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$100,000,000
National Energy Group, Inc.
10 3/4% Senior Notes due 2006
PURCHASE AGREEMENT
October 29, 1996
BEAR, XXXXXXX & CO. INC.
XXXXX XXXXXX INC.
XXXXXXXXX & COMPANY, INC.
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Ladies and Gentlemen:
National Energy Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchasers"), upon the terms
set forth herein ("this Agreement"), $100,000,000 principal amount of the
Company's 10 3/4% Senior Notes due 2006 (the "Notes"). The Notes will be
issued pursuant to an indenture, to be dated as of November 1, 1996 (the
"Indenture") by and among the Company, National Energy Group of Oklahoma, Inc.,
a Delaware corporation (the "Guarantor"), and Bank One, Columbus, N.A., as
trustee (the "Trustee"), substantially in the form previously furnished to you.
Concurrently herewith, the Company, the Guarantor and each of the Initial
Purchasers will enter into a Registration Rights Agreement, of even date
herewith (the "Registration Rights Agreement"), substantially in the form
attached hereto as Exhibit 1. Pursuant to the Registration Rights Agreement,
the Company and the Guarantor have agreed, among other things, to file with,
and cause to be declared effective by, the Securities and Exchange Commission
(the "Commission") a registered exchange offer under the Securities Act of
1933, as amended (the "Securities Act"), relating to an offer to exchange the
Notes for a like principal amount of debt securities of the Company which have
been registered under the Securities Act identical in all material respects to
the Notes.
Capitalized terms not specifically defined herein are defined in the
Offering Memorandum referred to below, and used herein as so defined.
References to Notes shall include the Guarantee (as defined in the Indenture)
of the Guarantor.
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1. Representations and Warranties of the Company and the
Guarantor.
The Company and the Guarantor, jointly and severally, represent and
warrant to each of the Initial Purchasers as follows:
(a) The Company has prepared and furnished to the Initial
Purchasers a preliminary offering memorandum, dated October 10, 1996, with
respect to the Notes that is subject to completion (hereafter, the "Preliminary
Memorandum") and is also preparing and furnishing to the Initial Purchasers a
final offering memorandum, dated the date hereof, with respect to the Notes
that includes information with respect to the rate of interest on the Notes and
other data (hereafter, the "Definitive Memorandum" and, collectively with the
Preliminary Memorandum, the "Offering Memorandum"). The Definitive Memorandum,
at the date thereof and at all times thereafter to and including the Closing
Date (as hereinafter defined) does not and will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representation or warranty as to information
contained in or omitted from the Offering Memorandum, as amended or
supplemented, in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any of the Initial Purchasers
specifically for inclusion in the Offering Memorandum. The Preliminary
Memorandum, at the date thereof and at all times subsequent thereto to the date
hereof, did not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No stop order preventing the use of the Offering Memorandum,
or any amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Securities Act, has been issued.
(b) Subsequent to the respective dates as of which
information is given in the Definitive Memorandum, except as set forth in the
Definitive Memorandum, there has not been any material adverse change in the
business, prospects, properties, operations, condition (financial or other) or
results of operations of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of business,
and since the date of the latest balance sheet included in the Definitive
Memorandum, neither the Company nor any of its subsidiaries has incurred or
undertaken any liabilities or obligations, direct or contingent, that are
material to the Company and its subsidiaries taken as a whole, except for
liabilities or obligations that were incurred or undertaken in the ordinary
course of business or that are fully reflected in the Definitive Memorandum.
(c) This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered by the Company
and the Guarantor and each is a valid and binding agreement of the Company and
the Guarantor enforceable against them in accordance with their terms, except
insofar as (i) such enforcement may be subject to (A) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or
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hereafter in effect relating to creditors' rights generally, and (B) general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (ii) rights to indemnification and
contribution may be limited by federal or state securities laws or public
policy relating thereto. This Agreement and the Registration Rights Agreement
conform in all material respects to the description thereof contained in the
Offering Memorandum.
(d) The execution, delivery, and performance of this
Agreement, the Registration Rights Agreement, the Indenture, the Notes and the
Guarantee, and the consummation of the transactions contemplated hereby and
thereby, including the issuance, sale and delivery of the Notes and the
Guarantee, and application of the proceeds of the sale thereof as set forth in
the Offering Memorandum, will not (i) conflict with or result in a breach of
any of the terms and provisions of, or constitute a default (or an event that
with notice or lapse of time, or both, would constitute a default) or require
consent under, or, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Guarantor,
pursuant to the terms of any agreement, instrument, franchise, license or
permit to or by which the Company or the Guarantor is a party or may be bound
(other than those as to which requisite waivers or consents have been obtained
by the Company or the Guarantor), subject, in the case of the performance of
the Indenture, to the conflict with or breach of or consent required under the
Revised Credit Facility in the event the Company makes a Net Proceeds Offer or
a Change of Control Offer under the terms of the Indenture, or (ii) violate or
conflict with any provision of the certificate of incorporation, by-laws, or
equivalent instruments of the Company or the Guarantor or any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or the Guarantor
or any of their respective properties or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or the Guarantor or any of their
respective properties or assets is required for the execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Indenture, the Notes and the Guarantee, except as may be required for
compliance with federal and state securities laws in connection with the
purchase of the Notes by the Initial Purchasers and performance of the
Company's and the Guarantor's obligations under the Registration Rights
Agreement.
(e) Each of the Company and the Guarantor has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, and has the corporate power and
authority required to carry on its business as described in the Offering
Memorandum and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole (a "Material Adverse Effect").
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(f) All of the outstanding shares of capital stock of the
Guarantor have been duly and validly authorized and issued and are fully paid
and non-assessable, and are owned by the Company, free and clear of any
security interest, claim, lien, or encumbrance. On the Closing Date, there
will not be any rights granted to or in favor of any person to acquire, at
present or in the future, any such capital stock or other equity interests of
the Guarantor. The Guarantor and Boomer Marketing, Inc. are all the
subsidiaries of the Company.
(g) The authorized, issued and outstanding capital stock
of the Company, as of September 30, 1996, was (i) 100,000,000 shares of Common
Stock authorized, of which 35,327,668 shares are issued and outstanding and
(ii) 1,000,000 shares of preferred stock, par value $1.00 per share authorized
(the "Preferred Stock"), of which 52,500 shares of 10% Cumulative Preferred
Stock, Series B, 40,000 shares of 10 1/2% Cumulative Convertible Preferred
Stock, Series C, 100,000 shares of Convertible Preferred Stock, Series D and
50,000 shares of Convertible Preferred Stock, Series E, are issued and
outstanding. No additional shares of capital stock of the Company have been
authorized or issued since September 30, 1996 except as described in a schedule
to Exhibit A attached hereto. As of the Closing Date, all of the outstanding
shares of Common Stock will have been duly authorized and validly issued, fully
paid and non-assessable and will not have been issued in violation of any
preemptive or similar rights. As of the Closing Date, except as disclosed in
the Offering Memorandum or as set forth in a schedule to Exhibit A attached
hereto, there will be no outstanding securities of the Company convertible into
or evidencing the right to purchase or subscribe for any shares of capital
stock of the Company (other than the outstanding options and warrants hereafter
mentioned); there will be no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other agreements of any
character obligating the Company to issue any shares of its capital stock or
any securities convertible into or evidencing the right to purchase or
subscribe for any shares of such stock; and there will be no agreements with
respect to the voting, sale or transfer of any shares of capital stock of the
Company to which the Company is a party.
(h) The Notes have been duly and validly authorized by
all necessary corporate action and, when authenticated by the Trustee and
issued, sold and delivered by the Company pursuant to this Agreement against
payment therefor, will have been duly and validly executed, authenticated,
issued and delivered and will constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except insofar as such enforcement may
be subject to (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity). The Guarantee has been duly authorized by the Guarantor and, upon the
due authentication, execution, issuance and delivery of the Notes, will have
been duly executed, issued and delivered by the Guarantor and will constitute a
valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms and entitled to the benefits provided by
the Guarantee, except insofar as such enforcement may be subject to (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors'
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rights generally and (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). The Notes and the
Guarantee, when issued, will conform in all material respects to the
description thereof set forth in the Offering Memorandum.
(i) The Indenture conforms in all material respects to
the description thereof set forth in the Offering Memorandum, conforms in all
material respects with the requirements of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), applicable to indentures to be qualified
thereunder, has been duly and validly authorized by all necessary corporate
action and, when executed and delivered by the Company, the Guarantor and the
Trustee, will constitute a valid and binding agreement of the Company and the
Guarantor, enforceable against the Company and the Guarantor in accordance with
its terms, except insofar as such enforcement may be subject to (i) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(j) Neither the Company nor the Guarantor is in violation
of its charter or by-laws or other governing instrument or in default in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other
agreement, indenture or instrument to which it is a party or by which it or any
of its property is bound, except for those defaults that, individually or in
the aggregate, would not have a Material Adverse Effect.
(k) Except as disclosed in the Offering Memorandum, there
are no legal or governmental proceedings pending to which the Company or the
Guarantor is a party or of which any of their respective properties or assets
is the subject, and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated, which, in each case, if adversely
decided, would have, individually or in the aggregate, a Material Adverse
Effect. The descriptions contained in the Offering Memorandum of the
proceedings disclosed therein are true, complete and accurate in all material
respects. There is no contract, document, statute or regulation material to
the Company and its subsidiaries, taken as a whole, that would be required to
be described in the Offering Memorandum if it were a prospectus included in a
registration statement on Form S-3 under the Securities Act that is not so
described.
(l) Each of the Company and the Guarantor has all
necessary licenses, consents, authorizations, approvals, orders, certificates
and permits (collectively, "Licenses") of and from, and has made all
declarations and filings with and satisfied all eligibility and other similar
requirements imposed by all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, in each case as required for the conduct of the business in which it
is engaged, and each such License is in full force and effect, except to the
extent that the failure to obtain any such License or to make any such
declaration or filing or satisfy any such requirement would not have a Material
Adverse Effect. Neither the Company nor the Guarantor has received any notice
of proceedings relating to, or has any reason to believe that any
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governmental body or agency is considering limiting, suspending, modifying or
revoking, any such License that would have a Material Adverse Effect.
(m) Neither the Company nor the Guarantor has received
any notice of infringement of or conflict with asserted rights of any third
party under any trademark, copyright, patent or license as a consequence of the
activities of the Company or any of its subsidiaries, except for infringements
or conflicts the remediation of or compensation for which would not have a
Material Adverse Effect.
(n) Ernst & Young LLP, whose reports are included in the
Offering Memorandum, is an independent public accountant (as defined in the
Securities Act) with respect to the Company, the Guarantor and Alexander.
(o) The consolidated financial statements of each of the
Company and Alexander and respective notes thereto included in the Offering
Memorandum present fairly in all material respects the consolidated financial
position, results of operations, cash flows and stockholders' equity of the
Company and Alexander, respectively (as reflected in such financial statements)
in conformity with generally accepted accounting principles on the basis stated
therein at the respective dates or for the respective periods to which they
apply; such statements and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum, in all
material respects, present fairly the information purported to be shown thereby
at the respective dates or for the respective periods to which they apply and
have been prepared on a basis consistent with such financial statements and the
books and records of the Company and the other entities as to which such
information is shown. The pro forma financial statements of the Company and
its subsidiaries included in the Definitive Memorandum have been prepared in
accordance with the published rules and regulations of the Commission
applicable to pro forma financial statements and the assumptions used in the
preparation thereof are reasonable and appropriate to give pro forma effect in
all material respects to the transactions or circumstances described therein.
(p) On June 30, 1996, after giving pro forma effect to
the issuance and sale of the Notes pursuant hereto, the Company and the
Guarantor would have had an authorized and outstanding capitalization as set
forth in the Offering Memorandum under "Capitalization."
(q) The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(r) Neither the Company nor any person acting on its
behalf (provided that no representation is made as to the Initial Purchasers or
any other person acting on their behalf) has offered the Notes or the Guarantee
for sale by means of any general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act. Neither the Company nor any
of its Affiliates has offered the Notes to any person except through the
Initial Purchasers.
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Neither the Company nor any person acting on its behalf (provided that no
representation is made as to the Initial Purchasers or any other person acting
on their behalf) has offered the Notes or the Guarantee or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than the Initial Purchasers and not more than 35 other institutional investors.
Neither the Company nor any affiliate (as defined in Rule 501(b) under the
Securities Act) thereof has, directly or indirectly, or through any agent,
within the six months preceding the date hereof, sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of the sale of any
security of the same or a similar class as the Notes or the Guarantee, other
than to the Initial Purchasers pursuant to this Agreement.
(s) Since the date of the Preliminary Memorandum, none of
the Company, the Guarantor or any affiliate has (i) sold, bid or, purchased or
paid any person any compensation for soliciting purchases of the Notes or (ii)
paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company, the Guarantor or any of their
respective subsidiaries, other than to the Initial Purchasers pursuant to this
Agreement.
(t) Assuming the accuracy of the Initial Purchasers'
representations contained in Section 3 hereof and the Initial Purchasers'
compliance with their covenants therein set forth, it is not necessary, in
connection with the sale and delivery of the Notes to the Initial Purchasers
and the offer and resale of the Notes by the Initial Purchasers, in each case
in the manner contemplated by this Agreement and the Offering Memorandum, to
register the Notes under the Securities Act or to qualify the Indenture under
the Trust Indenture Act.
(u) Neither the Company nor the Guarantor (i) has
violated any environmental, safety, health or similar law or regulation
applicable to its business relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants, including, without limitation, the Clean Air Act, as amended,
the Clean Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Federal Water Pollution Control
Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Toxic Substances Control Act, as amended, the Oil Pollution Act, as amended,
the Occupational Safety and Health Act, as amended, and comparable state and
local laws and other safety, health and environmental conservation or
protection laws ("Environmental Laws"), the effect of which would be to cause,
individually or in the aggregate, a Material Adverse Effect, or (ii) lacks any
notices, permits, licenses or other approvals required of them under applicable
Environmental Laws or is violating any terms and conditions of any such notice,
permit, license or approval, the effect of which would be to cause,
individually or in the aggregate, a Material Adverse Effect. Without
limitation of the foregoing, there is as of the date hereof no litigation or
action pending or, to the best knowledge of the Company, threatened against the
Company or the Guarantor relating to any violation of any Environmental Laws
with respect to the assets or business of the Company or the Guarantor which is
required to be disclosed in the Offering Memorandum, or which might result,
individually or in the aggregate, in a Material Adverse Effect.
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(v) Neither the Company nor any of its subsidiaries has
violated any Federal, state or local law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable wage or hour laws, nor
any provisions of ERISA or the rules and regulations promulgated thereunder,
nor has the Company or the Guarantor engaged in any unfair labor practice,
which in each case might result, singly or in the aggregate, in a Material
Adverse Effect. There is (i) no significant unfair labor practice complaint
pending against the Company or the Guarantor or, to the best knowledge of the
Company, threatened against any of them, before the National Labor Relations
Board or any state or local labor relations board, and no significant grievance
or significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or the Guarantor or, to
the best knowledge of the Company, threatened against any of them, (ii) no
significant strike, labor dispute, slowdown or stoppage pending against the
Company or the Guarantor or, to the best knowledge of the Company, threatened
against the Company or the Guarantor and (iii) to the best knowledge of the
Company, no union representation question currently exists with respect to the
employees of the Company or the Guarantor and, to the best knowledge of the
Company, no union organizing activities are taking place, except (with respect
to any matter specified in clause (i), (ii) or (iii) above, individually or in
the aggregate) such as could not have a Material Adverse Effect.
(w) All material tax returns required to be filed by the
Company and the Guarantor in any jurisdiction (including foreign jurisdictions)
have been so filed (except to the extent that the failure to make any such
filing would not have a Material Adverse Effect), and all taxes, assessments,
fees and other charges shown thereon to be due and payable have been paid,
other than those being contested in good faith or those currently payable
without penalty or interest. The Company does not know of any actual or
proposed material additional tax assessments for any fiscal period against it
or the Guarantor. None of the Company's nor the Guarantor's tax returns are
under audit, and no waivers of the statute of limitations or extensions of time
with respect to any tax returns have been granted to the Company or the
Guarantor, except such as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(x) The Company and the Guarantor maintain insurance
covering their properties, operations, personnel and businesses. In the
Company's reasonable judgment, such insurance insures against such losses and
risks as are adequate in accordance with customary industry practice to protect
the Company and the Guarantor and their businesses. Neither the Company nor
the Guarantor has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to be
made in order to continue such insurance. All such insurance is outstanding
and duly in force on the date hereof and will be outstanding and duly in force
on the Closing Date.
(y) The Company and the Guarantor have good and
defensible title to their interests in oil and gas properties and good and
marketable title to all other real and personal property owned by them, in each
case free and clear of all liens and defects except such as are described in
the Offering Memorandum or would not result in a Material Adverse Effect and do
not materially interfere with the use made or proposed to be made of such
properties by the Company
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and the Guarantor; and any real property and buildings held under lease by the
Company and the Guarantor are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect and do not materially interfere with the use made or proposed to be made
of such property and buildings by the Company and the Guarantor. Except to the
extent described in the Offering Memorandum, the leases, options to lease,
drilling concessions or other arrangements held by the Company and the
Guarantor reflect in all material respects the rights of the Company and the
Guarantor to develop the unexplored and undeveloped acreage to produce
undeveloped oil and natural gas reserves, as described in the Offering
Memorandum. The Company and the Guarantor have exercised reasonable diligence,
with respect to acquiring or otherwise procuring such leases, options to lease,
drilling concessions and other arrangements, although the investigation of
record title made by the Company and the Guarantor generally involved no more
than a preliminary review of local records, as is customary in the industry.
(z) The information which was supplied by the Company to
Netherland, Xxxxxx & Associates, Inc. ("NSA"), independent petroleum
engineers, for purposes of evaluating the oil and gas reserves of the Company
and Alexander as of December 31, 1995 and June 30, 1996, including, without
limitation, production, costs of operation and development, current prices for
production, agreements relating to current and future operations and sales of
production, was true and correct in all material respects on the dates such
estimates were made and such information was supplied and was prepared in
accordance with customary industry practices, as indicated in the letters of
NSA included in the Definitive Memorandum at Annexes A-1 through C (the "NSA
Letters"); NSA was, as of the date of the NSA Letters, and is, as of the date
hereof, independent with respect to the Company and the Guarantor; other than
normal production of the reserves and intervening product price fluctuations,
the Company is not aware of any facts or circumstances that would result in a
materially adverse change in the reserves, or the present value of future net
cash flows therefrom, as described in the Definitive Memorandum and as
reflected in the NSA Letters and the reserve report referenced therein;
estimates of such reserves and present values as described in the Definitive
Memorandum and reflected in the NSA Letters and the reserve report referenced
therein comply in all material respects to the applicable requirements of
Regulation S-X and Industry Guide 2 under the Securities Act. Except as set
forth in the Definitive Memorandum, there has been no event, trend or condition
that would have the effect of materially revising downward the estimates of pro
forma proved reserves of the Company as of June 30, 1996.
(aa) Except as (i) disclosed to the Initial Purchasers in
writing, (ii) disclosed in or contemplated by the Definitive Memorandum or
(iii) not required to be disclosed in the Definitive Memorandum, the Company is
not engaged in any negotiations, nor is it a party to any existing agreements,
arrangements or understandings, with respect to any acquisitions, combinations
or dispositions of assets or securities that would be material to the Company
and its subsidiaries, taken as a whole.
(bb) In reliance upon and subject to the accuracy of the
representations of the Initial Purchasers contained in Section 3 hereof,
neither the execution and delivery of this Agreement and the Registration
Rights Agreement nor the sale of the Notes to be purchased by the Initial
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Purchasers is a prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code), with respect to any employee benefit plans
sponsored by the Company or the Guarantor, that is not exempt by statute,
regulation or class exemption. The Company is in compliance in all material
respects with all presently applicable provisions of ERISA; no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any material liability;
the Company has not incurred and does not expect to incur liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 (whether or not waived) or 4971 of the
Code; and each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, that would cause the loss of such qualification except,
in each case, for any such event as would not have a Material Adverse Effect.
(cc) Other than discounts and commissions of the Initial
Purchasers as described in the Definitive Memorandum, no fees or commissions
will be payable by the Company to any broker, finder or investment banker with
respect to the issuance and sale of any of the Notes pursuant to the terms of
this Agreement.
(dd) No statement, representation or warranty made by the
Company or the Guarantor in this Agreement or the Registration Rights Agreement
or made in any certificate or document required by any of the foregoing
agreements to be delivered by the Company or the Guarantor (or their agents,
attorneys or representatives) to the Initial Purchasers, is, was or will be,
when made, inaccurate, untrue or incorrect in any material respect.
(ee) Neither the Company nor any agent thereof acting on
its behalf has taken, and none of them will take, any action that might cause
this Agreement or the issuance or sale of the Notes or the Exchange Notes or
the application of proceeds thereof to violate Section 7 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or any regulation issued
pursuant thereto, including, without limitation, Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System, in each case as in effect now
or as the same may hereafter be in effect on the Issue Date.
(ff) The Notes, when issued, will not be of the same class
(within the meaning of Rule 144A under the Securities Act) as other securities
of the Company that are listed on a national securities exchange registered
under Section 6 of the Exchange Act, or quoted in a U.S. automated interdealer
quotation system of a registered national securities association.
(gg) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any governmental
agency that prevents the issuance of the Notes or prevents or suspends the use
of the Offering Memorandum; no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction has been issued
that prevents the issuance of the Notes or prevents or suspends the sale of the
Notes in any jurisdiction referred to in
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Section 4(e) hereof; and every request of any securities authority or agency of
any jurisdiction for additional information has been complied with in all
material respects.
(hh) There are no holders of securities of the Company,
the Guarantor or any of their respective subsidiaries who, by reason of the
execution by the Company and the Guarantor of this Agreement, the Registration
Rights Agreement, the Indenture or the Notes, or the consummation by the
Company and the Guarantor of the transactions contemplated hereby and thereby,
have the right to request or demand that the Company, the Guarantor or any of
their respective subsidiaries register, under the Securities Act or analogous
foreign laws and regulations, securities held by them in connection with the
Exchange Offer.
(ii) None of the Company, the Guarantor or any of their
respective subsidiaries intends to, nor does it believe that it will, incur
debts beyond its ability to pay such debts as they mature. The present fair
saleable value of the assets of the Company, the Guarantor and their respective
subsidiaries, taken as a whole, exceeds the amount that will be required to be
paid on or in respect of the existing debts and other liabilities (including
contingent liabilities) of the Company, the Guarantor and their respective
subsidiaries as they become absolute and matured. The assets of the Company,
the Guarantor and their respective subsidiaries, taken as a whole, do not
constitute unreasonably small capital to carry out the business of the Company,
the Guarantor and their respective subsidiaries, taken as a whole, as conducted
or as proposed to be conducted. Upon the issuance of the Notes, the present
fair saleable value of the assets of the Company, the Guarantor and their
respective subsidiaries, taken as a whole, will exceed the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company, the Guarantor
and their respective subsidiaries, taken as a whole, as they become absolute
and matured. Upon the issuance of the Notes, the assets of the Company, the
Guarantor and their respective subsidiaries, taken as a whole, will not
constitute unreasonably small capital to carry out their businesses as now
conducted, including the capital needs of the Company, the Guarantor and their
respective subsidiaries, taking into account the projected capital requirements
and capital availability of the Company and its subsidiaries, taken as a whole.
(jj) Each certificate signed by any officer of the Company
and the Guarantor and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty by the
Company and the Guarantor, as the case may be, to the Initial Purchasers as to
the matters covered thereby.
2. Purchase, Sale and Delivery of the Notes.
(a) Subject to the terms and conditions and in reliance
upon the representations, warranties and covenants of the Company, the
Guarantor and the Initial Purchasers herein set forth, (i) the Company agrees
to sell to the Initial Purchasers and the Initial Purchasers agree to purchase
from the Company $100,000,000 principal amount of Notes, in the respective
principal amounts set forth opposite their names on Schedule I hereto, at a
price of 96.75% of their principal amount and
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(ii) the Guarantor agrees to execute and deliver the Guarantee with respect to
all Notes sold hereby to the Initial Purchasers. The obligations of the
Initial Purchasers under this Section 2(a) are several and not joint.
(b) Delivery of the Notes against payment of the purchase
price therefor shall be made at the offices of Xxxxxxxxxxx & Price, L.L.P.
located at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, or such other
location as may be mutually acceptable to the Initial Purchasers and the
Company and the Guarantor. Such delivery and payment shall be made at 10:00
a.m., New York time, on the third full business day next following the date of
this Agreement, or at such other time as shall be agreed upon by the Initial
Purchasers and the Company and the Guarantor. The time and date of such
delivery and payment are herein called the "Closing Date." One or more
certificates evidencing beneficial interests in the Notes registered in the
name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), or in
the name of such other eligible nominee of DTC identified by the Initial
Purchasers to the Company and the Guarantor in writing at least two full
business days prior to the Closing Date, in the principal amounts corresponding
to the aggregate principal amount of the Notes (the "Global Notes") sold to
Qualified Institutional Buyers (as defined in Section 3 below) and certificates
evidencing one or more individually denominated Notes registered in such names
and in such denominations as the Initial Purchasers may request in writing at
least two full business days prior to the Closing Date, in the principal
amounts corresponding to the aggregate principal amount of the Notes (the
"Individual Notes") sold to Accredited Institutions (as defined in Section 3
below) that are not Qualified Institutional Buyers shall be delivered to the
Initial Purchasers by the Company, against payment of the purchase price
therefor by certified or official bank check payable in New York Clearing House
funds to the order of the Company and the Guarantor.
(c) The Company and the Guarantor will permit the Initial
Purchasers to examine and package the Global Notes and the Individual Notes for
delivery at least one full business day prior to the Closing Date.
(d) It is understood that each certificate evidencing a
Note shall bear a legend substantially to the following effect:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH IS AN
INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT
IT WILL
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NOT PRIOR TO THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD AS
COMPLIES WITH RULE 144 UNDER THE SECURITIES ACT) AFTER THE LATER OF
THE DATE OF ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST DATE ON
WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS
SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") RESELL, PLEDGE OR
OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER, (B) TO A
PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS
OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(COPIES OF SUCH FORM CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (E) PURSUANT TO THE
RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN
EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE
DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL
TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS NOT A QUALIFIED
INSTITUTIONAL BUYER, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY
SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE.
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3. Offering and Resale of the Notes.
The Initial Purchasers have advised the Company and the Guarantor that
it is their intention, as promptly as they deem appropriate after the Company
and the Guarantor shall have furnished them with copies of the Definitive
Memorandum (as specified in Section 4(b) hereof), to resell the Notes but only
pursuant to the procedures and upon the terms and subject to the conditions set
forth in this Agreement and the Definitive Memorandum. Each Initial Purchaser
represents and warrants to the Company and the Guarantor that it is a Qualified
Institutional Buyer and an Accredited Investor (within the meaning of Rule
501(a) of Regulation D under the Securities Act). In connection therewith,
each Initial Purchaser represents and warrants to and agrees with the Company
and the Guarantor (A) that the Notes have been and will be offered for sale and
will be sold by it solely to (i) persons reasonably believed by it to be
"Qualified Institutional Buyers" purchasing for their own account or for the
account of other Qualified Institutional Buyers within the meaning of Rule 144A
under the Securities Act and that, in connection with each such sale, it has
taken or will take reasonable steps to ensure that the purchaser of such Notes
is aware that such sale is being made in reliance on Rule 144A and/or (ii) a
limited number of persons that are "Accredited Investors" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act that are institutions
(each, an "Accredited Institution"), and each of which provides to such Initial
Purchaser a letter in the form of Annex D to the Offering Memorandum, and (B)
that such Initial Purchaser has not offered and will not offer the Notes for
sale by means of any general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D under the Securities Act or in any
manner involving a public distribution or offering of the Notes within the
meaning of the Securities Act. The Initial Purchasers agree to use their
reasonable efforts to deliver a Definitive Memorandum to each person to whom
the Notes are resold by the Initial Purchasers substantially contemporaneously
with the Closing Date.
4. Agreements of the Company and the Guarantor.
The Company and the Guarantor agree with the Initial Purchasers as
follows:
(a) The Company and the Guarantor will advise the Initial
Purchasers promptly (and, if so requested by the Initial Purchasers, will
confirm such advice in writing) of (i) the occurrence, during the period
referred to in paragraph (d) below, of any event of which the Company and the
Guarantor have knowledge that makes any statement of a material fact made in
the Definitive Memorandum untrue or that requires the addition of any statement
of a material fact to, or other material change in, the Definitive Memorandum
in order to make the statements therein, in light of the circumstances existing
when it is delivered to a purchaser, not misleading and (ii) the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of the Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority.
(b) The Company and the Guarantor will furnish to the
Initial Purchasers and to those persons whom the Initial Purchasers identify to
the Company and the Guarantor such number
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of copies of the Definitive Memorandum, and any amendments thereof or
supplements thereto, as the Initial Purchasers may reasonably request.
(c) The Company and the Guarantor (i) will not make any
amendment of or supplement to the Offering Memorandum regarding which the
Initial Purchasers shall not previously have been consulted or use any such
proposed amendment or supplement to which the Initial Purchasers shall
reasonably and in good faith object and (ii) shall promptly prepare, upon the
Initial Purchaser's request, any amendment or supplement to the Offering
Memorandum that in the opinion of counsel to the Initial Purchasers may be
necessary or advisable in connection with resales by the Initial Purchasers
pursuant to the procedures and upon the terms and subject to the conditions set
forth in the Offering Memorandum.
(d) If, during the period from the date of the Definitive
Memorandum through the Closing Date, and for so long thereafter as in the
opinion of the Initial Purchasers' counsel the Definitive Memorandum is
required to be delivered in connection with resales of the Notes by the Initial
Purchasers, any event shall occur as a result of which it becomes necessary to
amend or supplement the Definitive Memorandum in order that the Definitive
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in light of the circumstances existing when the Definitive
Memorandum is or is to be delivered to a purchaser, or if it becomes necessary
to amend or supplement the Definitive Memorandum to comply with any law, the
Company and the Guarantor promptly will prepare an appropriate amendment of or
supplement to the Definitive Memorandum so that the Definitive Memorandum, as
so amended or supplemented, does not include such untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading, in light of the circumstances existing when
it is so delivered, or so that the Definitive Memorandum will comply with law,
and the Company and the Guarantor will furnish to the Initial Purchasers such
number of copies thereof as they reasonably may request.
(e) The Company and the Guarantor will cooperate with the
Initial Purchasers and their counsel in connection with the registration or
qualification of the Notes under the securities or "Blue Sky" laws of such
jurisdictions as they may request, will continue such qualification in effect
for so long as required to permit the continuance of sales of and dealings in
the Notes within such jurisdictions to complete the resale by them of all of
the Notes as specified in Section 3 hereof, and will file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that in connection
therewith neither the Company nor the Guarantor shall be required to qualify as
a foreign corporation or broker-dealer or to file any general consent to
service of process in any jurisdiction in which it is not already so qualified
or subject.
(f) So long as any of the Notes are outstanding, the
Company and the Guarantor will furnish to the Initial Purchasers as soon as
available a copy of each report mailed by the Company and the Guarantor to
holders of Common Stock of the Company and the Guarantor or filed by the
Company and the Guarantor with the Commission, whether such report or filing is
required
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by the Indenture or otherwise, and such other publicly available information
concerning the Company and the Guarantor as the Initial Purchasers reasonably
may request.
(g) So long as and at any time that the Notes are
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act and the Company (or the Guarantor, if
applicable) is not subject to Section 13 or 15(d) of the Exchange Act, the
Company and the Guarantor, upon request of any holder of the Notes, will
furnish to such holder, and to any prospective purchaser or purchasers of the
Notes, designated by such holder, information satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Securities Act.
(h) The Company and the Guarantor will use their best
efforts, and will cooperate with the Initial Purchasers, to cause the Notes to
be eligible for inclusion in the Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market of the National Association of Securities
Dealers, Inc. ("NASD").
(i) The Company and the Guarantor will not, and will not
authorize or knowingly permit any person acting on their behalf to, offer to
sell or solicit offers to buy any of the Notes by means of any form of general
solicitation or general advertising within the meaning of Section 502(c) under
Regulation D under the Securities Act or in any manner involving a public
offering or distribution of the Notes within the meaning of the Securities Act.
(j) The Company and the Guarantor shall not take any
action or omit to take any action, which taking or omission, as the case may
be, would result in the Company and the Guarantor, or any of them, becoming an
"investment company" or a company controlled by an "investment company" within
the meaning of, or require any or all of the Company and the Guarantor to
register as an "investment company" under, the Investment Company Act.
(k) Whether or not the transaction contemplated by this
Agreement is consummated or this Agreement becomes effective or is terminated,
to pay all costs, expenses, fees and taxes incident to the performance of the
obligations of the Company and the Guarantor hereunder, including in connection
with: (i) the preparation, printing, filing and distribution of the Offering
Memorandum (including, without limitation, financial statements) and all
amendments and supplements thereto required pursuant hereto, (ii) the
preparation (including, without limitation, duplication costs) and delivery of
all preliminary and final Blue Sky Memoranda and all other agreements,
memoranda, correspondence and all other documents prepared and delivered in
connection herewith and with resales by the Initial Purchasers (other than the
cost of preparation of this Agreement and the Registration Rights Agreement),
(iii) the issuance, transfer and delivery of the Notes to the Initial
Purchasers, (iv) the qualification or registration of the Notes for offer and
sale under the securities or Blue Sky laws of the several states (including,
without limitation, the cost of printing and mailing a preliminary and final
Blue Sky Memorandum and the reasonable fees and disbursements of counsel for
the Initial Purchasers relating thereto), (v) furnishing such copies of the
Offering Memorandum, and all amendments and supplements thereto, as may be
requested for use in connection with resales by the Initial Purchasers, (vi)
the preparation of certificates for the
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Notes (including, without limitation, printing and engraving thereof), (vii)
the fees, disbursements and expenses of the Company's and the Guarantor's
counsel and accountants, (viii) all fees and expenses (including fees and
expenses of counsel) of the Company and the Guarantor in connection with the
approval of the Notes by DTC for "book entry" transfer, (ix) rating the Notes
by the rating agencies, (x) the reasonable fees and expenses of the Trustee and
its counsel, (xi) the performance by the Company and the Guarantor of their
other obligations under this Agreement, the Registration Rights Agreement, the
Indenture and the Notes, and the consummation of the transactions contemplated
hereby and thereby and (xii) "roadshow" travel and other expenses incurred in
connection with the marketing and sale of the Notes; provided that, except as
provided in this Section 4(k) and in Section 8(c), the Initial Purchasers shall
pay their own costs and expenses, including the costs and expenses of their
counsel.
(l) The Company and the Guarantor will apply the net
proceeds from the sale of the Notes as set forth under the caption "Use of
Proceeds" in the Definitive Memorandum.
(m) The Company and the Guarantor will not (and will
direct their affiliates not to) take, directly or indirectly, any action that
is designed, or might reasonably be expected, to cause or result in the
stabilization or manipulation of the price of any security of the Company and
the Guarantor to facilitate the sale or resale of the Notes.
(n) During the period beginning from the date hereof and
continuing to and including the date which is six months after the Closing
Date, neither the Company nor any affiliate thereof shall sell, offer for sale,
solicit offers to buy or otherwise negotiate in respect of the sale of any
"security" (as defined in Section 2(1) of the Securities Act) of the same or a
similar class as the Notes, other than as contemplated by the Registration
Rights Agreement.
(o) The Company and the Guarantor will use their
reasonable best efforts to do and perform all things required or necessary to
be done and performed under this Agreement by them prior to the Closing Date
and to satisfy all conditions precedent to the delivery of the Notes.
(p) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Notes, in a manner that
would require the registration under the Securities Act of the sale to the
Initial Purchasers or the resale by the Initial Purchasers to the Qualified
Institutional Buyers or the Accredited Investors of the Notes or to take any
action that would result in the resales by the Initial Purchasers not being
exempt from registration under the Securities Act.
(q) To comply with all of their agreements set forth in
the Registration Rights Agreement and all agreements set forth in the
representations letter of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(r) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company and the Guarantor, copies of any
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unaudited interim financial statements for any period subsequent to the periods
covered by the financial statements appearing in the Offering Memorandum.
5. Indemnification.
(a) The Company and the Guarantor, jointly and severally,
agree to indemnify and hold harmless each Initial Purchaser, its directors,
officers and employees and each person, if any, who controls such Initial
Purchaser, now or hereafter, and their directors, officers and employees within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (the Initial Purchasers and each such person being sometimes hereafter
referred to as an "Indemnified Person"), from and against any and all losses,
claims, damages, awards, liabilities and judgments (collectively, "Losses")
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in the Offering Memorandum or in any amendments
thereof or supplements thereto (including, without limitation, the financial
statements, accounting and statistical data included therein and the related
notes thereto), or by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such Losses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or omission based
upon the information relating to such Initial Purchaser furnished by it to the
Company and the Guarantor expressly for use therein and used in conformity
therewith; provided, however, that the indemnity obligations arising under this
Section 5(a) with respect to the Preliminary Memorandum, shall not inure to the
benefit of an Initial Purchaser and its controlling persons and their
respective directors, officers and employees if the person asserting any such
Losses purchased the Notes from such Initial Purchaser and if a copy of the
Definitive Memorandum (as then amended or supplemented if the Company and the
Guarantor shall have timely furnished any amendments thereof or supplements
thereto), was not sent or given by such Initial Purchaser or on its behalf to
such person at or prior to the written confirmation of the sale of the Notes to
such person, and if the Definitive Memorandum (as then amended or supplemented
if the Company and the Guarantor shall have timely furnished any amendments
thereof or supplements thereto) would have cured the defect giving rise to such
Losses. This indemnity is and will be in addition to any liability which the
Company and the Guarantor otherwise may have.
(b) In case any action or proceeding (including any
governmental investigation or inquiry) shall be brought or asserted against an
Indemnified Person, or notice of any such claim is received, with respect to
which indemnity may be sought against the Company or the Guarantor, such
Indemnified Person shall promptly notify the Company and the Guarantor in
writing and the Company and the Guarantor shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person and the payment of all reasonable fees and expenses of such defense;
provided that the failure by any such Indemnified Person to so notify the
Company and the Guarantor shall not relieve the Company and the Guarantor of
their indemnification obligations under Sections 5(a) and (b) hereof, except to
the extent that the Company and the Guarantor are materially prejudiced or
forfeit substantive rights and defenses by reason of such failure. Such
Indemnified Person shall have the right to employ separate counsel in
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any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person,
unless (i) the employment of such counsel has been authorized in writing by the
Company and the Guarantor, (ii) the Company and the Guarantor have failed
promptly to assume the defense and employ counsel (reasonably satisfactory to
such Indemnified Person), or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and the
Company or the Guarantor, and such Indemnified Person shall have been advised
by such counsel that there may be one or more legal defenses available to such
Indemnified Person that are different from or additional to those available to
the Company or the Guarantor, as the case may be, and in the reasonable
judgment of such counsel it is advisable for such Indemnified Party to employ
separate counsel (in all of which cases, if such Indemnified Person notifies
the Company and the Guarantor in writing that it elects to employ separate
counsel at the expense of the Company and the Guarantor, the Company and the
Guarantor shall not have the right to assume the defense of such action on
behalf such Indemnified Person; it being understood, however, that the Company
and the Guarantor shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for such Indemnified Person and any other
Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons (which shall be reasonably satisfactory to the Company and
the Guarantor) and that all such fees and expenses shall be reimbursed promptly
as they are billed. The Company and the Guarantor shall not be liable for any
settlement of any such action or proceeding effected without their written
consent (not to be unreasonably withheld) and if settled with their written
consent or if there is a final, unappealable judgment for the plaintiff, the
Company and the Guarantor agree to jointly and severally indemnify and hold
harmless such Indemnified Persons from and against any loss or liability by
reason of such settlement or judgment. Without limiting the generality of the
foregoing, the Company and the Guarantor shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or has been threatened to be made a party where indemnity could have been
sought hereunder by such Indemnified Person unless the Company and the
Guarantor shall have obtained the prior written consent of such Indemnified
Person (not to be unreasonably withheld); provided, however, that the Company
and the Guarantor may effect such a settlement without the consent of such
Indemnified Person if such settlement includes an unconditional release of such
Indemnified Person from all liability for claims that are the subject matter of
such proceeding or the Company and the Guarantor indemnify such Indemnified
Person in writing and post a bond for an amount equal to the maximum liability
for all such claims as contemplated above or provide other security for such
indemnity as shall be reasonably satisfactory to such Indemnified Person.
(c) Each Initial Purchaser agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantor, their
directors, officers and employees and each person, if any, controlling the
Company and the Guarantor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all Losses to
the same extent as the foregoing indemnity from the Company and the Guarantor
to the Initial Purchasers but only with respect to information relating to such
Initial Purchaser furnished in writing by such Initial
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Purchaser expressly for use in the Offering Memorandum or any amendment thereof
or supplement thereto and used in conformity therewith; provided, however, that
in no case shall any Initial Purchaser be liable or responsible for any amount
in excess of the discounts and commissions received by the Initial Purchaser in
connection with the sale of the Notes, as set forth on the cover page of the
Offering Memorandum. In case any action or proceeding shall be brought against
the Company and the Guarantor, any of their directors, any of their officers or
any such controlling person based on the Offering Memorandum or any amendment
thereof or supplement thereto and in respect of which indemnity may be sought
against an Initial Purchaser, such Initial Purchaser shall have the same rights
and duties as are given to the Company and the Guarantor by Section 5(b) hereof
(except that if the Company and the Guarantor shall have assumed the defense
thereof, such Initial Purchaser shall not be required to do so, and in such
case such Initial Purchaser may employ separate counsel therein and participate
in the defense thereof but the fees and expenses of such counsel shall be at
such Initial Purchaser's expense), and the Company and the Guarantor, their
directors, officers and employees and each such controlling person shall have
the same rights and duties as are given to such Initial Purchaser by Section
5(b) hereof. The Company and the Guarantor acknowledge that the only
information furnished in writing by or on behalf of any Initial Purchaser
expressly for use in the Offering Memorandum consists of the following: (i) the
last full paragraph of text appearing on the outside front cover page of the
Definitive Memorandum, (ii) the names of the Initial Purchasers in the form
they appear on the outside front cover page of the Definitive Memorandum and in
the table under the caption "Plan of Distribution" in the Definitive
Memorandum, (iii) the first sentence of the second paragraph following the
table under the caption "Plan of Distribution" in the Definitive Memorandum,
(iv) the fifth and sixth sentences of the third paragraph following the table
under the caption "Plan of Distribution" in the Definitive Memorandum and (v)
the seventh and eighth sentences under the caption "Risk Factors - Absence of a
Public Market for the Notes" in the Definitive Memorandum.
(d) If the indemnification provided for in this Section 5
is unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any Losses (other than by reason of exceptions provided in
such Section), then the party who would otherwise be responsible for such
indemnification, in lieu of, or in addition to, indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such Losses (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party on the one hand and
the indemnified party on the other hand from the offering of the Notes or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party and the indemnified party in connection with the statements
or omissions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Guarantor and an Initial Purchaser shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company and the Guarantor, and the total discounts
and commissions received by such Initial Purchasers, bear to the total price of
the Notes to investors, in each case as set forth in the table on the cover
page of the Definitive Memorandum. The relative fault of the Company and the
Guarantor and such Initial Purchaser shall be determined by reference to, among
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other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Guarantor or such Initial Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Guarantor and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 5(d)
were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of Losses shall be deemed to include, subject to the
limitations set forth above, any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 5, each Initial Purchaser shall not be required to contribute any
amount in excess of the amount of the total discount applicable to the Notes
purchased by such Initial Purchaser. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5(d), each
director, officer and employee of an Initial Purchaser or the Company and the
Guarantor, and each person, if any, who controls an Initial Purchaser or the
Company and the Guarantor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as such Initial Purchaser or the Company and the Guarantor, as the
case may be.
6. Conditions of the Initial Purchasers' Obligations.
The Initial Purchasers' obligations to purchase and pay for the Notes
shall be subject to (i) the accuracy of the representations and warranties of
the Company and the Guarantor herein contained as of the date hereof and as of
the Closing Date, (ii) the absence in any certificates, opinions, written
statements or letters furnished pursuant to this Section 6 to the Initial
Purchasers or to their counsel, of any qualification or limitation not
previously approved by the Initial Purchasers, (iii) the performance by the
Company and the Guarantor of their obligations hereunder required to be
performed on or prior to the Closing Date, and (iv) the following additional
conditions:
(a) Since the date of the latest balance sheet included
in the Definitive Memorandum: (i) there shall not have been any material
adverse change, or any development involving a prospective material adverse
change, in the capital stock or in the long-term debt of the Company or the
Guarantor from that set forth in or contemplated by the Definitive Memorandum,
(ii) the Company shall have no liability or obligation, direct or contingent,
that is material to the Company and the Guarantor, taken as a whole, other than
those reflected in the Definitive Memorandum; and (iii) there shall not have
been any material adverse change, or any development involving a prospective
material adverse change, in the financial condition, business, properties,
prospects, oil and gas reserves, net worth or results of operations of the
Company and the Guarantor taken as a whole, except, in each case, as expressly
described in the Definitive Memorandum.
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(b) The representations and warranties made by the
Company and the Guarantor herein shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date; and the Company and the Guarantor
shall have complied in all material respects with all agreements hereunder
required to be performed by the Company and the Guarantor.
(c) As to each Initial Purchaser, the purchase of and
payment for the Notes to be purchased by such Initial Purchaser hereunder shall
not be prohibited or enjoined (temporarily or permanently) by any applicable
law or governmental regulation, order or other restriction.
(d) The Definitive Memorandum shall have been printed and
copies distributed to the Initial Purchasers not later than 10:00 a.m., New
York time, on the day following the date of this Agreement or at such later
date and time as to which the Initial Purchasers may agree, and no stop order
suspending the qualification or exemption from qualification of the Notes in
any jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending or
threatened.
(e) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the issuance
of the Notes; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the best knowledge of the Company and the
Guarantor, threatened against, the Company, the Guarantor or any of their
respective subsidiaries before any court or arbitrator or any governmental
body, agency or official that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect; and no stop order shall have
been issued preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or which could reasonably by expected to have a Material
Adverse Effect, on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its subsidiaries
taken as a whole.
(f) On the Closing Date, the Initial Purchasers shall
have received the opinion of Xxxxxxxxxxx & Price, L.L.P., counsel to the
Company, dated the Closing Date, addressed to the Initial Purchasers, and in
form and scope reasonably satisfactory to the Initial Purchasers' counsel,
substantially as set forth in Exhibit A hereto.
(g) On the Closing Date, the Initial Purchasers shall
have received a certificate, dated the Closing Date, signed by each of the
Chairman of the Board and Chief Financial Officer or the President and the
Chief Financial Officer of the Company and the Guarantor, and such other
certificates of executive officers as the Initial Purchasers may specify
confirming the matters set forth in paragraphs (a) and (b) of this Section 6.
(h) On the Closing Date, the Initial Purchasers shall
have received from Xxxxxxx & Xxxxx L.L.P., an opinion, dated the Closing Date,
addressed to the Initial Purchasers, with respect to the Company, the
Guarantor, the Offering Memorandum, the offer, sale and resale of the
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Notes and other related matters as the Initial Purchasers reasonably may
require, and the Company shall have furnished to such firm such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(i) Concurrently with the execution and delivery of this
Agreement, the Initial Purchasers shall have received from Ernst & Young LLP,
and on the Closing Date, the Initial Purchasers shall have received from Ernst
& Young LLP, a letter addressed to the Initial Purchasers, dated the date of
its delivery, substantially in the form and to the effect and with respect to
such matters as shall have been previously agreed upon by the Initial
Purchasers.
(j) Concurrently with the execution and delivery of this
Agreement, the Initial Purchasers shall have received from NSA, and on the
Closing Date, the Initial Purchasers shall have received from NSA, a letter
addressed to the Initial Purchasers, dated the date of its delivery,
substantially in the form and to the effect and with respect to such matters as
shall have been previously agreed upon by the Initial Purchasers.
(k) On the Closing Date, the Company and the Guarantor
shall have executed and delivered the Registration Rights Agreement and the
Indenture.
(l) On or prior to the Closing Date, the Revised Credit
Facility shall have been executed and delivered by the Company and the banks
executing same.
(m) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers reasonably may request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the Initial
Purchasers or to their counsel pursuant to this Section 6 shall not be
reasonably satisfactory in form and scope in all material respects to the
Initial Purchasers and to their counsel, all of the Initial Purchasers'
obligations hereunder may be cancelled by them at, or at any time prior to, the
Closing Date. Notice of such cancellation shall be given to the Company and
the Guarantor in writing or by telephone, telecopy, telex or telegraph,
confirmed in writing.
7. Effective Date of Agreement and Termination.
(a) This Agreement shall become effective upon its
execution.
(b) This Agreement may be terminated at any time prior to
the Closing Date by the Initial Purchasers upon notice to the Company and the
Guarantor if any of the following has occurred: (i) since the respective dates
as of which information is provided in the Definitive Memorandum, any material
adverse change which would, in the Initial Purchasers' reasonable judgment,
make it impracticable to market the Notes on the terms and in the manner
contemplated
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in the Offering Memorandum, (ii) any outbreak or escalation of hostilities or
other national or international calamity or crisis or material adverse change
in economic conditions, if the effect of such outbreak, escalation, calamity,
crisis or change on the financial markets of the United States would, in the
Initial Purchasers' reasonable judgment, make it impracticable to market the
Notes on the terms and in the manner specified in the Offering Memorandum,
(iii) any suspension of trading in securities on the New York Stock Exchange,
Inc., the American Stock Exchange or The Nasdaq Stock Market or the imposition
of any limitation on prices (other than limitations on hours or number of days
of trading) for securities on any such exchange or The Nasdaq Stock Market,
(iv) the reenactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other governmental
authority which in the Initial Purchasers' reasonable judgment materially and
adversely affects, or will materially and adversely affect, the business or
operations of the Company and its subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities, (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs that in the
Initial Purchasers' reasonable judgment could have a material adverse effect on
the financial markets in the United States, or (vii) there shall have been such
a material adverse change in general economic, political or financial
conditions or if the effect of international conditions on the financial
markets in the United States shall be such as, in the Initial Purchasers'
judgment, makes it inadvisable or impracticable to market the Notes on the
terms and in the manner contemplated in the Offering Memorandum.
8. Miscellaneous.
(a) Notices given pursuant to any provision of this
Agreement shall be given by facsimile transmission or by notice in writing hand
delivered or by certified mail, postage prepaid, return receipt requested. All
such notices shall be sent to the facsimile transmission number or address (as
the case may be) as follows:
(i) if to the Company, to:
National Energy Group, Inc.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: President
Fax Number: (000) 000-0000
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with a copy to:
Xxxxxxxxxxx & Price, L.L.P.
NationsBank Plaza
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxxxxx
Fax Number: (000) 000-0000
(ii) if to the Initial Purchasers, to:
Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Finance Department
Fax Number: (000) 000-0000
and
Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Finance Department
Fax Number: (000) 000-0000
and
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Finance Department
Fax Number: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax Number: (000) 000-0000
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(b) The respective indemnities, contribution
agreements, representations, warranties and other statements of the
Company and the Guarantor and the Initial Purchasers set forth in or
made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the
Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the officers or directors of
any of the Company and the Guarantor or any controlling person of the
Company and the Guarantor and (ii) acceptance of the Notes and payment
for them hereunder. The respective agreements, indemnities and other
statements set forth in Sections 4(k) and 5 hereof shall remain in
full force and effect, regardless of any termination or cancellation
of this Agreement.
(c) If this Agreement shall be terminated by the Initial
Purchasers because of any failure or refusal on the part of the Company and the
Guarantor to comply with the terms or to fulfill any of the conditions of this
Agreement, the Company and the Guarantor shall reimburse the Initial Purchasers
for all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by them in connection with the offering of the
Notes.
(d) Except as otherwise provided, this Agreement has been
and is made solely for the benefit of and shall be binding upon the Company and
the Guarantor, their respective directors and officers, the Initial Purchasers,
any controlling persons referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include a purchaser of any of the
Notes from the Initial Purchasers merely because of such purchase.
Notwithstanding the foregoing it is expressly understood and agreed that each
purchaser of the Notes from the Initial Purchasers is intended to be a
beneficiary of the Company's and the Guarantor's covenants contained in the
Registration Rights Agreement to the same extent as if the Notes were sold and
those covenants were made directly to such purchaser by the Company and the
Guarantor, and each such purchaser shall have the right to take action against
either of the Company and the Guarantor to enforce, and obtain monetary
recovery for damages resulting from any breach of, those covenants.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to instruments
made and performed wholly in such state and without regard to the choice of law
provisions of such state.
(f) This Agreement may be signed in counterparts, all of
which taken together shall constitute but one and the same original instrument.
Please confirm that the foregoing correctly sets forth the mutual
agreement and understanding between the Company, the Guarantor and the Initial
Purchasers as to the subject matter herein set forth.
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PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above:
Very truly yours,
NATIONAL ENERGY GROUP, INC.
By: /s/ MILES X. XXXXXX
-----------------------------------------
Name: Miles X. Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
Guarantor:
NATIONAL ENERGY GROUP OF OKLAHOMA, INC.
By: /s/ MILES X. XXXXXX
-----------------------------------------
Name: Miles X. Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
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PURCHASE AGREEMENT SIGNATURE PAGE
Accepted and agreed to as of
the first date written above
BEAR, XXXXXXX & CO. INC.
By: /s/ XXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: Senior Managing Director
---------------------------------
XXXXX XXXXXX INC.
By: /s/ XXXXXX XXXXXX
-----------------------------------
Name: Xxxxxx Xxxxxx
---------------------------------
Title: Managing Director
---------------------------------
XXXXXXXXX & COMPANY, INC.
By: /s/ XXXXXX XXXXXXXXX
-----------------------------------
Name: Xxxxxx Xxxxxxxxx
---------------------------------
Title: Senior Vice President
---------------------------------
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SCHEDULE I
Principal Amount
Bear, Xxxxxxx & Co. Inc. . . . . . . . . . . . . . . . . $ 60,000,000
Xxxxx Xxxxxx Inc. . . . . . . . . . . . . . . . . . . . . 27,000,000
Xxxxxxxxx & Company, Inc. . . . . . . . . . . . . . . . . 13,000,000
-------------
Total . . . . . . . . . . . . . . . . . $ 100,000,000
=============
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