Exhibit 10.1

 

$850,000,000
HALCÓN RESOURCES CORPORATION

 

6.75% Senior Notes due 2025

 

Purchase Agreement

 

February 9, 2017

 

J.P. Morgan Securities LLC

As Representative of the

several Initial Purchasers listed

in Schedule 1 hereto

 

c/o J.P. Morgan Securities LLC

383 Madison Avenue

New York, New York 10179

 

Ladies and Gentlemen:

 

Halcón Resources Corporation, a Delaware corporation (the “Company”), proposes
to issue and sell to the several initial purchasers listed in Schedule 1 hereto
(the “Initial Purchasers”), for whom you are acting as representative (the
“Representative”), $850,000,000 principal amount of its 6.75% Senior Notes due
2025 (the “Securities”). The Securities will be issued pursuant to an Indenture
to be dated as of  February 16, 2016 (the “Indenture”), among the Company, the
guarantors listed in Schedule 2 hereto (the “Guarantors”) and U.S. Bank National
Association, as trustee (the “Trustee”), and will be irrevocably and
unconditionally guaranteed, jointly and severally, by each of the Guarantors
(the “Guarantees”).  This Purchase Agreement (this “Agreement”) is to confirm
the agreement concerning the purchase of the Securities from the Company by the
Initial Purchasers.

 

The Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the “Securities
Act”), in reliance upon an exemption pursuant to Section 4(a)(2) under the
Securities Act. The Company and the Guarantors have prepared a preliminary
offering memorandum dated February 9, 2017 (the “Preliminary Offering
Memorandum”) and a pricing term sheet substantially in the form attached hereto
as Annex D (the “Pricing Term Sheet”) setting forth the terms of the Securities
omitted from the Preliminary Offering Memorandum and certain other information,
and will prepare an offering memorandum dated the date hereof (the “Offering
Memorandum”) setting forth information concerning the Company, the Guarantors,
the Securities and the Guarantees. Copies of the Preliminary Offering Memorandum
have been, and copies of the Offering Memorandum will be, delivered by the
Company to the Initial Purchasers pursuant to the terms of this Agreement. The
Company hereby confirms that it has authorized the use of the Preliminary
Offering Memorandum, the other Time of Sale Information (as defined below) and
the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in the manner contemplated by this
Agreement. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Preliminary Offering Memorandum. References herein to
the Preliminary Offering Memorandum, the Time of Sale Information and the
Offering Memorandum shall be deemed to refer to and include any document
incorporated by reference therein and any reference to “amend,” “amendment” or
“supplement” with respect to the Preliminary Offering Memorandum or the Offering
Memorandum shall be deemed to refer to and include any documents filed after
such date and incorporated by reference therein.  At or prior to the time when
sales of the Securities were first made (the “Time of Sale”), the Company had
prepared the following information (collectively, the “Time of Sale
Information”): the Preliminary Offering Memorandum, as supplemented and amended
by the written communications listed on Annex B hereto.

 

Holders (including subsequent transferees) of the Securities will have the
registration rights set forth in the registration rights agreement in a form
reasonably satisfactory to the Initial Purchasers (the “Registration Rights
Agreement”) between the Company, the Guarantors and the Initial Purchasers to be
dated the Closing Date (as defined herein), for so long as such Securities
constitute “Transfer Restricted Securities” (as defined in the

 

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Registration Rights Agreement).  Pursuant to the Registration Rights Agreement,
the Company and the Guarantors will agree to file with the Securities and
Exchange Commission (the “Commission”) under the circumstances set forth
therein, a registration statement under the Securities Act relating to the
Company’s 6.75% Senior Notes due 2025 (the “Exchange Securities”) and the
Guarantors’ Exchange Guarantees (the “Exchange Guarantees”) to be offered in
exchange for the Securities and the Guarantees.  Such portion of the offering is
referred to as the “Exchange Offer”. For purposes of this Agreement, “Operative
Documents” means the Securities, the Guarantees, the Indenture, the Exchange
Securities, the Exchange Guarantees and the Registration Rights Agreement. The
“Transaction Documents” means the Operative Documents and this Agreement.

 

1.                                      Purchase and Resale of the Securities.

 

(a)                                 The Company agrees to issue and sell the
Securities to the several Initial Purchasers as provided in this Agreement, and
each Initial Purchaser, on the basis of the representations, warranties and
agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
principal amount of Securities set forth opposite such Initial Purchaser’s name
in Schedule 1 hereto at a price equal to 98.25% of the principal amount thereof
plus accrued interest, if any, from February 9, 2017 to the Closing Date. The
Company will not be obligated to deliver any of the Securities except upon
payment for all the Securities to be purchased as provided herein.

 

(b)                                 The Company understands that the Initial
Purchasers intend to offer the Securities for resale on the terms set forth in
the Time of Sale Information. Each Initial Purchaser, severally and not jointly,
represents, warrants and agrees that:

 

(i)                                     it is a qualified institutional buyer (a
“QIB”)  within the meaning of Rule 144A under the Securities Act (“Rule 144A”)
and an accredited investor within the meaning of Rule 501(a) of Regulation D
under the Securities Act (“Regulation D”);

 

(ii)                                  it has not solicited offers for, or
offered or sold, and will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D or in any manner involving a
public offering within the meaning of Section 4(a)(2) of the Securities Act; and

 

(iii)                               it has not solicited offers for, or offered
or sold, and will not solicit offers for, or offer or sell, the Securities as
part of their initial offering except (the “Exempt Resales”):

 

(A)                               to persons whom it reasonably believes to be
QIBs in transactions pursuant to Rule 144A and in connection with each such
sale, it has taken or will take reasonable steps to ensure that the purchaser of
the Securities is aware that such sale is being made in reliance on Rule 144A;
or

 

(B)                               in accordance with the restrictions set forth
in Annex C hereto.

 

(c)                                  Each Initial Purchaser acknowledges and
agrees that the Company and, for purposes of the “no registration” opinions to
be delivered to the Initial Purchasers pursuant to Sections 6(c) and 6(i),
counsel for the Company and counsel for the Initial Purchasers, respectively,
may rely upon the accuracy of the representations and warranties of the Initial
Purchasers, and compliance by the Initial Purchasers with their agreements,
contained in paragraph (b) above (including Annex C hereto), and each Initial
Purchaser hereby consents to such reliance.

 

(d)                                 The Company acknowledges and agrees that the
Initial Purchasers may offer and sell Securities to or through any affiliate of
an Initial Purchaser and that any such affiliate may offer and sell Securities
purchased by it to or through any Initial Purchaser.

 

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(e)                                  The Company and the Guarantors acknowledge
and agree that each Initial Purchaser is acting solely in the capacity of an
arm’s length contractual counterparty to the Company and the Guarantors with
respect to the offering of Securities contemplated hereby (including in
connection with determining the terms of the offering) and not as a financial
advisor or a fiduciary to, or an agent of, the Company, the Guarantors or any
other person. Additionally, neither the Representative nor any other Initial
Purchaser is advising the Company, the Guarantors or any other person as to any
legal, tax, investment, accounting or regulatory matters in any jurisdiction.
The Company and the Guarantors shall consult with their own advisors concerning
such matters and shall be responsible for making their own independent
investigation and appraisal of the transactions contemplated hereby, and neither
the Representative nor any other Initial Purchaser shall have any responsibility
or liability to the Company or the Guarantors with respect thereto. Any review
by the Representative or any Initial Purchaser of the Company, the Guarantors,
and the transactions contemplated hereby or other matters relating to such
transactions will be performed solely for the benefit of the Representative or
such Initial Purchaser, as the case may be, and shall not be on behalf of the
Company, the Guarantors or any other person.

 

2.                                      Payment and Delivery.

 

(a)                                 Payment for and delivery of the Securities
will be made at the offices of Baker Botts L.L.P. at 10:00 A.M., New York City
time, on February 16, 2017, or at such other time or place on the same or such
other date, not later than the fifth business day thereafter, as the
Representative and the Company may agree upon in writing. The time and date of
such payment and delivery is referred to herein as the “Closing Date.”

 

(b)                                 Payment for the Securities shall be made by
wire transfer in immediately available funds to the account(s) specified by the
Company to the Representative against delivery to the nominee of The Depository
Trust Company (“DTC”), for the account of the Initial Purchasers, of one or more
global notes representing the Securities (collectively, the “Global Note”), with
any transfer taxes payable in connection with the sale of the Securities duly
paid by the Company. The Global Note will be made available for inspection by
the Representative not later than 1:00 P.M., New York City time, on the business
day prior to the Closing Date.

 

3.                                      Representations and Warranties of the
Company and the Guarantors. The Company and the Guarantors jointly and severally
represent and warrant to each Initial Purchaser that:

 

(a)                                 When the Securities and Guarantees are
issued and delivered pursuant to this Agreement, such Securities and Guarantees
will not be of the same class (within the meaning of Rule 144A under the
Securities Act) as securities of the Company or the Guarantors that are listed
on a national securities exchange registered under Section 6 of the Exchange Act
or that are quoted in a U.S. automated inter-dealer quotation system.

 

(b)                                 Neither the Company nor any subsidiary of
the Company is or, after giving effect to the offer and sale of the Securities
and the application of the proceeds therefrom as described under “Use of
Proceeds” in each of the Time of Sale Information and the Offering Memorandum,
will be an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder (the “Investment
Company Act”).

 

(c)                                  Assuming the accuracy of your
representations and warranties in Section 1(b), the purchase and resale of the
Securities pursuant hereto (including pursuant to the Exempt Resales) are exempt
from the registration requirements of the Securities Act. No form of general
solicitation or general advertising within the meaning of Regulation D
(including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) was used
by the Company, the Guarantors, or any person acting on behalf of the Company or
the Guarantors (other than you, as to whom the Company and the Guarantors make
no representation) in connection with the offer and sale of the Securities.

 

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(d)                                 No directed selling efforts within the
meaning of Rule 902 under the Securities Act were used by the Company, the
Guarantors, any affiliate of the Company or the Guarantors or any person acting
on behalf of the Company or the Guarantors (other than you, as to whom the
Company and the Guarantors make no representation) with respect to Securities
sold outside the United States in accordance with Regulation S, and the Company
and any person acting on its behalf (other than you, as to whom the Company and
the Guarantors make no representation) has complied with and will implement the
“offering restrictions” required by Rule 902 under the Securities Act.

 

(e)                                  Each of the Preliminary Offering
Memorandum, the Time of Sale Information and the Offering Memorandum, each as of
its respective date, contains all the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act.

 

(f)                                   The Preliminary Offering Memorandum, the
Time of Sale Information and the Offering Memorandum have been prepared by the
Company and the Guarantors for use by the Initial Purchasers in connection with
the Exempt Resales. No order or decree preventing the use of the Preliminary
Offering Memorandum, the Time of Sale Information or the Offering Memorandum, 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 or any of the Guarantors is contemplated.

 

(g)                                  The Time of Sale Information did not, as of
the Time of Sale, and will not, as of the Closing Date, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that no representation or warranty is
made as to information contained in or omitted from the Time of Sale Information
in reliance upon and in conformity with written information furnished to the
Company through the Representative by or on behalf of any Initial Purchaser
specifically for inclusion therein, which information is specified in
Section 7(e).

 

(h)                                 The Offering Memorandum will not, as of its
date or as of the Closing Date, contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Offering Memorandum in reliance
upon and in conformity with written information furnished to the Company through
the Representative by or on behalf of any Initial Purchaser specifically for
inclusion therein, which information is specified in Section 7(e).

 

(i)                                     Neither the Company nor any Guarantor
has made any offer to sell or solicitation of an offer to buy the Securities
that would constitute a “free writing prospectus” (if the offering of the
Securities was made pursuant to a registered offering under the Securities Act),
as defined in Rule 405 under the Securities Act (a “Free Writing Offering
Document”) without the prior consent of the Representative; any such Free
Writing Offering Document the use of which has been previously consented to by
the Initial Purchasers is listed on Annex B.

 

(j)                                    Each Free Writing Offering Document
listed on Annex A hereto, when taken together with the Time of Sale Information,
did not, as of the Time of Sale, and will not, as of the Closing Date, contain
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that no representation or
warranty is made as to information contained in or omitted from any Free Writing
Offering Document in reliance upon and in conformity with written information
furnished to the Company through the Representative by or on behalf of any
Initial Purchaser specifically for inclusion therein, which information is
specified in Section 7(e).

 

(k)                                 The documents incorporated by reference in
the Time of Sale Information and the Offering Memorandum, at the time they were
filed with the Commission, complied in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents, when read together with the other
information in the Time of Sale

 

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Information, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and any further
documents so filed and incorporated by reference in the Time of Sale Information
and the Offering Memorandum, when such documents are filed with the Commission
will conform in all material respects to the applicable requirements of the
Exchange Act and the rules and regulations of the Commission thereunder and will
not, when read together with the other information in the Time of Sale
Information, contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

 

(l)                                     The statistical and market-related data
relating to the Company included or incorporated by reference in the Time of
Sale Information and the Offering Memorandum and the consolidated financial
statements of the Company and its subsidiaries are based on or derived from
sources that the Company believes to be reliable in all material respects.

 

(m)                             The Company has been duly incorporated, is
validly existing and is in good standing under the laws of State of Delaware,
with corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Time of Sale Information and the
Offering Memorandum; the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to qualify or to
be in good standing would not have a material adverse effect on the business,
properties, prospects, financial condition, stockholders’ equity or results of
operations of the Company and its subsidiaries taken as a whole (a “Material
Adverse Effect”); each subsidiary of the Company other than those subsidiaries
which would not, individually or in the aggregate, constitute a “significant
subsidiary” as defined in Item 1-02(w) of Regulation S-X (each such “significant
subsidiary,” a “Subsidiary”) and each Guarantor is a corporation, partnership,
limited liability company or business trust duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite entity power and authority to
own, lease and operate its properties, except where the failure to qualify or be
in good standing would not have a Material Adverse Effect. The Company does not
own or control, directly or indirectly, any corporation, association or other
corporate entity that, individually or in the aggregate would constitute a
Subsidiary, other than the subsidiaries listed on Schedule 2 hereof. On a
consolidated basis, the Company and its subsidiaries conduct their business as
described in the Time of Sale Information and the Offering Memorandum and each
Subsidiary and each Guarantor is duly qualified as a foreign corporation,
partnership, limited liability company, business trust or other organization to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to qualify or to
be in good standing would not result in a Material Adverse Effect.

 

(n)                                 The Company has the authorized
capitalization as set forth in the Time of Sale Information and the Offering
Memorandum, and all of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable. Except as otherwise disclosed in the Time of Sale Information
and the Offering Memorandum, all of the issued and outstanding capital stock or
other ownership interests of each subsidiary of the Company (i) have been duly
authorized and validly issued, (ii) are fully paid and non-assessable and
(iii) are owned by the Company directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or equity
except as described in the Time of Sale Information and the Offering Memorandum
and except for such security interests, mortgages, pledges, liens, encumbrances,
claims or equities that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

 

(o)                                 The Company and each Guarantor has all
requisite corporate, partnership or limited liability company power and
authority, as applicable, to perform its obligations under the Indenture. The
Indenture on the Closing Date will be duly and validly authorized, executed and
delivered by the Company and the Guarantors and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and binding agreement of the Company and the Guarantors,

 

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enforceable against the Company and the Guarantors in accordance with its terms,
except as such enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors’ rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Indenture will conform in all material respects to
the requirements of the Trust Indenture Act of 1939, as amended (the “Trust
Indenture Act”), applicable to an indenture qualified thereunder. No
qualification of the Indenture under the Trust Indenture Act is required in
connection with the offer and sale of the Securities contemplated hereby or in
connection with the Exempt Resales. The Indenture conforms to the description
thereof in each of the Time of Sale Information and the Offering Memorandum.

 

(p)                                 The Company has all requisite corporate
power and authority to execute, issue, sell and perform its obligations under
the Securities. The Securities have been duly authorized by the Company and,
when duly executed by the Company in accordance with the terms of the Indenture,
assuming due authentication of the Securities by the Trustee, upon delivery to
the Initial Purchasers against payment therefor in accordance with the terms
hereof, will be validly issued and delivered and will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’
rights generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
Securities will conform in all material respects to the description thereof in
each of the Time of Sale Information and the Offering Memorandum.

 

(q)                                 The Company has all requisite corporate
power and authority to execute, issue and perform its obligations under the
Exchange Securities.  The Exchange Securities have been duly and validly
authorized by the Company and if and when issued and authenticated in accordance
with the terms of the Indenture and delivered in accordance with the Exchange
Offer provided for in the Registration Rights Agreement, will be validly issued
and delivered and will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

(r)                                    Each Guarantor has all requisite
corporate, partnership or limited liability company power and authority, as
applicable, to execute, issue and perform its obligations under the Guarantees.
The Guarantees have been duly and validly authorized and, on the Closing Date
will have been duly and validly executed and delivered by the Guarantors upon
the due execution, authentication and delivery of the Securities in accordance
with the Indenture and the issuance of the Securities in the sale to the Initial
Purchasers contemplated by this Agreement, and, when such Guarantees are duly
executed and delivered in accordance with its terms by each of the parties
thereto, will constitute valid and binding obligations of the Guarantors
entitled to the benefits of the Indenture, enforceable against the Guarantors in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Guarantees will conform in all material
respects to the description thereof in each of the Time of Sale Information and
the Offering Memorandum.

 

(s)                                   Each Guarantor has all requisite
corporate, partnership or limited liability company power and authority, as
applicable, to execute, issue and perform its obligations under the Exchange
Guarantees.  The Exchange Guarantees have been duly and validly authorized by
the Guarantors and if and when executed and delivered by the Guarantors in
accordance with the terms of the Indenture and upon the due execution and
authentication of the Exchange Securities in accordance with the Indenture and
the issuance and delivery of the Exchange Securities in the Exchange Offer
contemplated by the Registration Rights Agreement, will be duly and validly
issued and delivered and will constitute valid and binding obligations of the
Guarantors entitled to the benefits of the Indenture, enforceable against the
Guarantors in accordance with their terms, except as such enforceability may be
limited by bankruptcy, fraudulent

 

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conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors’ rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

(t)                                    The Company and each Guarantor has all
requisite corporate, partnership or limited liability company power and
authority, as applicable, to execute, deliver and perform its obligations under
the Registration Rights Agreement. The Registration Rights Agreement has been
duly authorized by the Company and each Guarantor and, when executed and
delivered by the Company and each Guarantor in accordance with the terms hereof
and thereof, will be validly executed and delivered and (assuming the due
authorization, execution and delivery thereof by the other parties thereto) will
be the legally valid and binding obligations of the Company and each Guarantor
in accordance with the terms thereof, enforceable against the Company and each
Guarantor in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditor’s rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and, as to rights of indemnification and
contribution, by principles of public policy. The Transaction Documents conform
in all material respects to the descriptions thereof in each of the Time of Sale
Information and the Offering Memorandum.

 

(u)                                 The Company and each Guarantor has all
requisite corporate, partnership or limited liability company power and
authority, as applicable, to execute, deliver and perform its obligations under
this Agreement. This Agreement has been duly and validly authorized, executed
and delivered by the Company and each of the Guarantors.

 

(v)                                 The issuance and sale of the Securities and
the issuance of the Guarantees, the issuance of the Exchange Securities and the
Exchange Guarantee, and the execution, delivery and performance by the Company
and each of the Guarantors of each of the Transaction Documents to which each is
a party, and compliance by the Company and each of the Guarantors with the terms
thereof and the consummation of the transactions contemplated by the Transaction
Documents, and the application of the proceeds from the sale of the Securities
as described under “Use of Proceeds” in each of the Time of Sale Information and
the Offering Memorandum, will not (i) conflict with or result in a breach or
violation of any of the terms or provisions of, impose any lien, charge or
encumbrance upon any property or assets of the Company, the Guarantors or their
respective subsidiaries, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, license, lease or other agreement or instrument
to which the Company, the Guarantors or any of their respective subsidiaries is
a party or by which the Company, the Guarantors or any of their respective
subsidiaries is bound or to which any of the property or assets of the Company,
the Guarantors or any of their respective subsidiaries is subject, (ii) result
in any violation of the provisions of the charter or by-laws (or similar
organizational documents) of the Company, the Guarantors or any of their
respective subsidiaries, or (iii) result in any violation by the Company, the
Guarantors or any of their respective subsidiaries of any statute or any
judgment, order, decree, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company, the Guarantors or any of their
respective subsidiaries or any of their properties or assets, except, with
respect to clauses (i) and (iii), conflicts or violations that would not
reasonably be expected to have a Material Adverse Effect or would not, in the
aggregate, reasonably be expected to have a material adverse effect on ability
of the Company or any Guarantor to perform their obligations under this
Agreement.

 

(w)                               No consent, approval, authorization or order
of, or filing, registration or qualification with, any court or governmental
agency or body, domestic or foreign, having jurisdiction over the Company is
required for the offering and sale of the Securities and the issuance of the
Guarantees, the issuance of the Exchange Securities and the Exchange Guarantees,
the execution, delivery and performance by the Company or any of the Guarantors
of each of the Transaction Documents to which each is a party or the
consummation by the Company of the other transactions contemplated by the
Transaction Documents, except for the filing of the registration statement by
the Company with the Commission pursuant to the Securities Act, as required by
the Registration Rights Agreement, and for such consents, approvals,
authorizations, orders, registrations, filings or qualifications which shall
have been obtained or made on or prior to the Closing Date as described in this
Agreement or as may be required by the securities or blue sky

 

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laws of the various states, the Securities Act and the securities laws of any
jurisdiction outside the United States in which the Securities are offered.

 

(x)                                 Except for the Registration Rights Agreement
and the registration rights agreement expected to be entered into in connection
with the closing of the Company’s offering of 8% automatically convertible
preferred stock and as disclosed in the Time of Sale Information and the
Offering Memorandum, there are no contracts, agreements or understandings
between the Company, any Guarantor and any person granting such person the right
to require the Company or any Guarantor to file a registration statement under
the Securities Act with respect to any securities of the Company or any
Guarantor owned or to be owned by such person or to require the Company or any
Guarantor to include such securities in the securities registered pursuant to
the Registration Rights Agreement or in any securities being registered pursuant
to any other registration statement filed by the Company or any Guarantor under
the Securities Act.

 

(y)                                 Neither the Company, any Guarantor nor any
other person acting on behalf of the Company or any Guarantor has sold or issued
any securities that would be integrated with the offering of the Securities
contemplated by this Agreement pursuant to the Securities Act, the rules and
regulations thereunder or the interpretations thereof by the Commission.

 

(z)                                  Except as described in the Time of Sale
Information or the Offering Memorandum, neither the Company, the Guarantors nor
any of their respective subsidiaries has sustained, (i) since the date of the
latest audited financial statements included and incorporated by reference in
the Time of Sale Information and the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, and, (ii) since such date, there has not
been (x) any change in the capital stock, partnership or limited liability
interests, as applicable, or long-term debt, of the Company, the Guarantors or
any of their respective subsidiaries or (y) any adverse change, or any
development involving a prospective adverse change, in or affecting the
business, properties, prospects, financial condition, stockholders’ equity or
results of operations of the Company and its subsidiaries, taken as a whole, in
the case of clause (i) or (ii)(x) above, except as could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(aa)                          The historical financial statements (including the
related notes and supporting schedules) of each of the Company and its
subsidiaries included and/or incorporated by reference in the Time of Sale
Information and the Offering Memorandum comply in all material respects with the
applicable requirements of the Act and the Exchange Act, as applicable, and
present fairly in all material respects the financial condition, results of
operations and cash flows of the entities purported to be shown thereby, at the
dates and for the periods indicated, giving effect to “fresh start” accounting
at all required dates and for all required periods, and have been prepared in
conformity with accounting principles generally accepted in the United States
applied on a consistent basis throughout the periods involved. The interactive
data in eXtensible Business Reporting Language (“XBRL”) included or incorporated
by reference in the Incorporated Documents fairly presents the financial
information called for in all material respects and has been prepared in
accordance with the Commission’s rules and guidelines applicable thereto. The
other financial information and financial data included and incorporated by
reference in the Time of Sale Information and Offering Memorandum is, in all
material respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Company.

 

(bb)                          Deloitte & Touche LLP, who have certified certain
financial statements of the Company, whose reports appear in the Time of Sale
Information and the Offering Memorandum or are incorporated by reference
therein, are independent registered public accountants as required by the
Securities Act and the rules and regulations thereunder and the rules and
regulations of the Public Company Accounting Oversight Board (the “PCAOB”)
during the periods covered by the financial statements on which they reported
contained in and incorporated by reference in the Time of Sale Information and
the Offering Memorandum.

 

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(cc)                            Netherland, Sewell & Associates (the “Company
Reservoir Engineer”), whose reports dated January 28, 2016 and February 1, 2017
are summarized or excerpted in reports incorporated by reference, or included,
in the Time of Sale Information and the Offering Memorandum, was, as of the date
of such report, and is, as of the date hereof, an independent petroleum engineer
with respect to the Company. The written engineering reports prepared by the
Company Reservoir Engineer dated January 28, 2016 and February 1, 2017 setting
forth the proved reserves attributed to the oil and gas properties of the
Company and its subsidiaries accurately reflects in all material respects the
interests of the Company and its subsidiaries in the properties therein as of
December 31, 2015 and December 31, 2016, respectively, and were prepared in
accordance with the Commission’s rules and regulations relating to the reporting
of oil and natural gas reserves; the information furnished by the Company to the
Company Reservoir Engineer for purposes of preparing its report, 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, correct and complete in all material respects on
the date supplied and was prepared in accordance with customary industry
practices, as indicated in the letters of the Company Reservoir Engineer dated
January 28, 2016 and February 1, 2017.

 

(dd)                          The Company and its subsidiaries have defensible
title to all of their interests in oil and gas properties (other than interests
earned under farm-out, participation or similar agreements in which an
assignment or transfer is pending) and all their interests in other real
property and good title to all other properties owned by them, in each case,
free and clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except (i) such as are described in the
Time of Sale Information and the Offering Memorandum, (ii) liens and
encumbrances under operating agreements, unitization and pooling agreements,
production sales contracts, farm-out agreements and other oil and gas
exploration participation and production agreements, in each case that secure
payment of amounts not yet due and payable for the performance of other
unmatured obligations and are of a scope and nature customary in the oil and gas
industry or arise in connection with drilling and production operations or
(iii) would not have a Material Adverse Effect; except as described in the Time
of Sale Information and the Offering Memorandum or as would not have a Material
Adverse Effect, all of the leases and subleases of real property of the Company
or any of its subsidiaries and under which the Company or any of its
subsidiaries holds properties described in the Time of Sale Information and the
Offering Memorandum, are in full force and effect.

 

(ee)                            The Company and each of its subsidiaries have
such permits, licenses, patents, franchises, certificates of need and other
approvals or authorizations of governmental or regulatory authorities
(“Permits”) as are necessary under applicable law to own their properties and
conduct their businesses in the manner described in the Time of Sale Information
and the Offering Memorandum, except for any of the foregoing that would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect; each of
the Company and its subsidiaries has fulfilled and performed all of its
obligations with respect to the Permits, and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or results in any other impairment of the rights of the holder or any such
Permits, except for any of the foregoing that could not reasonably be expected
to have a Material Adverse Effect.

 

(ff)                              The Company and its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the Company
believes are adequate for the conduct of their business and the value of their
properties and is reasonably customary for companies engaged in similar
industries, and all such insurance is in full force and effect. The Company has
no reason to believe that it and its subsidiaries will not be able to (i) renew
their existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct their business as currently conducted or proposed to be
conducted and at a cost that would not, individually or in the aggregate, result
in a Material Adverse Effect.

 

(gg)                            Other than as set forth in the Time of Sale
Information and the Offering Memorandum, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a party
or of which any property of the Company or any of its subsidiaries is the
subject which if determined adversely to the Company, or such subsidiary, would
individually or in the aggregate, have a Material Adverse Effect or which would
materially and adversely affect the consummation of the

 

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transactions contemplated under this Agreement or the Operative Documents or the
performance by the Company or any Guarantor of their obligations hereunder or
thereunder; and, to the Company’s and the Guarantors’ knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.

 

(hh)                          There are no contracts or other documents that
would be required to be described in a registration statement filed under the
Securities Act or filed as exhibits to a registration statement of the Company
pursuant to Item 601(10) of Regulation S-K, or a periodic report of the Company
under the Exchange Act that would be incorporated by reference therein, that
have not been described in the Time of Sale Information and the Offering
Memorandum. The statements made in the Time of Sale Information and the Offering
Memorandum, insofar as they purport to constitute summaries of the terms of the
contracts and other documents that are so described, constitute accurate
summaries of the terms of such contracts and documents in all material respects.
Neither the Company, the Guarantors nor any of their respective subsidiaries has
knowledge that any other party to any such contract or other document has any
intention not to render full performance as contemplated by the terms thereof.

 

(ii)                                  The statements made in the Time of Sale
Information and the Offering Memorandum under the captions “Business” (as
incorporated by reference from the Company’s Exchange Act Reports), “Certain
United States Federal Income Tax Considerations” and “Certain Considerations for
ERISA and Other U.S. Employee Benefit Plans,” insofar as they purport to
constitute summaries of the terms of statutes, rules or regulations, legal or
governmental proceedings or contracts and other documents, constitute accurate
summaries of the terms of such statutes, rules and regulations, legal and
governmental proceedings and contracts and other documents in all material
respects.

 

(jj)                                No relationship, direct or indirect, that
would be required to be described in a registration statement of the Company
pursuant to Item 404 of Regulation S-K, exists between or among the Company or
any Guarantor and their respective subsidiaries, on the one hand, and the
directors, officers, stockholders, customers or suppliers of the Company or any
Guarantor and their respective subsidiaries, on the other hand, that has not
been described in the Time of Sale Information and the Offering Memorandum.

 

(kk)                          No labor disturbance by or dispute with the
employees of the Company or any of its subsidiaries exists or, to the knowledge
of the Company or any Guarantor, is imminent that could reasonably be expected
to have a Material Adverse Effect.

 

(ll)                                  (i) Each “employee benefit plan” (within
the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as
amended (“ERISA”)) for which the Company or any member of its “Controlled Group”
(defined as any organization which is a member of a controlled group of
corporations within the meaning of Section 414 of the Internal Revenue Code of
1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been
maintained in compliance with its terms and with the requirements of all
applicable statutes, rules and regulations including ERISA and the Code in all
material respects; (ii) with respect to each Plan subject to Title IV of ERISA
(a) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has
occurred or is reasonably expected to occur, (b) no “accumulated funding
deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, has occurred or is reasonably expected to occur,
(c) the fair market value of the assets under each Plan exceeds the present
value of all benefits accrued under such Plan (determined based on those
assumptions used to fund such Plan) and (d) neither the Company or any member of
its Controlled Group has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA (other than contributions to the Plan or premiums to the
PBGC in the ordinary course and without default) in respect of a Plan (including
a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and
(iii) to the knowledge of the Company, each Plan 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 would cause the loss of
such qualification.

 

(mm)                  The Company and each of its subsidiaries has filed all
federal, state, local and foreign income and franchise tax returns required to
be filed through the date hereof, subject to permitted extensions, and paid all
taxes due thereon, and (i) no tax deficiency has been determined adversely to
the

 

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Company, the Guarantors or any of their respective subsidiaries, nor (ii) does
the Company or any Guarantor have any knowledge of any tax deficiencies that
could, in the case of clause (i) or (ii) in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(nn)                          There are no transfer taxes or other similar fees
or charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance by the Company or sale by the Company
of the Securities.

 

(oo)                          Since the date as of which information is given in
the Time of Sale Information and the Offering Memorandum and except as may
otherwise be described in the Time of Sale Information and the Offering
Memorandum, neither the Company nor any Guarantor has (i) incurred any material
liability or obligation, direct or contingent, other than liabilities and
obligations that were incurred in the ordinary course of business, (ii) entered
into any material transaction not in the ordinary course of business or
(iii) declared or paid any dividend on its capital stock.

 

(pp)                          Neither the Company nor any of its subsidiaries
(i) is in violation of its charter or by-laws (or similar organizational
documents), (ii) is in default, and no event has occurred that, with notice or
lapse of time or both, would constitute such a default, in the due performance
or observance of any term, covenant, condition or other obligation contained in
any indenture, mortgage, deed of trust, loan agreement, license or other
agreement or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject, or (iii) is in violation of
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over it or its property or assets or has failed to
obtain any license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to the
conduct of its business, except in the case of clauses (ii) and (iii), to the
extent any such conflict, breach, violation or default would not reasonably be
expected to have a material adverse effect on the ability of the Company or any
Guarantor to perform their obligations under any of the Transaction Documents.

 

(qq)                          The Company and each of its subsidiaries (i) are,
and at all times prior hereto were, in compliance with all laws, regulations,
ordinances, rules, orders, judgments, decrees, permits or other legal
requirements of any governmental authority, including without limitation any
international, national, state, provincial, regional, or local authority,
relating to the protection of human health or safety, the environment, or
natural resources, or to hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”) applicable to such entity, which compliance
includes, without limitation, obtaining, maintaining and complying with all
permits and authorizations and approvals required by Environmental Laws to
conduct their respective businesses, and (ii) have not received notice of any
actual or alleged violation of Environmental Laws, or of any potential liability
for or other obligation concerning the presence, disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, except in
the case of clause (i) or (ii) where such non-compliance, violation, liability,
or other obligation could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect. Except as described in the Time of Sale Information
and the Offering Memorandum, (A) there are no proceedings that are pending, or
known to be contemplated, against the Company or any of its subsidiaries under
Environmental Laws in which a governmental authority is also a party, other than
such proceedings regarding which it is reasonably believed no monetary sanctions
of $100,000 or more will be imposed (except for pending or contemplated
proceedings which are not material to the Company and its subsidiaries and were
not required to be disclosed in the documents incorporated by reference in the
Time of Sale Information), (B) the Company, and its subsidiaries are not aware
of any issues regarding compliance with Environmental Laws, or liabilities or
other obligations under Environmental Laws or concerning hazardous or toxic
substances or wastes, pollutants or contaminants, that could reasonably be
expected to have a Material Adverse Effect, and (C) none of the Company or its
subsidiaries anticipates material capital expenditures other than in the
ordinary course of business relating to Environmental Laws.

 

(rr)                                None of the transactions contemplated by
this Agreement (including, without limitation, the use of the proceeds from the
sale of the Securities), will violate or result in a violation of Section 7 of
the Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations T, U and X of the Board of Governors of the Federal
Reserve System.

 

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(ss)                              The statements contained in the Time of Sale
Information and the Offering Memorandum under the caption “Description of the
Notes,” insofar as they purport to constitute a summary of the terms of the
Transaction Documents and under the captions “Description of Our Other
Indebtedness” and “Plan of Distribution” insofar as they purport to describe the
provisions of the documents referred to therein, are accurate in all material
respects.

 

(tt)                                The Company and its affiliates have not
taken, directly or indirectly, any action designed to or that has constituted or
that could reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company or the Guarantors in
connection with the offering of the Securities.

 

(uu)                          The Company and each of its subsidiaries maintain
a system of internal control over financial reporting (as such term is defined
in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of
the Exchange Act and that has been designed by, or under the supervision of, the
Company’s principal executive and principal financial officers, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in the United States. The Company and
each of its subsidiaries maintains internal accounting controls that are
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorization,
(ii) transactions are recorded as necessary to permit preparation of the
Company’s financial statements in conformity with accounting principles
generally accepted in the United States and to maintain accountability for its
assets, (iii) access to the Company’s assets is permitted only in accordance
with management’s general or specific authorization, (iv) the recorded
accountability for the Company’s assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences, and (v) the interactive data in XBRL included or incorporated by
reference in the Time of Sale Information and the Offering Memorandum fairly
presents the information called for in all material respects and is prepared in
accordance with the Commission’s rules and guidelines applicable thereto.

 

(vv)                          (i) The Company and each of its subsidiaries have
established and maintain disclosure controls and procedures (as such term is
defined in Rule 13a-15 under the Exchange Act), (ii) such disclosure controls
and procedures are designed to ensure that the information required to be
disclosed by the Company in the reports they file or submit under the Exchange
Act (assuming the Company was required to file or submit such reports under the
Exchange Act) is accumulated and communicated to management of the Company and
its subsidiaries, including their respective principal executive officers and
principal financial officers, as appropriate, to allow timely decisions
regarding required disclosure to be made; and (iii) such disclosure controls and
procedures are effective in all material respects to perform the functions for
which they were established.

 

(ww)                      Since the date of the most recent balance sheet of the
Company and its consolidated subsidiaries audited by Deloitte & Touche LLP and
reviewed by the audit committee of the board of directors of the Company,
(i) the Company has not been advised of by its auditors, nor has it identified
(A) any material weaknesses in the design or operation of internal controls, and
(B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the internal controls of the Company
and each of its subsidiaries; and (ii) there have been no changes in internal
controls or in other factors that have materially affected or are reasonably
likely to materially affect internal controls.

 

(xx)                          No subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary’s capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary’s property or assets to the
Company or any other subsidiary of the Company, except as described in the Time
of Sale Information and the Offering Memorandum.

 

(yy)                          There is and has been no failure on the part of
the Company or, to the knowledge of the Company and the Guarantors or any of
their directors or officers, in their capacities as such, to comply with

 

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any applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith.

 

(zz)                            The section entitled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Critical
Accounting Policies and Estimates” as incorporated by reference from the
Company’s Exchange Act Reports in the Time of Sale Information and the Offering
Memorandum accurately and fully describes in all material respects (A) the
accounting policies that the Company believed as of the date thereof were the
most important in the portrayal of the Company’s financial condition and results
of operations and that required management’s most difficult, subjective or
complex judgments; (B) the judgments and uncertainties affecting the application
of critical accounting policies; and (C) the likelihood that materially
different amounts would be reported under different conditions or using
different assumptions and an explanation thereof.

 

(aaa)                   Neither the Company nor any of its subsidiaries, nor, to
the knowledge of the Company and each of the Guarantors, any director, officer,
employee, agent, affiliate or other person associated with or acting on behalf
of the Company or any of its subsidiaries has (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made or taken an act in furtherance of an
offer, promise or authorization of any direct or indirect unlawful payment or
benefit to any foreign or domestic government official or employee , including
of any government-owned or controlled entity or of a public international
organization, or any person acting in an official capacity for or on behalf of
any of the foregoing, or any political party or party official or candidate for
political office; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or
regulation implementing the OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions, or committed an offence
under the Bribery Act 2010 of the United Kingdom, or any other applicable
anti-bribery or anti-corruption law; or (iv) made, offered, agreed, requested or
taken an act in furtherance of any unlawful bribe or other unlawful benefit,
including, without limitation, any rebate, payoff, influence payment, kickback
or other unlawful or improper payment or benefit. The Company and its
subsidiaries have instituted, maintain and enforce, and will continue to
maintain and enforce, policies and procedures designed to promote and ensure
compliance with anti-bribery and anti-corruption laws to the extent such laws
are applicable to the business, assets and operations of the Company and its
subsidiaries.

 

(bbb)                   The operations of the Company and its subsidiaries are
and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements, including those of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the applicable money
laundering statutes of all jurisdictions where the Company or any of its
subsidiaries conducts business, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Anti-Money Laundering
Laws”), and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to
the knowledge of the Company or any of the Guarantors, threatened.

 

(ccc)                      Neither the Company nor any of its subsidiaries,
directors, officers or employees, nor, to the knowledge of the Company or any of
the Guarantors, any agent, affiliate or other person associated with or acting
on behalf of the Company or any of its subsidiaries is currently the subject or
the target of any sanctions administered or enforced by the U.S. government,
(including, without limitation, the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”) or the U.S. Department of State and
including, without limitation, the designation as a “specially designated
national” or “blocked person”), the United Nations Security Council (“UNSC”),
the European Union, Her Majesty’s Treasury (“HMT”), or other relevant sanctions
authority (collectively, “Sanctions”), nor is the Company or any of its
subsidiaries located, organized or resident in a country or territory that is
the subject or target of Sanctions, including, without limitation, Cuba, Iran,
North Korea, Sudan, Syria and Crimea (each, a “Sanctioned Country”); and the
Company will not directly or indirectly use the proceeds of the offering of the
Securities hereunder, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity
(i) to fund or facilitate any activities of or business with any person that, at
the time of such funding or facilitation, is the subject or target of Sanctions,
(ii) to fund or facilitate any

 

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activities of or business in any Sanctioned Country or (iii) in any other manner
that will result in a violation by any person (including any person
participating in the transaction, whether as underwriter, initial purchaser,
advisor, investor or otherwise) of Sanctions. For the past five years, the
Company and its subsidiaries have not knowingly engaged in, are not now
knowingly engaged in and will not engage in any dealings or transactions with
any person that at the time of the dealing or transaction is or was the subject
or the target of Sanctions or with any Sanctioned Country.

 

(ddd)                   The Company has not taken any action or omitted to take
any action (such as issuing any press release relating to any Securities without
an appropriate legend) which may result in the loss by any of the Initial
Purchasers of the ability to rely on any stabilization safe harbor provided by
the Financial Services Authority under the Financial Services and Markets Act
2000 (the “FSMA”). The Company has been informed of the guidance relating to
stabilization provided by the Financial Services Authority, in particular in
Section MAR 2 Annex 2G of the Financial Services Handbook.

 

(eee)                      Immediately after the consummation of the issuance
and sale of the Securities in accordance with the terms of this Agreement, each
of the Company and each of the Guarantors will be Solvent. As used in this
paragraph, the term “Solvent” means, with respect to a particular date, that on
such date (i) the present fair market value (or present fair saleable value) of
the assets of the Company and its subsidiaries and the Guarantors and their
subsidiaries are not less than the total amount required to pay the probable
liabilities of the Company and its subsidiaries and the Guarantors and their
subsidiaries on their total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (ii) the Company and its
subsidiaries and the Guarantors and their subsidiaries are able to realize upon
their assets and pay their debts and other liabilities, contingent obligations
and commitments as they mature and become due in the normal course of business,
(iii) assuming the sale of the Securities as contemplated by this Agreement, the
Time of Sale Information and the Offering Memorandum, the Company and its
subsidiaries and the Guarantors and their subsidiaries are not incurring debts
or liabilities beyond their ability to pay as such debts and liabilities mature
and (iv) the Company and its subsidiaries and the Guarantors and their
subsidiaries are not engaged in any business or transaction, and are not about
to engage in any business or transaction, for which their property would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which the Company and its subsidiaries
and the Guarantors and their subsidiaries are engaged. In computing the amount
of such contingent liabilities at any time, it is intended that such liabilities
will be computed at the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

 

(fff)                         As of the date hereof (i) all royalties, rentals,
deposits and other amounts owed under the oil and gas leases constituting the
oil and gas properties of the Company and its subsidiaries have been properly
and timely paid (other than amounts held in suspense accounts pending routine
payments or related to disputes about the proper identification of royalty
owners), and no amount of proceeds from the sale or production attributable to
the oil and gas properties of the Company and its subsidiaries are currently
being held in suspense by any purchaser thereof, except where such amounts due
could not, individually or in the aggregate, have a Material Adverse Effect, and
(ii) there are no claims under take-or-pay contracts pursuant to which natural
gas purchasers have any make-up rights affecting the interests of the Company
and its subsidiaries in their oil and gas properties, except where such claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

(ggg)                      Except as described in the Time of Sale Information
and the Offering Memorandum, there are no material off-balance sheet
transactions (including, without limitation, transactions related to, and the
existence of, “variable interest entities” within the meaning of Financial
Accounting Standards Board Accounting Standards Codification Topic 810),
arrangements, obligations (including contingent obligations), or any other
relationships with unconsolidated entities or other persons, that would
reasonably be expected to have a material current or future effect on the
Company’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses.

 

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(hhh)                   Neither the Company nor any of its subsidiaries is a
party to any contract, agreement or understanding with any person (other than
this Agreement) that could give rise to a valid claim against the Initial
Purchasers for a brokerage commission, finder’s fee or like payment in
connection with the offering and sale of the Securities.

 

(iii)                               No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) included or incorporated by reference in the Time of Sale Information or
the Offering Memorandum has been made without a reasonable basis at the time
such statement was made or has been disclosed other than in good faith.

 

(jjj)                            Neither the Company nor any of its subsidiaries
is in violation of or has received notice of any violation with respect to any
federal or state law relating to discrimination in the hiring, promotion or pay
of employees, nor any applicable federal or state wage and hour laws, the
violation of any of which could reasonably be expected to have a Material
Adverse Effect.

 

Any certificate signed by any officer of the Company or any Guarantor and
delivered to the Representative or counsel for the Initial Purchasers in
connection with the offering of the Securities shall be deemed a representation
and warranty by the Company or any such Guarantor, jointly and severally, as to
matters covered thereby, to each Initial Purchaser.

 

4.                                      Further Agreements of the Company and
the Guarantors. The Company and the Guarantors jointly and severally covenant
and agree with each Initial Purchaser that:

 

(a)                                 The Company will deliver, without charge, to
the Initial Purchasers as many copies of the Preliminary Offering Memorandum,
any other Time of Sale Information, any Free Writing Offering Document and the
Offering Memorandum (including all amendments and supplements thereto) as the
Representative may reasonably request.

 

(b)                                 Before finalizing the Offering Memorandum or
making or distributing any amendment or supplement to any of the Time of Sale
Information or the Offering Memorandum or filing with the Commission any
document that will be incorporated by reference therein, the Company will
furnish to the Representative and counsel for the Initial Purchasers a copy of
the proposed Offering Memorandum or such amendment or supplement or document to
be incorporated by reference therein for review, and will not distribute any
such proposed Offering Memorandum, amendment or supplement or file any such
document with the Commission to which the Representative reasonably objects.

 

(c)                                  Before making, preparing, using,
authorizing, approving or referring to any Free Writing Offering Document, the
Company and the Guarantors will furnish to the Representative and counsel for
the Initial Purchasers a copy of such written communication for review and will
not make, prepare, use, authorize, approve or refer to any such written
communication to which the Representative reasonably objects.

 

(d)                                 The Company will advise the Representative
promptly, and confirm such advice in writing, (i) of the issuance by any
governmental or regulatory authority of any order preventing or suspending the
use of any of the Time of Sale Information, any Free Writing Offering Document
or the Offering Memorandum or the initiation or threatening of any proceeding
for that purpose; (ii) of the occurrence of any event at any time prior to the
completion of the initial offering of the Securities as a result of which any of
the Time of Sale Information, any Free Writing Offering Document or the Offering
Memorandum as then amended or supplemented would include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing when such Time of
Sale Information, Free Writing Offering Document or the Offering Memorandum is
delivered to a purchaser, not misleading; and (iii) of the receipt by the
Company of any notice with respect to any suspension of the qualification of the
Securities for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and the Company will use its
reasonable best efforts to prevent the issuance of any such order preventing or
suspending the use of any of the Time of Sale Information, any Free Writing
Offering Document or the Offering Memorandum or

 

15

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suspending any such qualification of the Securities and, if any such order is
issued, will obtain as soon as possible the withdrawal thereof.

 

(e)                                  If at any time prior to the Closing Date
(i) any event shall occur or condition shall exist as a result of which any of
the Time of Sale Information as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (ii) it is necessary to amend or
supplement the Time of Sale Information to comply with law, the Company will
immediately notify the Initial Purchasers thereof and forthwith prepare and,
subject to paragraph (b) above, furnish to the Initial Purchasers such
amendments or supplements to the Time of Sale Information (or any document to be
filed with the Commission and incorporated by reference therein) as may be
necessary so that the statements in any of the Time of Sale Information as so
amended or supplemented (including such documents to be incorporated by
reference therein) will not, in the light of the circumstances under which they
were made, be misleading or so that any of the Time of Sale Information will
comply with law.

 

(f)                                   If at any time prior to the completion of
the initial offering of the Securities (i) any event shall occur or condition
shall exist as a result of which the Offering Memorandum as then amended or
supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances existing when the Offering Memorandum is
delivered to a purchaser, not misleading or (ii) it is necessary to amend or
supplement the Offering Memorandum to comply with law, the Company will
immediately notify the Initial Purchasers thereof and forthwith prepare and,
subject to paragraph (b) above, furnish to the Initial Purchasers such
amendments or supplements to the Offering Memorandum (or any document to be
filed with the Commission and incorporated by reference therein) as may be
necessary so that the statements in the Offering Memorandum as so amended or
supplemented (including such document to be incorporated by reference therein)
will not, in the light of the circumstances existing when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the Offering
Memorandum will comply with law.

 

(g)                                  The Company will qualify the Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
the Representative shall reasonably request and will continue such
qualifications in effect so long as required for the offering and resale of the
Securities; provided that neither the Company nor any of the Guarantors shall be
required to (i) qualify as a foreign corporation or other entity or as a dealer
in securities in any such jurisdiction where it would not otherwise be required
to so qualify, (ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it
is not otherwise so subject.

 

(h)                                 During the period from the date hereof
through and including the date that is 60 days after the date hereof, the
Company and each of the Guarantors will not, without the prior written consent
of the Representative, offer, sell, contract to sell or otherwise dispose of any
debt securities issued or guaranteed by the Company or any of the Guarantors and
having a tenor of more than one year except for the issuance of the Exchange
Securities and the Exchange Guarantees in connection with the Exchange Offer.

 

(i)                                     The Company will apply the net proceeds
from the sale of the Securities as described in each of the Time of Sale
Information and the Offering Memorandum under the heading “Use of Proceeds.”

 

(j)                                    While the Securities remain outstanding
and are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, the Company and each of the Guarantors will, during any period
in which the Company is not subject to and in compliance with Section 13 or
15(d) of the Exchange Act, furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon the request of
such holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(k)                                 The Company will assist the Initial
Purchasers in arranging for the Securities to be eligible for clearance and
settlement through DTC.

 

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(l)                                     The Company will not, and will not
permit any of its affiliates (as defined in Rule 144 under the Securities Act)
to, resell any of the Securities that have been acquired by any of them, except
for Securities purchased by the Company or any of its affiliates and resold in a
transaction registered under the Securities Act.

 

(m)                             Neither the Company nor any of its affiliates
(as defined in Rule 501(b) of Regulation D) will, directly or through any agent,
sell, offer for sale, solicit offers to buy or otherwise negotiate in respect
of, any security (as defined in the Securities Act), that is or will be
integrated with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.

 

(n)                                 None of the Company or any of its affiliates
or any other person acting on its or their behalf (other than the Initial
Purchasers, as to which no covenant is given) will (i) solicit offers for, or
offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D or in any
manner involving a public offering within the meaning of Section 4(a)(2) of the
Securities Act or (ii) engage in any directed selling efforts within the meaning
of Regulation S, and all such persons will comply with the offering restrictions
requirement of Regulation S.

 

(o)                                 The Company and the Guarantors agree to
comply with all the terms and conditions of the Registration Rights Agreement
and all agreements set forth in the representation letters of the Company and
the Guarantors to DTC relating to the approval of the Securities by DTC for
“book entry” transfer.

 

(p)                                 Neither the Company nor any of the
Guarantors will take, directly or indirectly, any action designed to or that
could reasonably be expected to cause or result in any stabilization or
manipulation of the price of the Securities.

 

5.                                      Certain Agreements of the Initial
Purchasers. Each Initial Purchaser, severally and not jointly, hereby represents
and agrees that it has not and will not use, authorize use of, refer to, or
participate in the planning for use of, any written communication that
constitutes an offer to sell or the solicitation of an offer to buy the
Securities other than (i) the Preliminary Offering Memorandum and the Offering
Memorandum, (ii) any written communication that contains either (a) no “issuer
information” (as defined in Rule 433(h)(2) under the Securities Act) or
(b) “issuer information” that was included (including through incorporation by
reference) in the Time of Sale Information or the Offering Memorandum, (iii) any
written communication listed on Annex A or prepared pursuant to
Section 4(c) (including any electronic road show) above, (iv) any written
communication prepared by such Initial Purchaser and approved by the Company and
the Representative in advance in writing or (v) any written communication
relating to or that contains the preliminary or final terms of the Securities or
their offering and/or other information that was included (including through
incorporation by reference) in the Time of Sale Information or the Offering
Memorandum.

 

6.                                      Conditions of Initial Purchasers’
Obligations. The respective obligations of each of the Initial Purchasers
hereunder are subject to the accuracy, when and on and as of the date hereof and
on the Closing Date of the representations and warranties of the Company and
each of the Guarantors contained herein, to the performance by the Company and
each of the Guarantors of their respective covenants and other obligations
hereunder and to the following additional conditions:

 

(a)                                 The Initial Purchasers shall not have
discovered and disclosed to the Company on or prior to the Closing Date that the
Time of Sale Information or the Offering Memorandum, or any amendment or
supplement thereto, contains an untrue statement of a fact which, in the opinion
of Baker Botts L.L.P., counsel to the Initial Purchasers, is material or omits
to state a fact which, in the opinion of such counsel, is material and is
necessary in order to make the statements therein, in the light of the
circumstances then prevailing, not misleading.

 

(b)                                 All corporate proceedings and other legal
matters incident to the authorization, form and validity of this Agreement, the
Securities, the Guarantees, the Operative Documents, the Indenture, the Time of
Sale Information and the Offering Memorandum, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company and the Guarantors shall have furnished to

 

17

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such counsel all documents and information that they may reasonably request to
enable them to pass upon such matters.

 

(c)                                  Mayer Brown LLP shall have furnished to the
Initial Purchasers its written opinion, as counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchasers,
substantially in the form of Exhibit A hereto.

 

(d)                                 Davis, Graham & Stubbs LLP  shall have
furnished to the Initial Purchasers its written opinion, as Colorado counsel to
the Company and the Guarantors, addressed to the Initial Purchasers and dated
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, substantially in the form of Exhibit B hereto.

 

(e)                                  Conner & Winters, LLP shall have furnished
to the Initial Purchasers its written opinion, as Oklahoma counsel to the
Company and the Guarantors, addressed to the Initial Purchasers and dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, substantially in the form of Exhibit C hereto.

 

(f)                                   David Elkouri, General Counsel of the
Company, shall have furnished to the Initial Purchasers his written opinion, as
counsel to the Company and the Guarantors, addressed to the Initial Purchasers
and dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, substantially in the form of Exhibit D hereto.

 

(g)                                  Mark Mize, Executive Vice President, Chief
Financial Officer and Treasurer of the Company shall have furnished to the
Initial Purchasers a certificate, addressed to the Initial Purchasers and dated
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, substantially in the form of Exhibit E hereto.

 

(h)                                 The Initial Purchasers shall have received
from Baker Botts L.L.P., counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to the issuance and sale of the
Securities, the Time of Sale Information, the Offering Memorandum and other
related matters as the Initial Purchasers may reasonably require, and the
Company shall have furnished to such counsel such documents and information as
such counsel reasonably requests for the purpose of enabling them to pass upon
such matters.

 

(i)                                     At the time of execution of this
Agreement, the Initial Purchasers shall have received from Deloitte & Touche LLP
a letter, in form and substance satisfactory to the Initial Purchasers,
addressed to the Initial Purchasers and dated the date hereof (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Time of Sale Information, as of
a date not more than three days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and
(iii) covering such other matters as are ordinarily covered by accountants’
“comfort letters” to underwriters in connection with registered public
offerings.

 

(j)                                    With respect to the letter of Deloitte &
Touche LLP, referred to in the preceding paragraph and delivered to the Initial
Purchasers concurrently with the execution of this Agreement (the “initial
letter”), the Company shall have furnished to the Initial Purchasers a
“bring-down letter” of such accountants, addressed to the Initial Purchasers and
dated the Closing Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the Closing
Date (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in each of
the Time of Sale Information or the Offering Memorandum, as of a date not more
than three days prior to the

 

18

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date of the Closing Date), the conclusions and findings of such firm with
respect to the financial information and other matters covered by the initial
letter, and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letter

 

(k)                                 Except as described in the Time of Sale
Information and the Offering Memorandum, (i) neither the Company, any Guarantor
nor any of their respective subsidiaries shall have sustained, since the date of
the latest audited financial statements included and incorporated by reference
in the Time of Sale Information and the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, or (ii) since such date, there shall not
have been any change in the capital stock or long-term debt of the Company, any
Guarantor or any of their respective subsidiaries or any change, or any
development involving a prospective change, in or affecting the business,
properties, prospects, financial condition, stockholders’ equity or results of
operations of the Company, the Guarantors and their respective subsidiaries,
taken as a whole, the effect of which, in any such case described in clause
(i) or (ii), is, individually or in the aggregate, in the judgment of the
Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities being
delivered on the Closing Date on the terms and in the manner contemplated in the
Time of Sale Information and the Offering Memorandum.

 

(l)                                     At the time of execution of this
Agreement, the Initial Purchasers shall have received from the Company Reservoir
Engineer an initial letter (an “initial expert letter”), in form and substance
satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and
dated the date hereof and a subsequent letter dated as of the Closing Date,
which such letter shall cover the period from any initial expert letter to the
Closing Date, confirming that they are independent with respect to the Company
and stating the conclusions and findings of such firm with respect to matters
pertaining to the Company’s use of the reports of proved reserves from the
Company Reservoir Engineer.

 

(m)                             The Company and each Guarantor shall have
furnished or caused to be furnished to the Initial Purchasers dated as of the
Closing Date a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company and each Guarantor, or other officers satisfactory to the
Initial Purchasers, as to such matters as the Representative may reasonably
request, including, without limitation, a statement that:

 

(i)                                     The representations, warranties and
agreements of the Company and the Guarantors in Section 3 are true and correct
on and as of the Closing Date, and the Company and the Guarantors have complied
with all its agreements contained herein and satisfied all the conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date; and

 

(ii)                                  They have examined the Time of Sale
Information and the Offering Memorandum, and, in their opinion, (A) the Time of
Sale Information, as of the Time of Sale and as of the Closing Date, and the
Offering Memorandum, as of its date and as of the Closing Date, did not and do
not contain any untrue statement of a material fact and did not and do not omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
(B) since the date of the Time of Sale Information and the Offering Memorandum,
no event has occurred which should have been set forth in a supplement or
amendment to the Time of Sale Information and the Offering Memorandum.

 

(n)                                 Subsequent to the earlier of the Time of
Sale and the execution and delivery of this Agreement (i) no downgrading shall
have occurred in the rating accorded the Company’s debt securities by any
“nationally recognized statistical rating organization,” as such term is used in
Section 15E of the Exchange Act, and (ii) no such organization shall have
publicly announced that it has under surveillance or review, or has changed its
outlook with respect to, its rating of the Securities or of any other debt
securities issued or guaranteed by the Company or any of the Guarantors (in each
case, other than an announcement with positive implications of a possible
upgrading).

 

19

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(o)                                 The Initial Purchasers shall have received a
counterpart of the Registration Rights Agreement that shall have been executed
and delivered by a duly authorized officer of the Company and each of the
Guarantors.

 

(p)                                 The Securities shall be eligible for
clearance and settlement through DTC.

 

(q)                                 The Indenture shall have been duly executed
and delivered by a duly authorized officer of the Company, each of the
Guarantors and the Trustee.

 

(r)                                    The Securities and the notation of
guarantees shall be executed by the Company and the Guarantors in substantially
the respective forms set forth in the Indenture and the Securities shall be
authenticated and delivered by the Trustee in accordance with the Indenture.

 

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.

 

7.                                      Indemnification and Contribution.

 

(a)                                 The Company and each Guarantor, hereby
agrees, jointly and severally, to indemnify and hold harmless each Initial
Purchaser, its affiliates, directors, officers and employees and each person, if
any, who controls any Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Securities), to which that Initial Purchaser,
affiliate, director, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Free Writing
Offering Document, the Preliminary Offering Memorandum, the Time of Sale
Information or the Offering Memorandum or in any amendment or supplement
thereto, (B) in any Blue Sky application or other document prepared or executed
by the Company or any Guarantor (or based upon any written information furnished
by the Company or any Guarantor) specifically for the purpose of qualifying any
or all of the Securities under the securities laws of any state or other
jurisdiction (any such application, document or information being hereinafter
called a “Blue Sky Application”), or (C) in any materials or information
provided to investors by, or with the approval of, the Company or any Guarantor
in connection with the marketing of the offering of the Securities (“Marketing
Materials”), including any road show or investor presentations made to investors
by the Company (whether in person or electronically) or any materials prepared,
or approved, by the Company for the purpose of compliance with the Canadian
securities laws, or (ii) the omission or alleged omission to state in any Free
Writing Offering Document, the Preliminary Offering Memorandum, the Time of Sale
Information or the Offering Memorandum, or in any amendment or supplement
thereto, or in any Blue Sky Application or in any Marketing Materials, any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and shall
reimburse each Initial Purchaser and each such affiliate, director, officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Initial Purchaser, affiliate, director,
officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company and
the Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Offering Memorandum, the Time of Sale Information or
Offering Memorandum, or in any such amendment or supplement thereto, or in any
Blue Sky Application or in any Marketing Materials, in reliance upon and in
conformity with written information concerning such Initial Purchaser furnished
to the Company through the Representative by or on behalf of any Initial
Purchaser specifically for inclusion therein, which information consists solely
of the information specified in Section 7(e). The foregoing indemnity agreement
is in addition to any liability that the Company or the Guarantors may otherwise
have to any Initial Purchaser or to any affiliate, director, officer, employee
or controlling person of that Initial Purchaser.

 

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(b)                                 Each Initial Purchaser, severally and not
jointly, hereby agrees to indemnify and hold harmless the Company, each
Guarantor, their respective officers and employees, each of their respective
directors, and each person, if any, who controls the Company or any Guarantor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company, any Guarantor
or any such director, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Free Writing Offering Document, Preliminary Offering Memorandum, the Time of
Sale Information or the Offering Memorandum or in any amendment or supplement
thereto, (B) in any Blue Sky Application, or (C) in any Marketing Materials, or
(ii) the omission or alleged omission to state in any Free Writing Offering
Document, Preliminary Offering Memorandum, the Time of Sale Information or the
Offering Memorandum, or in any amendment or supplement thereto, or in any Blue
Sky Application or in any Marketing Materials any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Initial Purchaser furnished to the Company through the Representative by or
on behalf of that Initial Purchaser specifically for inclusion therein, which
information is limited to the information set forth in Section 7(e). The
foregoing indemnity agreement is in addition to any liability that any Initial
Purchaser may otherwise have to the Company, any Guarantor or any such director,
officer, employee or controlling person.

 

(c)                                  Promptly after receipt by an indemnified
party under paragraphs (a) or (b) of this Section 7 of notice of any claim or
the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under paragraphs
(a) or (b) of this Section 7, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability that it
may have under paragraphs (a) or (b) of this Section 7 except to the extent it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure and; provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under this paragraph (a) or (b) of this
Section 7. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that the Initial Purchasers shall have the right to employ counsel to
represent jointly the Initial Purchasers and their respective affiliates,
directors, officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Initial Purchasers against the Company or any Guarantor under this
Section 7, if (i) the Company, the Guarantors and the Initial Purchasers shall
have so mutually agreed; (ii) the Company and the Guarantors have failed within
a reasonable time to retain counsel reasonably satisfactory to the Initial
Purchasers; (iii) the Initial Purchasers and their respective affiliates,
directors, officers, employees and controlling persons shall have reasonably
concluded, based on the advice of counsel, that there may be legal defenses
available to them that are different from or in addition to those available to
the Company and the Guarantors; or (iv) the named parties in any such proceeding
(including any impleaded parties) include both the Initial Purchasers or their
respective affiliates, directors, officers, employees or controlling persons, on
the one hand, and the Company and the Guarantors, on the other hand, and
representation of both sets of parties by the same counsel would present a
conflict due to actual or potential differing interests between them, and in any
such event the fees and expenses of such separate counsel shall be paid by the
Company and the Guarantors. No indemnifying party shall (x) without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such

 

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claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding and does not include a statement as
to, or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party, or (y) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.

 

(d)                                 If the indemnification provided for in this
Section 7 shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 7(a) or 7(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company and the Guarantors, on the one hand, and the
Initial Purchasers, on the other, from the offering of the Securities, 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 Company and the Guarantors, on the one hand, and the Initial Purchasers, on
the other, with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers, on the
other, with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities
purchased under this Agreement (before deducting expenses) received by the
Company and the Guarantors, on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Securities
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Securities under this Agreement as set forth
on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the Guarantors, or the Initial
Purchasers, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
For purposes of the preceding two sentences, the net proceeds deemed to be
received by the Company shall be deemed to be also for the benefit of the
Guarantors, and information supplied by the Company shall also be deemed to have
been supplied by the Guarantors. The Company, the Guarantors, and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation (even
if the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(d) shall be deemed to include, for
purposes of this Section 7(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the net proceeds from the sale of the Securities initially purchased by it
exceeds the amount of any damages that such Initial Purchaser has otherwise paid
or become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. 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. The Initial Purchasers’ obligations to contribute as provided
in this Section 7(d) are several in proportion to their respective purchase
obligations and not joint.

 

(e)                                  The Initial Purchasers severally confirm
and the Company and the Guarantors acknowledge and agree that the statements
contained in the second sentence under the heading “Plan of Distribution” in the
Time of Sale Information and the Offering Memorandum are correct and constitute
the only information concerning such Initial Purchasers furnished in writing to
the Company or any Guarantor by or on behalf of the Initial Purchasers
specifically for inclusion in any Free Writing Offering Document,

 

22

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the Preliminary Offering Memorandum, the Time of Sale Information, the Offering
Memorandum, or in any amendment or supplement thereto or in any Blue Sky
Application or in any Marketing Materials.

 

(f)                                   The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies that may
otherwise be available to any Indemnified Person at law or in equity.

 

8.                                      Termination. This Agreement may be
terminated in the absolute discretion of the Representative, by notice to the
Company, if after the execution and delivery of this Agreement and on or prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on the New York Stock Exchange or the over-the-counter
market; (ii) trading of any securities issued or guaranteed by the Company or
any of the Guarantors shall have been suspended on any exchange or in any
over-the-counter market; (iii) a general moratorium on commercial banking
activities shall have been declared by federal or New York State authorities; or
(iv) there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis, either within or outside
the United States, that, in the judgment of the Representative, is material and
adverse and makes it impracticable or inadvisable to proceed with the offering,
sale or delivery of the Securities on the terms and in the manner contemplated
by this Agreement, the Time of Sale Information and the Offering Memorandum.

 

9.                                      Defaulting Initial Purchaser.

 

(a)                                 If, on the Closing Date, any Initial
Purchaser defaults on its obligation to purchase the Securities that it has
agreed to purchase hereunder, the non-defaulting Initial Purchasers may in their
discretion arrange for the purchase of such Securities by other persons
satisfactory to the Company on the terms contained in this Agreement. If, within
36 hours after any such default by any Initial Purchaser, the non-defaulting
Initial Purchasers do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Initial Purchasers to
purchase such Securities on such terms. If other persons become obligated or
agree to purchase the Securities of a defaulting Initial Purchaser, either the
non-defaulting Initial Purchasers or the Company may postpone the Closing Date
for up to five full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Initial Purchasers may be
necessary in the Time of Sale Information, the Offering Memorandum or in any
other document or arrangement, and the Company agrees to promptly prepare any
amendment or supplement to the Time of Sale Information or the Offering
Memorandum that effects any such changes. As used in this Agreement, the term
“Initial Purchaser” includes, for all purposes of this Agreement unless the
context otherwise requires, any person not listed in Schedule 1 hereto that,
pursuant to this Section 9, purchases Securities that a defaulting Initial
Purchaser agreed but failed to purchase.

 

(b)                                 If, after giving effect to any arrangements
for the purchase of the Securities of a defaulting Initial Purchaser or Initial
Purchasers by the non-defaulting Initial Purchasers and the Company as provided
in paragraph (a) above, the aggregate principal amount of such Securities that
remains unpurchased does not exceed one-eleventh of the aggregate principal
amount of all the Securities, then the Company shall have the right to require
each non-defaulting Initial Purchaser to purchase the principal amount of
Securities that such Initial Purchaser agreed to purchase hereunder plus such
Initial Purchaser’s pro rata share (based on the principal amount of Securities
that such Initial Purchaser agreed to purchase hereunder) of the Securities of
such defaulting Initial Purchaser or Initial Purchasers for which such
arrangements have not been made.

 

(c)                                  If, after giving effect to any arrangements
for the purchase of the Securities of a defaulting Initial Purchaser or Initial
Purchasers by the non-defaulting Initial Purchasers and the Company as provided
in paragraph (a) above, the aggregate principal amount of such Securities that
remains unpurchased exceeds one-eleventh of the aggregate principal amount of
all the Securities, or if the Company shall not exercise the right described in
paragraph (b) above, then this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers. Any termination of this
Agreement pursuant to this Section 9 shall be without liability on the part of
the Company or the Guarantors, except that the Company and each of the
Guarantors will continue to be liable for the payment of expenses as set forth
in Section 10 hereof and except that the provisions of Section 7 hereof shall
not terminate and shall remain in effect.

 

23

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(d)                                 Nothing contained herein shall relieve a
defaulting Initial Purchaser of any liability it may have to the Company, the
Guarantors or any non-defaulting Initial Purchaser for damages caused by its
default.

 

10.                               Payment of Expenses.

 

(a)                                 Whether or not the transactions contemplated
by this Agreement are consummated or this Agreement is terminated, the Company
and each of the Guarantors jointly and severally agree to pay or cause to be
paid all costs and expenses incident to the performance of their respective
obligations hereunder, including without limitation, (i) the costs incident to
the authorization, issuance, sale, preparation and delivery of the Securities
and any taxes payable in that connection; (ii) the costs incident to the
preparation and printing of the Preliminary Offering Memorandum, any other Time
of Sale Information, any Free Writing Offering Document and the Offering
Memorandum (including any amendment or supplement thereto) and the distribution
thereof; (iii) the costs of reproducing and distributing each of the Transaction
Documents; (iv) the fees and expenses of the Company’s and the Guarantors’
counsel and independent accountants; (v) the fees and expenses incurred in
connection with the registration or qualification and determination of
eligibility for investment of the Securities under the laws of such
jurisdictions as the Representative may designate and the preparation, printing
and distribution of a Blue Sky Memorandum (including the related fees and
expenses of counsel for the Initial Purchasers); (vi) any fees charged by rating
agencies for rating the Securities; (vii) the fees and expenses of the Trustee
and any paying agent (including related fees and expenses of any counsel to such
parties); (viii) all expenses and application fees incurred in connection with
the approval of the Securities for book-entry transfer by DTC and (ix) all
expenses incurred by the Company in connection with any “road show” presentation
to potential investors.

 

(b)                                 If (i) this Agreement is terminated pursuant
to Section 8, (ii) the Company for any reason fails to tender the Securities for
delivery to the Initial Purchasers or (iii) the Initial Purchasers decline to
purchase the Securities for any reason permitted under this Agreement, the
Company and each of the Guarantors jointly and severally agree to reimburse the
Initial Purchasers for all out-of-pocket costs and expenses (including the fees
and expenses of their counsel) reasonably incurred by the Initial Purchasers in
connection with this Agreement and the offering contemplated hereby.

 

11.                               Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and the officers and directors and any
controlling persons referred to herein, and the affiliates of each Initial
Purchaser referred to in Section 7 hereof. Nothing in this Agreement is intended
or shall be construed to give any other person any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein. No purchaser of Securities from any Initial Purchaser shall be deemed to
be a successor merely by reason of such purchase.

 

12.                               Survival. The respective indemnities, rights
of contribution, representations, warranties and agreements of the Company, the
Guarantors and the Initial Purchasers contained in this Agreement or made by or
on behalf of the Company, the Guarantors or the Initial Purchasers pursuant to
this Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination of this Agreement or any investigation
made by or on behalf of the Company, the Guarantors, the Initial Purchasers, and
the affiliates, directors, officers and employees and each person, if any, who
controls the Company, any Guarantors or any Initial Purchaser in the manner
described in Section 7.

 

13.                               Certain Defined Terms. For purposes of this
Agreement, (a) except where otherwise expressly provided, the term “affiliate”
has the meaning set forth in Rule 405 under the Securities Act; (b) the term
“business day” means any day other than a day on which banks are permitted or
required to be closed in New York City; (c) the term “subsidiary” has the
meaning set forth in Rule 405 under the Securities Act; (d) the term “Exchange
Act” means the Securities Exchange Act of 1934, as amended; and (e) the term
“written communication” has the meaning set forth in Rule 405 under the
Securities Act.

 

24

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14.                               Compliance with USA Patriot Act. In accordance
with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)), the Initial Purchasers are required to
obtain, verify and record information that identifies their respective clients,
including the Company, which information may include the name and address of
their respective clients, as well as other information that will allow the
Initial Purchasers to properly identify their respective clients.

 

15.                               Miscellaneous.

 

(a)                                 Any action by the Initial Purchasers
hereunder may be taken by J.P. Morgan Securities LLC on behalf of the Initial
Purchasers, and any such action taken by J.P. Morgan Securities LLC shall be
binding upon the Initial Purchasers.

 

(b)                                 All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted and confirmed by any standard form of telecommunication.
Notices to the Initial Purchasers shall be given to the Representative c/o J.P.
Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179 (fax:
212-270-1063); Attention: Legal, with a copy to Baker Botts L.L.P., 910
Louisiana Street, Houston, Texas 77002, Attention: Hillary Holmes. Notices to
the Company and the Guarantors shall be delivered or sent by mail, telex,
overnight courier or facsimile transmission to Halcón Resources Corporation,
1000 Louisiana Street, Suite 6700, Houston, Texas 77002, Attention: David
Elkouri, with a copy to Mayer Brown LLP, 700 Louisiana Street, Suite 3400,
Houston, Texas 77002, Attention: William T. Heller IV.

 

(c)                                  This Agreement and any claim, controversy
or dispute arising under or related to this Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

 

(d)                                 The Company and each of the Guarantors
hereby submit to the exclusive jurisdiction of the U.S. federal and New York
state courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. The Company and each of the Guarantors waive any objection
which it may now or hereafter have to the laying of venue of any such suit or
proceeding in such courts. Each of the Company and each of the Guarantors agrees
that final judgment in any such suit, action or proceeding brought in such court
shall be conclusive and binding upon the Company and each Guarantor, as
applicable, and may be enforced in any court to the jurisdiction of which
Company and each Guarantor, as applicable, is subject by a suit upon such
judgment.

 

(e)                                  Each of the parties hereto hereby waives
any right to trial by jury in any suit or proceeding arising out of or relating
to this Agreement.

 

(f)                                   This Agreement may be signed in
counterparts (which may include counterparts delivered by any standard form of
telecommunication), each of which shall be an original and all of which together
shall constitute one and the same instrument.

 

(g)                                  No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.

 

(h)                                 The headings herein are included for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.

 

[Signature page follows]

 

25

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If the foregoing is in accordance with your understanding, please indicate your
acceptance of this Agreement by signing in the space provided below.

 

 

Very truly yours,

 

 

 

 

HALCÓN RESOURCES CORPORATION

 

 

 

 

 

 

 

By

/s/ Mark J. Mize

 

 

Mark J. Mize

 

 

Executive Vice President, Chief Financial Officer

 

 

and Treasurer

 

 

 

 

HALCÓN ENERGY PROPERTIES, INC.

 

HALCÓN FIELD SERVICES, LLC

 

HALCÓN HOLDINGS, INC.

 

HALCÓN OPERATING CO., INC.

 

HALCÓN RESOURCES OPERATING, INC.

 

HALCÓN LOUISIANA OPERATING, L.P.

 

 

By:  HALCÓN GULF STATES, LLC,

 

 

its General Partner

 

HALCÓN GULF STATES, LLC

 

HRC ENERGY LOUISIANA, LLC

 

HRC ENERGY, LLC

 

HRC OPERATING, LLC

 

HRC ENERGY RESOURCES (WV), INC.

 

HALCÓN ENERGY HOLDINGS, LLC

 

HALCÓN WILLISTON I, LLC

 

HALCÓN WILLISTON II, LLC

 

HRC PRODUCTION COMPANY

 

HK OIL & GAS, LLC

 

HK ENERGY OPERATING, LLC

 

HK LOUISIANA OPERATING, LLC

 

HK ENERGY, LLC

 

HK RESOURCES, LLC

 

THE 7711 CORPORATION

 

LAMPE, LLC

 

 

 

 

 

 

 

By

/s/ Mark J. Mize

 

 

Mark J. Mize

 

 

Executive Vice President, Chief Financial Officer

 

 

and Treasurer

 

[Signature Page to Purchase Agreement]

 

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Accepted: As of the date first written above

 

J.P. MORGAN SECURITIES LLC

 

 

 

For itself and on behalf of the

 

several Initial Purchasers listed

 

in Schedule 1 hereto.

 

 

 

 

 

 

 

By

/s/ Jack Smith

 

 

Jack Smith

 

 

Managing Director

 

 

[Signature Page to Purchase Agreement]

 

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Schedule 1

 

Initial Purchaser

 

Principal Amount

 

J.P. Morgan Securities LLC

 

$

187,000,000

 

Goldman, Sachs & Co.

 

97,750,000

 

Barclays Capital Inc.

 

85,000,000

 

BMO Capital Markets Corp.

 

85,000,000

 

Wells Fargo Securities, LLC

 

85,000,000

 

Credit Suisse Securities (USA) LLC

 

44,625,000

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated

 

42,500,000

 

Natixis Securities Americas LLC

 

42,500,000

 

ING Financial Markets LLC

 

40,375,000

 

Capital One Securities, Inc.

 

34,000,000

 

RBC Capital Markets, LLC

 

34,000,000

 

SunTrust Robinson Humphrey, Inc.

 

34,000,000

 

Comerica Securities, Inc.

 

23,375,000

 

BNP Paribas Securities Corp.

 

14,875,000

 

Total

 

$

850,000,000

 

 

Schedule 1

 

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Schedule 2

 

LIST OF GUARANTORS

 

Guarantor

 

State of Incorporation or
Organization

Halcón Energy Properties, Inc.

 

Delaware

Halcón Field Services, LLC

 

Delaware

Halcón Holdings, Inc.

 

Delaware

Halcón Operating Co., Inc.

 

Texas

Halcón Resources Operating, Inc.

 

Delaware

Halcón Louisiana Operating, L.P.

 

Delaware

Halcón Gulf States, LLC

 

Oklahoma

HRC Energy Louisiana, LLC

 

Delaware

HRC Energy Resources (WV), Inc.

 

Delaware

Halcón Energy Holdings, LLC

 

Delaware

Halcón Williston I, LLC

 

Texas

Halcón Williston II, LLC

 

Texas

HRC Production Company

 

Texas

HK Oil & Gas LLC

 

Texas

HRC Energy, LLC

 

Colorado

HRC Operating, LLC

 

Colorado

HK Energy Operating, LLC

 

Texas

HK Energy, LLC

 

Texas

HK Louisiana Operating, LLC

 

Texas

HK Resources, LLC

 

Delaware

The 7711 Corporation

 

Texas

Lampe, LLC

 

Delaware

 

Schedule 2

 

--------------------------------------------------------------------------------

 

ANNEX A

 

FREE WRITING OFFERING DOCUMENTS

 

1.              The Company’s Road Show Presentation: see attached.

 

--------------------------------------------------------------------------------

 

ANNEX B

 

ADDITIONAL TIME OF SALE INFORMATION

 

1.                                      Term sheet containing the terms of the
Securities, substantially in the form of Annex D.

 

--------------------------------------------------------------------------------

 

ANNEX C

 

RESTRICTIONS ON OFFERS AND SALES OUTSIDE THE UNITED STATES

 

In connection with offers and sales of Securities outside the United States:

 

(a)                                 Each Initial Purchaser acknowledges that the
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in transactions not
subject to, the registration requirements of the Securities Act.

 

(b)                                 Each Initial Purchaser, severally and not
jointly, represents, warrants and agrees that:

 

(i)                                     Such Initial Purchaser has offered and
sold the Securities, and will offer and sell the Securities, (A) as part of
their distribution at any time and (B) otherwise until 40 days after the later
of the commencement of the offering of the Securities and the Closing Date, only
in accordance with Regulation S under the Securities Act (“Regulation S”) or
Rule 144A or any other available exemption from registration under the
Securities Act.

 

(ii)                                  None of such Initial Purchaser or any of
its affiliates or any other person acting on its or their behalf has engaged or
will engage in any directed selling efforts with respect to the Securities, and
all such persons have complied and will comply with the offering restrictions
requirement of Regulation S.

 

(iii)                               At or prior to the confirmation of sale of
any Securities sold in reliance on Regulation S, such Initial Purchaser will
have sent to each distributor, dealer or other person receiving a selling
concession, fee or other remuneration that purchases Securities from it during
the distribution compliance period a confirmation or notice to substantially the
following effect:

 

The Securities covered hereby have not been registered under the U.S. Securities
Act of 1933, as amended (the “Securities Act”), and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
(i) as part of their distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering of the Securities and the
date of original issuance of the Securities, except in accordance with
Regulation S or Rule 144A or any other available exemption from registration
under the Securities Act. Terms used above have the meanings given to them by
Regulation S.

 

(iv)                              Such Initial Purchaser has not and will not
enter into any contractual arrangement with any distributor with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.

 

Terms used in paragraph (a) and this paragraph (b) and not otherwise defined in
this Agreement have the meanings given to them by Regulation S.

 

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ANNEX D

 

[g38724km11i001.jpg]

 

HALCÓN RESOURCES CORPORATION

 

$850,000,000
 6.75% Senior Notes due 2025

 

February 9, 2017

 

Pricing Supplement dated February 9, 2017 to the Preliminary Offering Memorandum
dated February 9, 2017 of Halcón Resources Corporation. This Pricing Supplement
is qualified in its entirety by reference to the Preliminary Offering
Memorandum. The information in this Pricing Supplement supplements the
Preliminary Offering Memorandum and supersedes the information in the
Preliminary Offering Memorandum to the extent it is inconsistent with the
information in the Preliminary Offering Memorandum. The information in the
Preliminary Offering Memorandum will be modified to the extent affected by the
changes disclosed herein. Capitalized terms used in this Pricing Supplement but
not defined have the meanings given them in the Preliminary Offering Memorandum.

 

The notes have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or the securities laws of any other jurisdiction. The
notes may not be offered or sold in the United States or to U.S. persons (as
defined in Regulation S) except in transactions exempt from, or not subject to,
the registration requirements of the Securities Act. Accordingly, the notes are
being offered only to (1) “qualified institutional buyers” as defined in
Rule 144A under the Securities Act and (2) outside the United States to non-U.S.
persons in compliance with Regulation S under the Securities Act.

 

Issuer

 

Halcón Resources Corporation

 

 

 

Guarantors

 

The notes will be jointly and severally guaranteed by all the Issuer’s current
restricted subsidiaries and by any future restricted subsidiaries that guarantee
the Issuer’s indebtedness under a credit facility.

 

 

 

Title of Securities

 

6.75% Senior Notes due 2025 (the “Notes”)

 

 

 

Aggregate Principal Amount

 

$850,000,000

 

 

 

Use of Proceeds

 

We estimate the net proceeds of this offering will be approximately $835.1
million after deducting the initial purchasers’ discounts and commissions and
excluding accrued interest. We intend to use the net proceeds from the sale of
the notes offered hereby to purchase any and all of our outstanding 8.625%
Senior Secured Notes due 2020 (“2020 notes”) tendered in the tender offer, to
redeem any 2020 notes that are not tendered and to pay fees, premiums and
expenses and accrued and unpaid interest related to the tender offer or
redemption, and for general corporate purposes.

 

--------------------------------------------------------------------------------

 

Distribution

 

144A / Regulation S with registration rights

 

 

 

Maturity Date

 

February 15, 2025

 

 

 

Issue Price

 

100%, plus accrued interest, if any, from February 16, 2017

 

 

 

Coupon

 

6.75%

 

 

 

Yield to Maturity

 

6.75%

 

 

 

Spread to Treasury

 

+445 basis points

 

 

 

Benchmark Treasury

 

UST 2.0% due February 15, 2025

 

 

 

Interest Payment Dates

 

February 15 and August 15 of each year, beginning on August 15, 2017

 

 

 

Record Dates

 

February 1 and August 1 of each year

 

 

 

Trade Date

 

February 9, 2017

 

 

 

Settlement Date

 

February 16, 2017 (T+5)

It is expected that delivery of the Notes will be made against payment therefor
on or about February 16, 2017, which is the fifth business day following the
date hereof (such settlement cycle being referred to as ‘‘T+5’’). Under
Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in three business days unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade the Notes on the date of pricing or the next succeeding
business day will be required, by virtue of the fact that the notes initially
will settle in T+ 5, to specify an alternative settlement cycle at the time of
any such trade to prevent failed settlement. Purchasers of the Notes who wish to
trade the Notes on the date of pricing should consult their own advisors.

 

 

 

Optional Redemption

 

On or after February 15, 2020, at the following redemption prices (expressed as
a percentage of principal amount), plus accrued and unpaid interest, if any, on
the Notes redeemed during the twelve-month period indicated beginning on
February 15 of the years indicated below:

 

 

 

 

 

Year

 

Price

 

 

 

 

2020

 

105.063

%

 

 

 

2021

 

103.375

%

 

 

 

2022

 

101.688

%

 

 

 

2023 and thereafter

 

100.000

%

 

 

 

 

Make-Whole Redemption

 

Make-whole redemption at Treasury Rate + 50 basis points prior to February 15,
2020

 

 

 

Equity Clawback

 

Up to 35% at 106.75% plus accrued and unpaid interest prior to February 15, 2020

 

 

 

Change of Control

 

101% plus accrued and unpaid interest (following a Rating Decline)

 

 

 

CUSIP and ISIN Numbers

 

Rule 144A CUSIP:

40537Q AN0

 

 

Regulation S CUSIP:

U4057P AJ4

 

 

Rule 144A ISIN:

US40537QAN07

 

--------------------------------------------------------------------------------

 

 

 

Regulation S ISIN:

USU4057PAJ40

 

 

 

Ratings*

 

Moody’s: Caa1
S&P: B-

 

 

 

Denominations

 

Minimum denominations of $2,000 and integral multiples of $1,000 in excess
thereof

 

 

 

Joint Book-Running Mangers

 

J.P. Morgan Securities LLC

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

 

 

Barclays Capital Inc.
BMO Capital Markets Corp.
Goldman, Sachs & Co.
RBC Capital Markets, LLC
Wells Fargo Securities, LLC

 

 

 

Senior Co-Managers

 

Capital One Securities, Inc.
Credit Suisse Securities (USA) LLC
Natixis Securities Americas LLC
SunTrust Robinson Humphrey, Inc.

 

 

 

Co-Managers

 

BNP Paribas Securities Corp.
Comerica Securities, Inc.
ING Financial Markets LLC

 

This material is confidential and is for your information only and is not
intended to be used by anyone other than you. This information does not purport
to be a complete description of these Notes or the offering. Please refer to the
Preliminary Offering Memorandum for a complete description.

 

This communication is being distributed in the United States solely to Qualified
Institutional Buyers, as defined in Rule 144A under the Securities Act, and
outside the United States solely to Non-U.S. persons as defined under
Regulation S.

 

This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.

 

--------------------------------------------------------------------------------

*A securities rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time.

 

Any disclaimer or other notice that may appear below is not applicable to this
communication and should be disregarded. Such disclaimer or notice was
automatically generated as a result of this communication being sent by
Bloomberg or another email system.

 

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