indirect transferees of
the Purchased Shares will be entitled to the benefits of the
Registration Rights Agreement to be dated as of December 21,
2005, among the parties hereto (the “Registration Rights
Agreement”) pursuant to which the Company will agree, among
other things, to file (i) a registration statement (the
“Registration Statement”) on the appropriate form with
the Commission registering the resale of the Securities under the
Securities Act and (ii) to use its best efforts to cause any
such Registration Statement to be declared effective.
This Agreement,
the Preliminary Offering Memorandum, the Offering Memorandum and
the Registration Rights Agreement are herein referred to as the
“Offering Documents.”
2.
Representations and Warranties of the Company . The Company
represents and warrants to and agrees with the Initial Purchasers
that:
(a) The
Preliminary Offering Memorandum as of its date does not, and the
Offering Memorandum, as of its date, as of the Closing Date and as
of the Additional Closing Date, if any (each as defined in
Section 3 hereof), does
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not and will
not, and any supplement or amendment to them 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 not
misleading, except that the representations and warranties set
forth in this Section 2(a) do not apply to statements or omissions
that are made in reliance upon and in conformity with information
furnished in writing to the Company in writing by or on behalf of
the Initial Purchasers specifically for use in the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto. The Preliminary Offering Memorandum, the
Offering Memorandum and any amendment or supplement thereto each
complied or will comply in all material respects with
Rule 144A(d)(4) under the Securities Act.
(b) The
Preliminary Offering Memorandum and the Offering Memorandum with
respect to the Purchased Shares have been or will be prepared by
the Company for use by the Initial Purchasers in connection with
the Offering. No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act has been issued and
no proceeding for that purpose has commenced or is pending or, to
the knowledge of the Company, is contemplated.
(c) KPMG LLP,
which has examined certain of such financial statements as set
forth in its reports included in the Offering Memorandum (or, if
the Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum), is an independent public
accounting firm as required by the Securities Act and the
Securities Exchange Act of 1934, as amended (together with the
rules and regulations of the Commission promulgated thereunder, the
“Exchange Act”).
(d) Netherland
Sewell & Associates, Inc. (“Netherland Sewell”) and
Coutret and Associates, Inc. (“Coutret”), each being a
petroleum engineering firm from whose reserve reports information
is set forth in the Preliminary Offering Memorandum and the
Offering Memorandum, are independent petroleum engineers with
respect to the Company. Other than (i) the production of
reserves in the ordinary course of business (ii) intervening
price fluctuations or (iii) as described in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum), the Company is not
aware of any facts or circumstances that would result in a material
adverse change in its proved reserves in the aggregate, or the
aggregate present value of estimated future net revenues of the
Company or the standardized measure of discounted future net cash
flows therefrom, as described in the Offering Memorandum (or, if
the Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum) and reflected in the Reserve
Information as of the respective dates such information is given.
Estimates of the proved reserves and the present value of the
estimated future net revenues and the discounted future net cash
flows derived therefrom as described
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in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum) and reflected in the
Reserve Information comply in all material respects to the
applicable requirements of Regulation S-X of the Securities
Act Regulations and Industry Guide 2 under the Securities
Act.
(e) Subsequent to
the respective dates as of which information is given in the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the most recent Preliminary Offering Memorandum), except
as disclosed in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum), the Company has not declared, paid or made
any dividends or other distributions of any kind on or in respect
of its capital stock and there has been no material adverse change
or any development involving a prospective material adverse change,
whether or not arising from transactions in the ordinary course of
business, in the business, condition (financial or otherwise),
results of operations, stockholders’ equity, properties or
prospects of the Company and each subsidiary of the Company listed
on Exhibit A hereto (the “Subsidiaries”), individually
or taken as a whole (a “Material Adverse Change”).
Since the date of the latest balance sheet presented, or
incorporated by reference, in the Offering Memorandum (or, if the
Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum), neither the Company nor any
Subsidiary has incurred or undertaken any liabilities or
obligations, whether direct or indirect, liquidated or contingent,
matured or unmatured, or entered into any transactions, including
any acquisition or disposition of any business or asset, which are
material to the Company and the Subsidiaries, individually or taken
as a whole, except for liabilities, obligations and transactions
incurred in the ordinary course of business or which are disclosed
in the Offering Memorandum (or, if the Offering Memorandum is not
in existence, the most recent Preliminary Offering
Memorandum).
(f) The
authorized, issued and outstanding capital stock of the Company is
as set forth in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum) under the caption “Capitalization”
and, after giving effect to the Offering, will be as set forth in
the column headed “As Adjusted” under the caption
“Capitalization.” All of the issued and outstanding
shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and were
not issued in violation of or subject to any preemptive or similar
right that does or will entitle any person, upon the issuance or
sale of any security, to acquire from the Company or any Subsidiary
any Common Stock or other security of the Company or any Subsidiary
or any security convertible into, or exercisable or exchangeable
for, Common Stock or any other such security (any “Relevant
Security”), except for such rights as may have been fully
satisfied or waived prior to the date of the Offering Memorandum
(or, if the Offering Memorandum is not in existence, the most
recent Preliminary Offering Memorandum). The Purchased Shares to be
delivered on the Closing
4
Date and the
Additional Closing Date, if any (as hereinafter respectively
defined), have been duly and validly authorized and, when delivered
in accordance with this Agreement, will be duly and validly issued,
fully paid and non-assessable , and will not have
been issued in violation of or subject to any preemptive or similar
right that does or will entitle any person to acquire any Relevant
Security from the Company or any Subsidiary upon issuance thereof
by the Company in the Offering. The Company has authorized and has
reserved, and covenants to continue to reserve, free of any
preemptive or similar rights, a sufficient number of authorized but
unissued shares of Common Stock, to satisfy the conversion rights
of the Purchased Shares and issue the Conversion Shares. The
Conversion Shares have been duly authorized for issuance upon
conversion of the Purchased Shares, and upon conversion of the
Purchased Shares in accordance with the Certificate of Designation,
will be issued free of statutory and contractual preemptive rights
and will be sufficient in number to meet the current conversion
requirements, and the Conversion Shares, when so issued, will be
duly and validly issued and fully paid and non-assessable, will
have been issued in compliance with all applicable state, federal
and foreign securities laws, will have not been issued in violation
of or subject to any preemptive or similar right that does or will
entitle any person to acquire any Relevant Security from the
Company or any Subsidiary upon issuance or sale of the Purchased
Shares or the Conversion Shares, and will not be subject to any
restriction upon the voting or transfer thereof pursuant to
applicable law or the Company’s restated certificate of
incorporation, bylaws or governing documents or any agreement to
which the Company or any of its Subsidiaries is a party or by which
any of them may be bound.
(g) The Purchased
Shares and the Registration Rights Agreement conform in all
material respects to the descriptions thereof in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum). The Common Stock
(including the Conversion Shares) conforms in all material respects
to the description thereof contained in the Offering Memorandum
(or, if the Offering Memorandum is not in existence, the most
recent Preliminary Offering Memorandum). Except as disclosed in the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the most recent Preliminary Offering Memorandum),
neither the Company nor any Subsidiary has outstanding warrants,
options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, or any contracts or commitments to
issue or sell, any Relevant Security. All corporate action required
to be taken by the Company for the issuance and delivery of the
Conversion Shares has been duly and validly taken. Except as
disclosed in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the Preliminary 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 to acquire any shares of, or any security convertible
into or exchangeable or exercisable for, the capital stock of, or
other ownership interest in, the Company or the
Subsidiaries.
5
(h) The
Subsidiaries are the only subsidiaries of the Company within the
meaning of Rule 405 under the Securities Act. Except for the
Subsidiaries and as otherwise disclosed in the Offering Memorandum
(or, if the Offering Memorandum is not in existence, the
Preliminary Offering Memorandum), the Company holds no ownership or
other interest, nominal or beneficial, direct or indirect, in any
corporation, partnership, joint venture or other business entity.
Goodrich Petroleum Company LLC and Goodrich Petroleum Company
— Lafitte, LLC (each, a “Principal Subsidiary”
and together the “Principal Subsidiaries”) are the only
Subsidiaries that meet the definition of “significant
subsidiary” of the Company under the conditions specified in
Rule 1-02(w) Regulation S-X under the Securities Act. All
of the issued shares of capital stock of or other ownership
interests in each Principal Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable and are
owned directly or indirectly by the Company free and clear of any
lien, charge, mortgage, pledge, security interest, claim, equity,
trust or other encumbrance, preferential arrangement, defect or
restriction of any kind whatsoever (any
“Lien”).
(i) Each of the
Company and the Principal Subsidiaries has been duly organized and
validly exists as a corporation, partnership or limited liability
company in good standing under the laws of its jurisdiction of
organization. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign
corporation, partnership or limited liability company in each
jurisdiction in which the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its
business makes such qualification necessary, except for those
failures to be so qualified or in good standing which (individually
and in the aggregate) could not reasonably be expected to have a
material adverse effect on the business, condition (financial or
otherwise), results of operations, stockholders’ equity,
properties or prospects of the Company and the Subsidiaries,
individually or taken as a whole (a “Material Adverse
Effect”). Each of the Company and the Principal Subsidiaries
has all requisite power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications,
licenses, filings and permits of, with and from all judicial,
regulatory and other legal or governmental agencies and bodies
(collectively, the “Consents”), to own, lease and
operate its properties and conduct its business as it is now being
conducted and as disclosed in the Offering Memorandum (or, if the
Offering Memorandum is not in existence, the Preliminary Offering
Memorandum). No Consent contains a materially burdensome
restriction not adequately disclosed in the Offering Memorandum
(or, if the Offering Memorandum is not in existence, the
Preliminary Offering Memorandum).
(j) The Company
has full right, power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement and the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
Preliminary Offering Memorandum). This Agreement and the
transactions
6
contemplated by
this Agreement have been duly and validly authorized by the
Company. This Agreement has been duly and validly executed and
delivered by the Company.
(k) The Company
has the requisite corporate power and authority to execute, deliver
and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and
validly authorized by the Company and when executed and delivered
by the Company (assuming the due authorization, execution and
delivery by the Initial Purchasers), will constitute a valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms.
(l) The execution,
delivery, and performance of this Agreement and consummation of the
transactions contemplated by this Agreement and the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
Preliminary Offering Memorandum) do not and will not
(i) conflict with, require consent under or result in a breach
of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would
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 Subsidiary pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement,
instrument, franchise, license or permit to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary
or their respective properties, operations or assets may be bound,
(ii) violate or conflict with any provision of the certificate
or articles of incorporation, by-laws, certificate of formation,
limited liability company agreement, partnership agreement or other
organizational documents of the Company or any Subsidiary, or
(iii) violate or conflict with any law, rule, regulation,
ordinance, directive, judgment, decree or order of any judicial,
regulatory or other legal or governmental agency or body, domestic
or foreign, except (in the case of clauses (i) and
(iii) above) as could not reasonably be expected to have a
Material Adverse Effect.
(m) No Consent of,
with or from any judicial, regulatory or other legal or
governmental agency or body or any third party, foreign or
domestic, is required for the execution, delivery and performance
of this Agreement or consummation of the transactions contemplated
by the Offering Documents, including the issuance, sale and
delivery of the Purchased Shares (and the issuance of the
Conversion Shares upon conversion of the Purchased Shares), except
such Consents as may be required under state or foreign securities
or blue sky laws and that the Commission must declare the
Registration Statement effective pursuant to the Registration
Rights Agreement.
(n) Except as
disclosed in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum), there is no legal or governmental proceeding
to which the Company or any Subsidiary is a party or of which any
property, operations or
7
assets of the
Company or any Subsidiary is the subject which, individually or in
the aggregate, if determined adversely to the Company or any
Subsidiary, could reasonably be expected to have a Material Adverse
Effect; to the Company’s knowledge, no such proceeding is
threatened or contemplated.
(o) The financial
statements, including the notes thereto, and the supporting
schedules included or incorporated by reference in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum) present fairly the
financial position as of the dates indicated and the cash flows and
results of operations for the periods specified of the Company and
its consolidated subsidiaries; except as otherwise stated in the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the most recent Preliminary Offering Memorandum), said
financial statements have been prepared in conformity with United
States generally accepted accounting principles applied on a
consistent basis throughout the periods involved; and the
supporting schedules included in the Offering Memorandum (or, if
the Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum) present fairly the information
required to be stated therein. No other financial statements or
supporting schedules are required to be included in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum) if the Offering
Memorandum were included in a registration statement filed pursuant
to the Securities Act. The other financial and statistical
information included or incorporated by reference in the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum) are correct and
accurate in all material respects and, with respect to such
financial information, have been prepared on a basis consistent
with that of the financial statements that are included or
incorporated by reference in the Offering Memorandum (or, if the
Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum) from which such information has
been derived.
(p) There are no
pro forma or as adjusted financial statements that would be
required to be included or incorporated by reference in the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the most recent Preliminary Offering Memorandum) if the
Offering Memorandum were included in a registration statement filed
pursuant to the Securities Act.
(q) The Company is
subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act and files reports with the Commission on its
Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”). The Common Stock is registered pursuant to
Section 12(b) of the Exchange Act and the outstanding shares of
Common Stock (other than the Purchased Shares) are listed on the
New York Stock Exchange (the “NYSE”) and the Company
has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange
Act or de-listing the Common Stock from the NYSE, nor has the
Company received any notification
8
that the
Commission or the NYSE is contemplating terminating such
registration or listing.
(r) The documents
incorporated or deemed to be incorporated by reference into the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the most recent Preliminary Offering Memorandum), at the
time they were filed with the Commission, complied in all material
respects with the requirements of the Exchange Act and the rules
and regulations thereunder. None of such documents or reports
contained or, when read together with the other information in the
Offering Memorandum, do contain (or, if the Offering Memorandum is
not in existence, the most recent Preliminary Offering Memorandum)
an untrue statement of any material fact or omitted (or, when read
together with the other information in the Offering Memorandum, do
omit) to state any material fact required to be stated therein or
necessary to make the statements therein not misleading as the case
may be, at all times up to and including the Closing Date (and if
any Optional Shares are purchased, the Additional Closing Date),
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein in the light of the
circumstances under which they were made not misleading.
(s) The Company
and its Subsidiaries maintain a system of internal accounting and
other controls sufficient to provide reasonable assurances 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 United States generally
accepted accounting principles and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and
(iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(t) Neither the
Company nor any of its affiliates (within the meaning of
Rule 144 under the Securities Act) has taken, directly or
indirectly, any action that constitutes or is designed to cause or
result in, or which could reasonably be expected to constitute,
cause or result in, the stabilization or manipulation of the price
of any security to facilitate the sale or resale of the
Securities.
(u) None of the
Company or any of the Subsidiaries or any of their respective
affiliates (as defined in Rule 501(b) of Regulation D under
the Securities Act) directly, or through any agent, (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated
in respect of any “security” (as defined in the
Securities Act) which is or could be integrated with the sale of
the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in
any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in
connection
9
with the
offering of the Securities or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities
Act. Assuming the accuracy of the Initial Purchasers’
representations and warranties set forth in Section 10 hereof,
the offer and sale of the Purchased Shares to the Initial
Purchasers in the manner contemplated by this Agreement and the
Offering Memorandum does not require registration under the
Securities Act.
(v) Except as
described in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum), no holder of any Relevant Security has any
rights to require registration of any Relevant Security as part or
on account of, or otherwise in connection with the Offering and any
of the other transactions contemplated by the Offering Documents,
and any such rights so disclosed have been effectively waived by
the holders thereof, and any such waivers remain in full force and
effect.
(w) The Company is
not and, at all times up to and including consummation of the
transactions contemplated by this Agreement and the Offering
Memorandum (or, if the Offering Memorandum is not in existence, the
most recent Preliminary Offering Memorandum), and after giving
effect to application of the net proceeds of the Offering as
described in the Offering Memorandum under the caption “Use
of Proceeds,” will not be, subject to registration as an
“investment company” under the Investment Company Act
of 1940, as amended, and is not and will not be an entity
“controlled” by an “investment company”
within the meaning of such act.
(x) No
relationship, direct or indirect, exists between or among the
Company or any affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company
or any affiliate of the Company, on the other hand, which is
required by the Exchange Act to be described in the Company’s
annual and/or quarterly reports on Form 10-K and 10-Q, as
applicable, which is not so described and described as required in
such reports. There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for
the benefit of any of the officers or directors of the Company or
any of their respective family members. The Company has not, in
violation of the Sarbanes-Oxley Act, directly or indirectly,
including through a Subsidiary, extended or maintained credit,
arranged for the extension of credit, or renewed an extension of
credit, in the form of a personal loan to or for any director or
executive officer of the Company.
(y) Except as
otherwise set forth in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum), and except for (i) the usual and
customary liens in favor of the operator under applicable operating
agreements, (ii) mechanic’s and materialman’s
liens that are not delinquent or are being disputed in good faith,
(iii) liens of the various taxing authorities for ad
valorem property taxes that are
10
not yet due, or
if due, are not delinquent, and (iv) such other liens,
encumbrances and defects that, individually or in the aggregate,
would not materially affect the value thereof or materially
interfere with the use made or to be made thereof by them, the
Company and its Subsidiaries have title to the properties described
in the Offering Memorandum (or, if the Offering Memorandum is not
in existence, the most recent Preliminary Offering Memorandum) as
being owned by them as follows: (A) with respect to producing
properties (including oil and gas wells, producing leasehold
interests and appurtenant personal property, but other than the
Willamette No. 2 well and the Walker No. 1 well, Sibley
Field, Webster Parish, Louisiana, which were sold in the first
fiscal quarter of 2005), such title is good and Defensible (as
defined below) and free and clear of all Liens; (B) with
respect to their respective non-producing leasehold properties
(including undeveloped locations on leases held by production and
those leases not held by production and including exploration
prospects described in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum) as being owned by them), such title was
investigated in accordance with customary industry procedures prior
to the Company’s acquisition thereof; (C) with respect
to their respective real property other than oil and gas interests
described in the Offering Memorandum (or, if the Offering
Memorandum is not in existence, the most recent Preliminary
Offering Memorandum) as being owned by them, such title is good and
indefeasible and free and clear of all Liens; and (D) with
respect to their respective personal property other than that
appurtenant to its oil and gas interests, such title is free and
clear of all liens, security interests, pledges, charges,
encumbrances, mortgages and restrictions. As used herein,
“Defensible” means, with respect to title to the
producing properties (including oil and gas wells and producing
leasehold interests) described in the Offering Memorandum (or, if
the Offering Memorandum is not in existence, the most recent
Preliminary Offering Memorandum) as being owned by the Company and
its Subsidiaries, that the Company and its Subsidiaries
(i) are entitled to receive not less than the net revenue
interests of such properties as set forth in the reserve report of
Netherland Sewell dated as of December 31, 2004 (the
“Netherland Sewell Report”) of all hydrocarbons and
minerals produced, saved and marketed from such properties, and
proceeds thereof, all without reduction, suspension or termination
of such interests throughout the productive life of such
properties, and (ii) are obligated to bear a share of the costs and
expenses relating to the maintenance, exploration, drilling,
completion, development, operation, plugging and abandonment of
such properties not greater than the working interests of such
properties as set forth in the Netherland Sewell Report, without
increase throughout the life of such properties.
(z) The Company
and each Subsidiary (i) owns or possesses adequate right to
use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights, licenses, formulae, customer lists, and know-how and
other intellectual property (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct
of
11
their
respective businesses as being conducted and as described in the
Offering Memorandum (or, if the Offering Memorandum is not in
existence, the Preliminary Offering Memorandum) and (ii) have
no reason to believe that the conduct of their respective
businesses does or will conflict with, and have not received any
notice of any claim of conflict with, any such right of
others.
(aa) The Company
and the Subsidiaries maintain insurance in such amounts and
covering such risks as the Company reasonably considers adequate
for the conduct of its business and the value of its properties and
as is customary for companies engaged in similar businesses in
similar industries, all of which insurance is in full force and
effect, except where the failure to maintain such insurance could
not reasonably be expected to have a Material Adverse Effect. There
are no material claims by the Company or any Subsidiary under any
such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights
clause. The Company reasonably believes that it will be able to
renew its existing insurance as and when such coverage expires or
will be able to obtain replacement insurance adequate for the
conduct of the business and the value of its properties at a cost
that could not reasonably be expected to have a Material Adverse
Effect.
(bb) Each of the
Company and the Subsidiaries has accurately prepared and timely
filed all federal, state, foreign and other tax returns that are
required to be filed by it and has paid or made provision for the
payment of all taxes, assessments, governmental or other similar
charges, including without limitation, all sales and use taxes and
all taxes which the Company or any Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third
parties, with respect to the periods covered by such tax returns
(whether or not such amounts are shown as due on any tax return),
except where the failure to file or pay could not reasonably be
expected to have a Material Adverse Effect. No deficiency
assessment with respect to a proposed adjustment of the
Company’s or any Subsidiary’ federal, state, local or
foreign taxes is pending or, to the best of the Company’s
knowledge, threatened, except where such assessment could not
reasonably be expected to have a Material Adverse Effect. The
accruals and reserves on the books and records of the Company and
the Subsidiaries in respect of tax liabilities for any taxable
period not finally determined are adequate to meet any assessments
and related liabilities for any such period in all material
respects and, since December 31, 2004, the Company and the
Subsidiaries have not incurred any liability for taxes other than
in the ordinary course of its business. There is no tax lien,
whether imposed by any federal, state, foreign or other taxing
authority, outstanding against the assets, properties or business
of the Company or any Subsidiary.
(cc) No labor
disturbance by the employees of the Company or any Subsidiary
exists or, to the best of the Company’s knowledge, is
imminent and the Company is not aware of any existing or imminent
labor disturbances by the employees of any of its or any
Subsidiary’s principal suppliers,
12
manufacturers’, customers or contractors,
which, in either case (individually or in the aggregate), could
reasonably be expected to have a Material Adverse
Effect.
(dd) No
“prohibited transaction” (as defined in either
Section 406 of the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”) or
Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time (the “Code”)), “accumulated
funding deficiency” (as defined in Section 302 of ERISA)
or other event of the kind described in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has
occurred with respect to any employee benefit plan for which the
Company or any Subsidiary would have any liability; each employee
benefit plan for which the Company or any Subsidiary would have any
liability is in compliance in all material respects with applicable
law, including (without limitation) ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title
IV of ERISA with respect to the termination of, or withdrawal from
any “pension plan”; and each 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 and nothing has
occurred, whether by action or by failure to act, which could cause
the loss of such qualification.
(ee) There has
been no storage, generation, transportation, handling, treatment,
disposal, discharge, emission or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused
by the Company or any Subsidiary (or, to the Company’s
knowledge, any other entity for whose acts or omissions the Company
is or may be liable) upon any other property now or previously
owned or leased by the Company or any Subsidiary, or upon any other
property, which would be a violation of or give rise to any
liability under any applicable law, rule, regulation, order,
judgment, decree or permit relating to pollution or protection of
human health and the environment (“Environmental Law”),
except for any violation or liability which could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There has been no disposal discharge, emission or
other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes
or other hazardous substances, except as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect. Neither the C
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