Exhibit 10.1
Allis-Chalmers Energy Inc.
and
the Guarantors listed on Schedule B hereto
$250,000,000
8.50% Senior Notes due 2017
PURCHASE AGREEMENT
dated January 24, 2007
RBC Capital Markets Corporation
Morgan Joseph & Co. Inc

 

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PURCHASE AGREEMENT
January 24, 2007
RBC Capital Markets Corporation
1211 Avenue of the Americas, 32nd Floor
New York, New York 10036
Morgan Joseph & Co. Inc
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
     Introductory. Allis-Chalmers Energy Inc., a Delaware corporation (the
“Company”), proposes, subject to the terms and conditions stated herein, to
issue and sell to RBC Capital Markets Corporation (“RBC”) and Morgan Joseph &
Co. Inc (“Morgan Joseph” and collectively with RBC, the “Initial Purchasers”)
$250,000,000 aggregate principal amount of its 8.50% Senior Notes due 2017 (the
“Notes”). The Securities (as defined below) will be issued pursuant to an
indenture (the “Indenture”) dated January 18, 2006 among the Company, the
Guarantors (as defined below) and Wells Fargo Bank, N.A., as trustee (the
“Trustee”).
     Securities issued in book-entry form will be issued in the name of Cede &
Co., as nominee of The Depository Trust Company (“DTC” or the “Depositary”)
pursuant to a DTC Blanket Letter of Representations, to be dated as of or prior
to the Closing Date (as defined in Section 2) (the “DTC Agreement”), from the
Company to the Depositary.
     The Company’s obligations under the Notes, the Exchange Notes (as defined
below) and the Indenture will be, jointly and severally, unconditionally
guaranteed, on a senior unsecured basis, by (i) each of the Company’s domestic
subsidiaries as of the date hereof, which are listed on Schedule B hereto, and
(ii) any subsidiary of the Company formed or acquired on or after the Closing
Date that executes the Indenture or a supplemental indenture setting forth an
additional guarantee in accordance with the terms of the Indenture, and their
respective successors and assigns (collectively, the “Guarantors”), pursuant to
their guarantees included in the Indenture (the “Guarantees”). The Notes and the
Guarantees thereof are herein collectively referred to as the “Securities”; and
the Exchange Notes (as defined below) and the Guarantees thereof are herein
collectively referred to as the “Exchange Securities.”
     The holders of the Securities will be entitled to the benefits of a
registration rights agreement to be dated as of the Closing Date (the
“Registration Rights Agreement”) among the Company, the Guarantors and the
Initial Purchasers, pursuant to which the Company and each of the Guarantors
will agree to file with the Securities and Exchange Commission (the “SEC”),
under the circumstances set forth therein, (i) a registration statement under
the Securities Act of 1933, as amended, relating to an offer (the “Exchange
Offer”) to exchange another series of debt securities of the Company with terms
substantially identical to the Notes (the “Exchange Notes”) and (ii) to the
extent required by the Registration Rights Agreement, a shelf registration
statement pursuant to Rule 415 of the Securities Act relating to the resale by
certain holders of

 

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the Notes. The Securities Act of 1933, as amended, together with the rules and
regulations of the SEC promulgated thereunder, is referred to herein as the
“Securities Act.”
     As more fully described in the Preliminary Offering Memorandum and in the
Offering Memorandum (as each term is defined below), the Company purchased
substantially all of the assets of Oil & Gas Rental Services, Inc. (“Oil & Gas
Rental”) on December 18, 2006. The purchase by the Company of substantially all
of the assets of Oil & Gas Rental, as described in the Preliminary Offering
Memorandum and in the Offering Memorandum, is referred to herein as the
“Acquisition.” In connection with the Acquisition, the Company (a) received a
limited waiver of certain provisions of Sections 2.04, 7.01 and 7.04 of the
Company’s $25 million senior secured credit facility among the Company, each
lender from time to time party thereto, and Royal Bank of Canada (the “Bank
Credit Facility”) and (b) will (i) offer and sell the Securities contemplated by
this Agreement and (ii) offer and sell the Common Stock pursuant to an
underwriting agreement dated January 23, 2007, between the Company and the
underwriters named therein. The proceeds of this offering, together with the
proceeds from the offering of the Common Stock, will be used to repay the debt
outstanding under the Company’s $300 million bridge loan facility, which the
Company incurred to finance the Acquisition. The aforementioned transactions are
collectively referred to herein as the “Transactions.”
     The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
in the Preliminary Offering Memorandum (as defined below) and agrees that the
Initial Purchasers may resell, subject to the conditions set forth herein, all
or a portion of the Securities to purchasers (the “Subsequent Purchasers”) at
any time after the date of this Agreement. The Securities are to be offered and
sold to or through the Initial Purchasers without registration with the SEC
under the Securities Act, in reliance upon exemptions therefrom. The terms of
the Securities and the Indenture will require that investors that acquire
Securities expressly agree that Securities may only be resold or otherwise
transferred, after the date hereof, if such resale or transfer is registered
under the Securities Act or if an exemption from the registration requirements
of the Securities Act is available (including the exemptions afforded by
Rule 144A (“Rule 144A”) or Regulation S (“Regulation S”) thereunder).
     The Company has prepared and delivered to the Initial Purchasers copies of
a preliminary offering memorandum, dated January 2, 2007 (the “Preliminary
Offering Memorandum”), and has prepared and delivered to the Initial Purchasers
copies of a pricing supplement dated January 24, 2007 (the “Pricing Supplement”)
describing the terms of the Securities, each for use by the Initial Purchasers
in connection with their solicitation of offers to purchase the Securities. As
used herein, the term “Offering Memorandum” shall mean the Preliminary Offering
Memorandum, as supplemented by the Pricing Supplement, and any exhibits thereto,
in the most recent form that has been prepared and delivered by the Company to
the Initial Purchasers in connection with their solicitation of offers to buy
Securities. Promptly after this Agreement is executed by the parties hereto (the
“Time of Execution”) and in any event no later than the second Business Day
following the Time of Execution, the Company will prepare and deliver to the
Initial Purchasers a final Offering Memorandum (the “Final Offering Memorandum”)
which will consist of the Preliminary Offering Memorandum with only such changes
therein as are required to reflect the information contained in the Pricing
Supplement, and from and after the time such Final Offering Memorandum is
delivered to the Initial Purchasers, all references herein

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to the Offering Memorandum shall be deemed to refer to both the Offering
Memorandum and the Final Offering Memorandum.
     The Company and the Guarantors hereby confirm their agreement with the
Initial Purchasers as follows:
     SECTION 1. Representations and Warranties. The Company and the Guarantors,
jointly and severally, hereby represent, warrant and covenant to the Initial
Purchasers as follows:
     (a) No Registration Required. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in Section 2 hereof
and with the procedures set forth in Section 7 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated by this
Agreement, the Preliminary Offering Memorandum and the Offering Memorandum to
register under the Securities Act the offer and sale of the Securities hereunder
or the initial resale of Securities to Subsequent Purchasers or, until such time
as the Exchange Securities are issued pursuant to an effective registration
statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the
“Trust Indenture Act,” which term, as used herein, includes the rules and
regulations of the SEC promulgated thereunder).
     (b) No Integration of Offerings or General Solicitation; Regulation S
Matters. Neither the Company nor any Guarantor has, directly or indirectly,
solicited any offer to buy or offered to sell, and will not, directly or
indirectly, solicit any offer to buy or offer to sell, in the United States or
to any United States citizen or resident, any security which is or would be
integrated with the sale of the Securities in a manner that would require the
offer and sale of the Securities hereunder or the initial resale to Subsequent
Purchasers to be registered under the Securities Act. None of the Company, the
Guarantors, their respective affiliates (as such term is defined in Rule 501
under the Securities Act) (each, an “Affiliate”), or any person acting on its or
their behalf (other than the Initial Purchasers, as to whom neither the Company
nor any Guarantor makes any representation or warranty) has engaged or will
engage, in connection with the offering of the Securities, in any form of
general solicitation or general advertising within the meaning of Rule 502 under
the Securities Act. With respect to those Securities sold in reliance upon
Regulation S, (i) none of the Company, the Guarantors, their respective
Affiliates or any person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation or warranty) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S, (ii) each of the Company, the Guarantors and their respective
Affiliates and any person acting on its or their behalf (other than the Initial
Purchasers, as to whom neither the Company nor any Guarantor makes any
representation or warranty) has complied and will comply with the offering
restrictions set forth in Regulation S and, in connection therewith, the
Preliminary Offering Memorandum and the Offering Memorandum will contain the
disclosure required by Rule 902 of the Securities Act, and (iii) the sale of the
Securities pursuant to Regulation S is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
     (c) Eligibility for Resale under Rule 144A. The Securities are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Date, of the same
class as securities listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of

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1934, as amended (the “Exchange Act”), or quoted in a U.S. automated interdealer
quotation system.
     (d) The Offering Memorandum. As of the Time of Execution, the Offering
Memorandum does not, and at the Closing Date will not, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information furnished to
the Company in writing by the Initial Purchasers expressly for use in the
Offering Memorandum. Neither the Company nor any Guarantor has distributed or
will distribute, prior to the later of the Closing Date and the completion of
the Initial Purchasers’ distribution of the Securities, any offering material in
connection with the offering and sale of the Securities other than the
Preliminary Offering Memorandum and the Offering Memorandum.
     (e) Documents Incorporated by Reference. Except as set forth on Schedule D
hereto, the documents incorporated by reference in the Preliminary Offering
Memorandum and the Offering Memorandum, when they became effective or were filed
with the Commission, as the case may be, conformed in all material respects to
the requirements of the Exchange Act and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Any further
documents so filed and incorporated by reference in the Preliminary Offering
Memorandum and the Offering Memorandum or any further amendment or supplement
thereto, when such documents become effective or are filed with the Commission,
as the case may be, will conform in all material respects to the requirements of
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder.
     (f) The Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company
and each Guarantor, enforceable against the Company and each Guarantor in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
     (g) The Registration Rights Agreement. The Registration Rights Agreement
has been duly authorized by the Company and each Guarantor, and, when duly
executed and delivered by the Company and each Guarantor, the Registration
Rights Agreement will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles and except as rights to indemnification under the Registration Rights
Agreement may be limited by applicable law.
     (h) The DTC Agreement. At the Closing Date, the DTC Agreement will have
been duly authorized, executed and delivered by, and (assuming the due
authorization, execution and

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delivery thereof by the other parties thereto) will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
     (i) Authorization of the Securities and the Exchange Securities. The Notes
to be purchased by the Initial Purchasers from the Company will be in the form
contemplated by the Indenture, and have been duly authorized for issuance and
sale pursuant to this Agreement and the Indenture, and, when executed by the
Company and authenticated by the Trustee in accordance with the terms of the
Indenture and delivered against payment of the purchase price therefor, the
Notes will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles and will be entitled to the benefits of the
Indenture. The Exchange Notes have been duly and validly authorized for issuance
by the Company, and when issued and authenticated in accordance with the terms
of the Indenture, the Registration Rights Agreement and the Exchange Offer, the
Exchange Notes will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles and will be entitled to
the benefits of the Indenture. The Guarantees of the Notes set forth in the
Indenture have been duly authorized for issuance and sale pursuant to this
Agreement and the Indenture, and, when the Notes have been executed,
authenticated and issued in accordance with the terms of the Indenture and
delivered against payment of the purchase price therefor, the Guarantees of the
Notes will constitute valid and binding obligations of the Guarantors,
enforceable against the Guarantors in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles and will be entitled to
the benefits of the Indenture. The Guarantees of the Exchange Notes set forth in
the Indenture have been duly authorized for issuance and sale pursuant to this
Agreement and the Indenture, and, when the Exchange Notes have been issued and
authenticated in accordance with the terms of the Indenture and delivered
against payment of the purchase price therefor, the Guarantees of the Exchange
Notes will constitute valid and binding obligations of the Guarantors,
enforceable against the Guarantors in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles and will be entitled to
the benefits of the Indenture.
     (j) Authorization of the Indenture. The Indenture has been duly authorized,
executed and delivered by the Company and each Guarantor, and, assuming due
authorization, execution and delivery thereof by the Trustee, constitutes a
valid and binding agreement of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.

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     (k) Authorization of the Transactions. The Company and each Guarantor, as
applicable, have or will have on or prior to the Closing Date all requisite
power and authority to consummate the Transactions to which they are a party and
to enter into all agreements related to the Transactions (collectively, the
“Transaction Documents”) to which they are a party. Each of the Transaction
Documents has been or will have been on or prior to the Closing Date, duly
authorized by the Company and each Guarantor to the extent such persons are
parties thereto, and, when executed and delivered by the Company and each
Guarantor, (assuming due authorization, execution and delivery by the other
parties thereto) constitute a legal, valid and binding agreement of the Company
and each Guarantor party thereto, enforceable against the Company and each
Guarantor, as applicable, in accordance with its terms, except as such
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors generally or by general equitable principles.
     (l) Description of the Securities and the Indenture. The Notes, the
Exchange Notes, the Guarantees of the Notes and the Exchange Notes and the
Indenture will conform in all material respects to the respective statements
relating thereto contained in the Preliminary Offering Memorandum and the
Offering Memorandum.
     (m) No Material Adverse Change. Except as otherwise disclosed in the
Preliminary Offering Memorandum and the Offering Memorandum, subsequent to the
respective dates as of which information is given in the Preliminary Offering
Memorandum and in the Offering Memorandum: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business or operations, whether or not arising from transactions
in the ordinary course of business, of the Company and its subsidiaries,
considered as one entity (any such change is called a “Material Adverse
Change”); (ii) the Company and its subsidiaries, considered as one entity, have
not incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiaries, any
of its subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its subsidiaries of any class of capital stock.
     (n) Independent Accountants. Each of the accounting firms listed on
Schedule C hereto, who have expressed their opinion with respect to the
financial statements (which term as used in this Agreement includes the related
notes thereto) and supporting schedules included in the Preliminary Offering
Memorandum and in the Offering Memorandum are independent registered public
accounting firms, in the case of UHY Mann Frankfort Stein & Lipp CPAs, LLP, UHY
LLP and Gordon, Hughes and Banks, LLP, or an independent public accounting firm,
in the case of Sibille (la firma argentina miembro de KPMG International, una
cooperativa suiza) , or independent certified public accountants, in the case of
the other firms listed on Schedule C hereto, within the meaning of
Regulation S-X under the Securities Act and the Exchange Act.
     (o) Preparation of the Financial Statements. The historical financial
statements, together with the related schedules and notes, included in the
Preliminary Offering Memorandum and in the Offering Memorandum present fairly
the consolidated financial position of the

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Company and its subsidiaries or of DLS, Specialty Rental Tools Inc., W. T.
Enterprises, Inc., Delta Rental Service, Inc., Capcoil Tubing Services, Inc. and
Petro-Rentals, Incorporated (“Petro-Rentals”), as the case may be, as of and at
the dates indicated and the consolidated results of their respective operations
and cash flows for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles, as applied
in the United States, applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto. The
historical financial information set forth in the Preliminary Offering
Memorandum and in the Offering Memorandum under the caption “Offering Memorandum
Summary—Summary Historical and Pro Forma Consolidated Financial Information”
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Preliminary Offering
Memorandum and in the Offering Memorandum. The pro forma consolidated condensed
financial statements of the Company and its subsidiaries and the related notes
thereto included under the caption “Offering Memorandum Summary—Summary
Historical and Pro Forma Consolidated Financial Information,” “Unaudited Pro
Forma As Adjusted Consolidated Financial Information” and elsewhere in the
Preliminary Offering Memorandum and in the Offering Memorandum present fairly
the information contained therein, have been prepared in accordance with the
SEC’s rules and guidelines with respect to pro forma financial statements and
have been properly presented on the bases described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances referred to
therein.
     (p) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly incorporated, formed or
organized and is validly existing as a corporation or limited liability company
in good standing under the laws of the jurisdiction of its incorporation,
formation or organization and has corporate, limited liability company or other
organization power and authority to own, lease and operate its properties and to
conduct its business as described in the Preliminary Offering Memorandum and in
the Offering Memorandum and, in the case of the Company and the Guarantors, to
enter into and perform their respective obligations under each of this
Agreement, the Registration Rights Agreement, the DTC Agreement (in the case of
the Company only), the Securities, the Exchange Securities and the Indenture.
Each of the Company and its subsidiaries is duly qualified as a foreign
corporation, limited liability company 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 for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change. Except as disclosed in the
Preliminary Offering Memorandum and in the Offering Memorandum, all of the
issued and outstanding capital stock or membership interests of each subsidiary
of the Company has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through one or more
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Schedule B hereto.
     (q) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company nor any of its subsidiaries is in
violation of its charter, by-laws or equivalent organizational documents, or is
in default (or, with the giving of

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notice or lapse of time, would be in default) (“Default”) under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or other
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any of its subsidiaries is subject (each, an “Existing
Instrument”), except for such Defaults as would not, individually or in the
aggregate, result in a Material Adverse Change. The Company’s and each
Guarantor’s execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the DTC Agreement (in the case of the Company
only) and the Indenture, and the issuance and delivery of the Securities or the
Exchange Securities, and consummation of the transactions contemplated hereby
and thereby and by the Preliminary Offering Memorandum and the Offering
Memorandum (i) have been duly authorized by all necessary corporate action and
will not result in any violation of the provisions of the charter, by-laws or
equivalent organizational documents of the Company or any subsidiary, (ii) will
not conflict with or constitute a breach of, or Default or a Debt Repayment
Triggering Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, or require the consent of any
other party to, any Existing Instrument, except for such conflicts, breaches,
Defaults, liens, charges or encumbrances as would not, individually or in the
aggregate, result in a Material Adverse Change and (iii) will not result in any
violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary, except for such violations
as would not, individually or in the aggregate, result in a Material Adverse
Change. No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental or regulatory authority or
agency, is required for the Company’s or each Guarantor’s execution, delivery
and performance of this Agreement, the Registration Rights Agreement, the DTC
Agreement (in the case of the Company only) or the Indenture, or the issuance
and delivery of the Securities or the Exchange Securities, or consummation of
the transactions contemplated hereby and thereby and by the Preliminary Offering
Memorandum and the Offering Memorandum (including, but not limited to, the
Acquisition), except such as have been obtained or made by the Company or the
Guarantors and are in full force and effect under the Securities Act, applicable
state securities or blue sky laws and except such as may be required by federal
and state securities laws or blue sky laws with respect to the Company’s or each
Guarantor’s obligations under the Registration Rights Agreement. As used herein,
a “Debt Repayment Triggering Event” means any event or condition which gives, or
with the giving of notice or lapse of time would give, the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any of its subsidiaries.
     (r) No Material Actions or Proceedings. Except as disclosed in the
Preliminary Offering Memorandum and in the Offering Memorandum, there are no
legal or governmental actions, suits or proceedings pending or, to the best of
the Company’s and each Guarantor’s knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries or (ii) which has as the
subject thereof any property owned or leased by, the Company or any of its
subsidiaries, where in any such case (A) it is reasonably expected that such
action, suit or proceeding might be determined adversely to the Company or such
subsidiary and (B) any such action, suit or proceeding, if so determined
adversely, would reasonably be expected to result in a Material Adverse Change
or adversely affect the consummation of the transactions contemplated by this
Agreement and by the Preliminary Offering Memorandum and the Offering

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Memorandum in the “Use of Proceeds” section. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the best of the
Company’s and each of the Guarantor’s knowledge, is threatened or imminent
which, if determined adversely to the Company would reasonably be expected to
result in a Material Adverse Change.
     (s) Intellectual Property Rights. The Company and its subsidiaries own or
possess sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively, “Intellectual
Property Rights”) reasonably necessary to conduct their businesses as described
in the Preliminary Offering Memorandum and in the Offering Memorandum; and the
expected expiration of any of such Intellectual Property Rights if not renewed
or replaced would not result in a Material Adverse Change. Neither the Company
nor any of its subsidiaries has received any notice of infringement or conflict
with asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a Material
Adverse Change.
     (t) All Necessary Permits, etc. Except as disclosed in the Preliminary
Offering Memorandum and in the Offering Memorandum, the Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses as currently
conducted, and neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
     (u) Title to Properties. Except as disclosed in the Preliminary Offering
Memorandum and in the Offering Memorandum, the Company and each of its
subsidiaries have good and marketable title to all the properties and assets
reflected as owned in the financial statements referred to in Section 1(n) above
(or elsewhere in the Preliminary Offering Memorandum and in the Offering
Memorandum), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except (i) such as do
not materially and adversely affect the value of such property and (ii) such as
do not materially interfere with the current or currently proposed use of such
property by the Company or such subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such exceptions as
are not material and do not materially interfere with the current or currently
proposed use of such real property, improvements, equipment or personal property
by the Company or such subsidiary.
     (v) Tax Law Compliance. The Company and its consolidated subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against any
of them, except, in all cases, for any such tax, assessment, fine or penalty
that the Company is contesting in good faith and except, in any case, in which
the failure to so file or pay would not in the aggregate result in a Material
Adverse Change. The Company has made adequate charges, accruals and reserves in
the applicable financial statements referred to in Section 1(n) above in respect
of all federal, state and foreign income and franchise taxes for all periods as
to which the tax liability of the Company or any of its

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consolidated subsidiaries has not been finally determined, except where the
failure to make such charges, accruals and reserves would not result in a
Material Adverse Change.
     (w) Company and Guarantors Each Not an “Investment Company”. The Company
has been advised of the rules and requirements under the Investment Company Act
of 1940, as amended (the “Investment Company Act”). Neither the Company nor any
Guarantor is, nor after giving effect to the offering and sale of the Securities
and the application of the net proceeds therefrom, as described in the
Preliminary Offering Memorandum and in the Offering Memorandum, will be, an
“investment company” within the meaning of the Investment Company Act, and the
Company and each Guarantor intends to conduct its business in a manner so that
it will not become subject to the Investment Company Act.
     (x) Insurance. Except as disclosed in the Preliminary Offering Memorandum
and in the Offering Memorandum, each of the Company and its subsidiaries are
insured by recognized, financially sound institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes. Except as disclosed in the Preliminary Offering Memorandum and in
the Offering Memorandum, the Company has no reason to believe that it or any
subsidiary will not be able (i) to renew its 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 its business as now
conducted and at a cost that would not result in a Material Adverse Change.
     (y) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities.
     (z) Solvency. The Company and each Guarantor is, and immediately after the
Closing Date, will be, Solvent. As used herein, the term “Solvent” means, with
respect to the Company and each Guarantor on a particular date, that on such
date (i) the fair market value of its assets is greater than the total amount of
its liabilities (including contingent liabilities); (ii) the present fair
salable value of its assets is greater than the amount that will be required to
pay the probable liabilities on its debts as they become due and payable;
(iii) it is able to realize upon its assets and pay its debts and other
liabilities, including contingent obligations, as they become due and payable;
and (iv) it does not have unreasonably small capital to carry on its business as
conducted and as proposed to be conducted, as set forth in the Preliminary
Offering Memorandum and the Offering Memorandum.
     (aa) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor, to the best of the Company’s knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any applicable law or of the character necessary
to be disclosed in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading.

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     (bb) Company’s Accounting System. Except as disclosed in the Preliminary
Offering Memorandum and Offering Memorandum, the Company maintains a system of
accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
     (cc) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change: (i) neither the
Company nor any of its subsidiaries is in violation of any federal, state, local
or foreign law or regulation relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, “Materials of Environmental Concern”), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
“Environmental Laws”), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or any of its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation with
respect to which the Company has received written notice, and no written notice
by any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages, property
damages, personal injuries, attorneys’ fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past (collectively,
“Environmental Claims”), pending or, to the best of the Company’s or any
Guarantor’s knowledge, threatened against the Company or any of its subsidiaries
or any person or entity whose liability for any Environmental Claim the Company
or any of its subsidiaries has retained or assumed either contractually or by
operation of law; and (iii) to the best of the Company’s or any Guarantor’s
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that reasonably could result in a violation of any Environmental Law or
form the basis of a potential Environmental Claim against the Company or any of
its subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law.
     (dd) ERISA Compliance. The Company and its subsidiaries and any “employee
benefit plan” (as defined under the Employee Retirement Income Security Act of
1974, as

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amended, and the regulations and published interpretations thereunder
(collectively, “ERISA”)) established or maintained by the Company, its
subsidiaries or their “ERISA Affiliates” (as defined below) are in compliance
with ERISA, except for any such noncompliance as would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
“ERISA Affiliate” means, with respect to the Company or a subsidiary, any member
of any group of organizations described in Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the “Code”) of which the Company or such subsidiary
is a member. No “reportable event” (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any “employee benefit plan”
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No “employee benefit plan” (as defined in Section 3(3) of ERISA)
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such “employee benefit plan” were terminated, would have any
“amount of unfunded benefit liabilities” (as defined under ERISA) that could
reasonably be expected to result in a Material Adverse Change. Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any “employee benefit plan” or
(ii) Section 412, 4971, 4975 or 4980B of the Code that could reasonably be
expected to result in a Material Adverse Change. Each “employee benefit plan”
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, including by action or failure to act,
which would cause the loss of such qualification, that has given or would give
rise to any tax, penalty or other liability that could reasonably be expected to
result in a Material Adverse Change.
     (ee) Sarbanes-Oxley Act. The Company is in compliance in all material
respects with applicable provisions of the Sarbanes-Oxley Act of 2002 that are
effective as of the date of this Agreement.
     (ff) Disclosure Controls and Procedures. Except as disclosed in the
Preliminary Offering Memorandum and the Offering Memorandum, (i) the Company has
established and maintains “disclosure controls and procedures” (as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) and (ii) the Company’s
“disclosure controls and procedures” are reasonably designed to ensure that all
information (both financial and non-financial) required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and regulations thereunder, and that all such information is
accumulated and communicated to the Company’s management as appropriate to allow
timely decisions regarding required disclosure and to make the certifications of
the Chief Executive Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports. Without limiting the
generality of the foregoing, as disclosed in the Preliminary Offering Memorandum
and the Offering Memorandum, the Company’s disclosure controls and procedures
are not effective to enable it to record, process, summarize, and report
information required to be included in its SEC filings within the required time
period, and to ensure that such information is accumulated and communicated to
its management, including its Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure.

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     (gg) Payment of Dividends by Subsidiaries. No subsidiary of the Company is
currently prohibited, directly or indirectly, from paying any dividends to the
Company or any other subsidiary, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company or any other subsidiary
any loans or advances to such subsidiary from the Company or any other
subsidiary 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 or
contemplated in the Preliminary Offering Memorandum and the Offering Memorandum.
     (hh) Forward Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Act and Section 21E of the Exchange Act) or
presentation of market-related or statistical data contained in the Preliminary
Offering Memorandum or Offering Memorandum has been made or reaffirmed without a
reasonable basis or has been disclosed in other than good faith.
     Any certificate signed by an officer of the Company and delivered to the
Initial Purchasers or to counsel for the Initial Purchasers shall be deemed to
be a representation and warranty by the Company to each Initial Purchaser as to
the matters set forth therein.
     SECTION 2. Purchase, Sale and Delivery of the Securities.
     (a) The Securities. The Company agrees to issue and sell to the several
Initial Purchasers all of the Notes upon the terms herein set forth. The
Guarantors, jointly and severally, agree to issue to the several Initial
Purchasers all of the Guarantees of the Notes upon the terms herein set forth.
On the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, each of the
Initial Purchasers agrees, severally and not jointly, to purchase from the
Company the aggregate principal amount of Notes set forth opposite its name in
Schedule A, at a purchase price of 97.50% of the principal amount thereof plus
interest from January 29, 2007, payable on the Closing Date.
     (b) The Closing Date. Delivery of and payment for the Securities shall be
made at the offices of Shearman & Sterling LLP in New York or such other place
as shall be agreed upon by the Company and the Initial Purchasers at 9:00 a.m.,
New York City time, on January 29, 2007 or at such time on such later date as
the Initial Purchasers and the Company shall designate, which date and time may
be postponed by agreement between the Initial Purchasers and the Company (such
date and time of delivery and payment for the Securities being herein called the
“Closing Date”). The Company hereby acknowledges that circumstances under which
the Initial Purchasers may provide notice to postpone the Closing Date as
originally scheduled include, but are in no way limited to, any determination by
the Company or the Initial Purchasers to recirculate to investors copies of an
amended or supplemented Offering Memorandum or a delay as contemplated by the
provisions of Section 18.
     (c) Delivery of and Payment for the Securities. The Company shall deliver,
or cause to be delivered, to or as directed by RBC for the accounts of the
several Initial Purchasers certificates for the Securities at the Closing Date
against the irrevocable release of a wire transfer of immediately available
funds for the amount of the purchase price therefor. The certificates for the
Securities shall be in such denominations and registered in the name of Cede &
Co., as nominee of the Depository, pursuant to the DTC Agreement, and shall be
made available for

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inspection on the business day preceding the Closing Date at a location in New
York City, as the Initial Purchasers may designate. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Initial Purchasers.
     (d) Initial Purchasers as Accredited Investors. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company that it is an “accredited investor” within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Notes.
     SECTION 3. Additional Covenants. The Company and, as applicable, each of
the Guarantors, jointly and severally, further covenant and agree with each
Initial Purchaser as follows:
     (a) Initial Purchasers’ Review of Proposed Amendments and Supplements.
Until the later of (x) the completion of the placement of the Securities by the
Initial Purchasers with the Subsequent Purchasers and (y) the Closing Date,
prior to amending or supplementing the Offering Memorandum, the Company shall
furnish to the Initial Purchasers for review a copy of each such proposed
amendment or supplement, and the Company shall not use any such proposed
amendment or supplement to which the Initial Purchasers reasonably object.
     (b) Amendments and Supplements to the Offering Memorandum. If, prior to the
completion of the placement of the Securities by the Initial Purchasers with the
Subsequent Purchasers, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, not misleading, or if in the opinion of
the Initial Purchasers or counsel for the Initial Purchasers it is otherwise
necessary to amend or supplement the Offering Memorandum to comply with
applicable law, the Company agrees to prepare promptly (subject to Section 3(a)
hereof), and furnish at its own expense to the Initial Purchasers, amendments or
supplements to the Offering Memorandum so that the statements in the Offering
Memorandum as so amended or supplemented will not, in the light of the
circumstances when the Offering Memorandum is delivered to a purchaser, be
misleading or so that the Offering Memorandum, as amended or supplemented, will
comply with applicable law.
     (c) Copies of the Offering Memorandum. The Company agrees to furnish the
Initial Purchasers, without charge, as many copies of the Offering Memorandum
and any amendments and supplements thereto as they shall have reasonably
requested.
     (d) Blue Sky Compliance. The Company and each Guarantor shall cooperate
with the Initial Purchasers and counsel for the Initial Purchasers to qualify or
register the Securities for sale under (or obtain exemptions from the
application of) the state securities, or blue sky, laws of those jurisdictions
designated by the Initial Purchasers, shall comply with such laws and shall
continue such qualifications, registrations and exemptions in effect so long as
required for the distribution of the Securities. Neither the Company nor any
Guarantor shall be required to qualify as a foreign corporation or to take any
action that would subject it to general service of

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process in any such jurisdiction where it is not presently qualified or where it
would be subject to taxation as a foreign corporation, limited liability company
or other entity. The Company will advise the Initial Purchasers promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Securities for offering, sale or trading in any jurisdiction or
any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company shall use its commercially reasonable efforts to
obtain the withdrawal thereof at the earliest possible moment.
     (e) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Securities sold by it in the manner described under the caption “Use of
Proceeds” in the Preliminary Offering Memorandum and the Offering Memorandum.
     (f) The Depositary. The Company will cooperate with the Initial Purchasers
and use its commercially reasonable efforts to permit the Securities to be
eligible for clearance and settlement through the facilities of the Depositary.
     (g) No Integration. The Company agrees that it will not and will cause its
Affiliates not to make any offer or sale of securities of the Company of any
class if, as a result of the doctrine of “integration” referred to in Rule 502
under the Securities Act, such offer or sale would render invalid (for the
purpose of (i) the sale of the Securities by the Company to the Initial
Purchasers, (ii) the resale of the Securities by the Initial Purchasers to
Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent
Purchasers to others) the exemption from the registration requirements of the
Securities Act provided by Section 4 thereof or by Rule 144A or by Regulation S
thereunder or otherwise.
     (h) Legended Securities. Each certificate for a Note will bear the legend
contained in “Notice to Investors” in the Preliminary Offering Memorandum and
the Offering Memorandum for the time period and upon the other terms stated in
the Preliminary Offering Memorandum and the Offering Memorandum.
     (i) PORTALSM. The Company will use its commercially reasonable efforts to
cause the Notes to be eligible for The PORTALSM Market of the National
Association of Securities Dealers, Inc. (“The PORTALSM Market”).
     (j) Agreement Not to Offer or Sell Additional Securities. During the period
of 90 days following the date of the Offering Memorandum, none of the Company or
any Guarantor will, without the prior written consent of the Initial Purchasers
(which consent may be withheld at the sole discretion of the Initial
Purchasers), directly or indirectly, sell, offer, contract or grant any option
to sell, pledge, transfer or establish an open “put equivalent position” within
the meaning of Rule 16a-1 under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any debt securities of the Company or any
Guarantor substantially similar to the Securities or securities exchangeable for
or convertible into debt securities of the Company or any Guarantor
substantially similar to the Securities (other than as contemplated by this
Agreement and to register the Exchange Securities).

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     (k) Rating of Securities. The Company and the Guarantors shall take all
commercially reasonable action necessary to enable Standard & Poor’s Rating
Services, a division of The McGraw-Hill, Inc. Companies, and Moody’s Investor
Services, Inc. to provide their respective credit ratings to the Securities at
or prior to the time of their initial issuance.
     The Initial Purchasers, may, in their sole discretion, waive in writing the
performance by the Company of any one or more of the foregoing covenants or
extend the time for their performance.
     SECTION 4. Payment of Expenses. The Company and the Guarantors, jointly and
severally, agree to pay all costs, fees and expenses incurred in connection with
the performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation, (i) all expenses
incident to the issuance and delivery of the Securities, (ii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Securities to the Initial Purchasers, (iii) all fees and expenses of the
Company’s and the Guarantors’ counsel, independent registered public accounting
firms or independent certified public accountants and other advisors, (iv) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of each Preliminary Offering Memorandum and
the Offering Memorandum (including financial statements and exhibits), and all
amendments and supplements thereto, this Agreement, the Registration Rights
Agreement, the Indenture, the DTC Agreement, and the Securities, (v) all filing
fees, attorneys’ fees and expenses incurred by the Company or the Initial
Purchasers in connection with qualifying or registering (or obtaining exemptions
from the qualification or registration of) all or any part of the Securities for
offer and sale under the state securities or blue sky laws and, if requested by
the Initial Purchasers, preparing and printing a “Blue Sky Survey” or
memorandum, and any supplements thereto, advising the Initial Purchasers of such
qualifications, registrations and exemptions, (vi) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture, the Securities and the Exchange Securities,
(vii) any fees payable in connection with the rating of the Securities or the
Exchange Securities with the ratings agencies and the listing of the Securities
with The PORTALSM Market, (viii) all fees and expenses (including reasonable
fees and expenses of counsel) of the Company and the Guarantors in connection
with approval of the Securities by DTC for “book-entry” transfer, (ix) the
transportation and other expenses incurred by or on behalf of the
representatives of the Company in connection with presentations to prospective
purchasers of the Securities, including, but not limited to, the cost of any
chartered aircraft and (x) all other costs and expenses incident to the
performance by the Company and the Guarantors of their respective other
obligations under this Agreement. Except as provided in this Section 4,
Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay
their own expenses, including the fees and disbursements of their counsel.
     SECTION 5. Conditions of the Obligations of the Initial Purchasers. The
obligations of the several Initial Purchasers to purchase and pay for the
Securities as provided herein on the Closing Date shall be subject to (A) the
accuracy in all material respects of the representations and warranties on the
part of the Company and the Guarantors set forth in Section 1 hereof that are
not qualified by materiality as of the date hereof and as of the Closing Date as
though then made, (B) to the accuracy of the representations and warranties on
the part of the Company and the Guarantors set forth in Section 1 hereof that
are qualified by materiality as of the date hereof

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and as of the Closing Date as though then made, (C) the timely performance by
the Company of its covenants and other obligations hereunder and (D) each of the
following additional conditions:
     (a) Accountants’ Comfort Letters. On the date hereof, the Initial
Purchasers shall have received from the accountants listed on Schedule C hereto,
in respect of each entity set forth opposite such accountant’s name on
Schedule C hereto, a letter from each such accountant, dated the date hereof
addressed to the Initial Purchasers, in form and substance satisfactory to the
Initial Purchasers, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to initial purchasers with respect to
the financial statements and certain financial information contained in the
Preliminary Offering Memorandum and the Pricing Supplement, and the specified
date referred to therein for the carrying out of procedures shall be no more
than three days prior to the date hereof.
     (b) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the Closing Date:
     (i) there shall not have occurred any Material Adverse Change; and
     (ii) there shall not have occurred any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the possible change, in
the rating accorded any securities of the Company or any of its subsidiaries by
any “nationally recognized statistical rating organization” as such term is
defined for purposes of Rule 436 under the Securities Act.
     (c) Opinion of Counsel for the Company and the Guarantors. The Company
shall have requested and caused the following legal opinions dated the Closing
Date and addressed to the Initial Purchasers to be furnished to the Initial
Purchasers:
     (i) an opinion of Andrews Kurth LLP, special counsel for the Company and
the Guarantors, substantially to the effect set forth in Exhibit A-1; and
     (ii) an opinion of Liskow & Lewis, special Louisiana counsel for the
Company and the Guarantors, substantially to the effect set forth in Exhibit A-2
hereto.
     (d) Opinion of Counsel for the Initial Purchasers. The Initial Purchasers
shall have received from Shearman & Sterling LLP, counsel for the Initial
Purchasers, such opinion or opinions, dated the Closing Date and addressed to
the Initial Purchasers, with respect to the issuance and sale of the Securities,
the Preliminary Offering Memorandum and the Offering Memorandum (as amended or
supplemented at the Closing Date) and other related matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling it to pass
upon such matters.
     (e) Officers’ Certificate. On the Closing Date, the Initial Purchasers
shall have received a written certificate executed by the Chairman of the Board,
Chief Executive Officer or President and the Chief Financial Officer or Chief
Accounting Officer of the Company dated as

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of the Closing Date, to the effect set forth in subsection (b) of this
Section 5, and further to the effect that:
     (i) the representations and warranties of the Company and the Guarantors
set forth in Section 1 of this Agreement that are not qualified by materiality
are true and correct in all material respects as of the Time of Execution and
are true and correct as of the Closing Date, and the representations and
warranties and of the Company and the Guarantors that are qualified by
materiality are true and correct as of the Time of Execution and are true and
correct as of the Closing Date, in each case, with the same force and effect as
though expressly made on and as of the Closing Date; and
     (ii) the Company and the Guarantors have complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date.
     (f) Bring-down Comfort Letter. On the Closing Date, the Initial Purchasers
shall have received from the accountants listed on Schedule C hereto, in respect
of each entity set forth opposite such accountant’s name on Schedule C hereto, a
letter dated such date, in form and substance satisfactory to the Initial
Purchasers, to the effect that they reaffirm the statements made in the letter
furnished by them pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures shall be
no more than three business days prior to the Closing Date and that their
procedures shall extend to financial information in the Final Offering
Memorandum not contained in the Preliminary Offering Memorandum or the Pricing
Supplement.
     (g) PORTALSM Eligibility. At the Closing Date, the Notes shall have been
designated for trading on The PORTALSM Market.
     (h) Registration Rights Agreement. The Company and each of the Guarantors
shall have executed and delivered the Registration Rights Agreement and the
Initial Purchasers shall have received executed counterparts thereof.
     (i) Additional Documents. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Securities
as contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
     If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company at any time on or prior to the Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6, Section 8 and Section 9 shall at
all times be effective and shall survive such termination.
     SECTION 6. Reimbursement of Initial Purchasers’ Expenses. If this Agreement
is terminated by the Initial Purchasers pursuant to Section 5, or if the sale to
the Initial Purchasers of the Securities on the Closing Date is not consummated
because of any refusal, inability or

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failure on the part of the Company or any Guarantor to perform any agreement
herein or to comply with any provision hereof, the Company and the Guarantors,
jointly and severally, agree to reimburse the Initial Purchasers upon demand for
all out-of-pocket expenses that shall have been reasonably incurred by the
Initial Purchasers in connection with the proposed purchase and the offering and
sale of the Securities, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
     SECTION 7. Offer, Sale and Resale Procedures. Each of the Initial
Purchasers, on the one hand, and the Company and each of the Guarantors, on the
other hand, hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
     (a) Offers and sales of the Securities will be made only by the Initial
Purchasers or Affiliates thereof qualified to do so in the jurisdictions in
which such offers or sales are made. Each such offer or sale shall only be made
to (i) persons whom the offeror or seller reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act) or
(ii) non-U.S. persons outside the United States to whom the offeror or seller
reasonably believes offers and sales of the Securities may be made in reliance
upon Regulation S under the Securities Act, upon the terms and conditions set
forth in Annex I hereto, which Annex I is hereby expressly made a part hereof.
     (b) The Securities will be offered by approaching prospective Subsequent
Purchasers on an individual basis. No general solicitation or general
advertising (within the meaning of Rule 502 under the Securities Act) will be
used in the United States in connection with the offering of the Securities.
     (c) Upon original issuance by the Company, and until such time as the same
is no longer required under the applicable requirements of the Securities Act,
the Securities (and all securities issued in exchange therefor or in
substitution thereof, other than the Exchange Securities) shall bear the legend
set forth in the Preliminary Offering Memorandum and the Offering Memorandum
under the caption “Notice to Investors.”
     (d) Each of the Initial Purchasers represents and agrees that:
     (i) European Economic Area. In relation to each Member State of the
European Economic Area which has implemented the Prospectus Directive (each, a
“Relevant Member State”) it has not made and will not make an offer of the Notes
to the public in that Relevant Member State except that it may, with effect from
and including the Relevant Implementation Date, make an offer of Notes to the
public in that Relevant Member State:
          (A) in (or in Germany, where the offer starts within) the period
beginning on the date of publication of a prospectus in relation to those Notes
which has been approved by the competent authority in that Relevant Member State
or, where appropriate, approved in another Relevant Member State and notified to
the competent authority in that Relevant Member State, all in accordance with
the Prospectus Directive and ending on the date which is 12 months after the
date of such publication;

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          (B) at any time to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;
          (C) at any time to any legal entity which has two or more of (x) an
average of at least 250 employees during the last financial year; (y) a total
balance sheet of more than €443,000,000 and (z) an annual net turnover of more
than €450,000,000 as shown in its last annual or consolidated accounts; or
          (D) at any time in any other circumstances which do not require the
publication by the issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
For the purposes of this provision, the expression an “offer of Notes to the
public” in relation to any Notes in any Relevant Member State means to
communication in any form and by any means of sufficient information on the
terms of the offer and the Notes to be offered so as to enable an investor to
decide to purchase or subscribe the Notes, as the same may be varied in that
Member State, by any measure implementing the Prospectus Directive in that
Member State and the expression “Prospectus Directive” means Directive
2003/71/EC and includes any relevant implementing measure in each Relevant
Member State.
     (ii) United Kingdom. A. No deposit taking: (1) it is a person whose
ordinary activities involve it in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of its business and (2) it
has not offered or sold and will not offer or sell any Notes other than to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or who it is reasonable to expect will acquire, hold, manage or
dispose of investments (as principal or agent) for the purposes of their
businesses where the issue of the Notes would otherwise constitute a
contravention of Section 19 of the Financial Services and Markets Act of 2000,
or the FSMA, by the Company;
          B. Financial promotion: it has only communicated or caused to be
communicated and will only communicate or cause to be communicated an invitation
or inducement to engage in investment activity (within the meaning of Section 21
of the FSMA) received by it in connection with the issue or sale of any Notes in
circumstances in which Section 21(1) of the FSMA does not or, in the case of the
Company, would not, if it was not an authorized institution, apply to the
Company; and
          C. General compliance: it has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to any Notes in, from or otherwise involving the United Kingdom.
     (iii) Switzerland. In connection with the initial placement of any Notes in
Switzerland, the Notes will not be offered or sold in Switzerland except to a
limited

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group of persons within the meaning of Article 652(a)(2) of the Swiss Code of
Obligations of March 30, 1911.
     Following the sale of the Securities by the Initial Purchasers to
Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall
not be liable or responsible to the Company or any Guarantor for any losses,
damages or liabilities suffered or incurred by the Company or any Guarantor,
including any losses, damages or liabilities under the Securities Act, arising
from or relating to any resale or transfer of any Security.
     SECTION 8. Indemnification.
     (a) Indemnification of the Initial Purchasers. Each of the Company and the
Guarantors, jointly and severally, agree to indemnify and hold harmless each
Initial Purchaser, its directors, officers and employees, and each person, if
any, who controls an Initial Purchaser within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Initial Purchaser or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Company and/or the Guarantors),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of 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 to reimburse each
Initial Purchaser and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by the Initial
Purchaser) as such expenses are reasonably incurred by such Initial Purchaser or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Initial
Purchasers expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum (or any amendment or supplement thereto). The indemnity
agreement set forth in this Section 8(a) shall be in addition to any liabilities
that the Company or the Guarantors may otherwise have.
     (b) Indemnification of the Company, the Guarantors and their respective
Directors and Officers. Each Initial Purchaser agrees, severally and not
jointly, to indemnify and hold harmless the Company, the Guarantors and each of
their respective directors, officers and employees 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, against any loss, claim,
damage, liability or expense, as incurred, to which the Company or the
Guarantors or any such director, officer, employee or controlling person may
become subject, under the Securities Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written

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consent of such Initial Purchaser), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
(i) arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto), or (ii) arises out of or is
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Initial Purchasers expressly
for use therein; and to reimburse the Company, the Guarantors or any such
director, officer, employee or controlling person for any legal and other
expenses reasonably incurred by the Company, the Guarantors or any such
director, officer, employee or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company and each Guarantor hereby
acknowledges that the only information that the Initial Purchasers have
furnished to the Company expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement thereto)
is (i) the names of the Initial Purchasers as set forth on the front and back
covers of the Preliminary Offering Memorandum and the Offering Memorandum and as
further set forth in the table in the first paragraph under the caption “Plan of
Distribution,” (ii) the statements set forth in the fourth and fifth sentences
of the paragraph under the caption “Risk Factors — If an active trading market
does not develop for these notes you may not be able to resell them”; provided
however, that with respect to this subclause (ii) only, such information has
been solely provided by RBC, and not by Morgan Joseph in its capacity as an
Initial Purchaser or otherwise, (iii) the statements set forth in the first
sentence of the third paragraph, under the caption “Plan of Distribution” in the
Preliminary Offering Memorandum and the Offering Memorandum and (iv) the
statements set forth in the fourth sentence of the tenth paragraph and the
eleventh, twelfth and thirteenth paragraphs, concerning stabilization by the
Initial Purchasers, under the caption “Plan of Distribution” in the Preliminary
Offering Memorandum and the Offering Memorandum; provided however, that with
respect to this subclause (iv) only, such information has been solely provided
by RBC, and not by Morgan Joseph in its capacity as an Initial Purchaser or
otherwise; and the Initial Purchasers confirm that such statements are correct.
The indemnity agreement set forth in this Section 8(b) shall be in addition to
any liabilities that each Initial Purchaser may otherwise have.
     (c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to

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assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that a conflict may arise
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party’s election so to
assume the defense of such action and approval by the indemnified party of
counsel, which such approval shall not be unreasonably withheld, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel (together with local counsel), approved by the indemnifying
party, representing the indemnified parties who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party.
     (d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
     SECTION 9. Contribution. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors, on the one hand,
and the Initial Purchasers, on the other hand, from the offering of the
Securities pursuant to this Agreement 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 hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties

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herein which resulted in such losses, claims, damages, liabilities or expenses,
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 hand, in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
or the Guarantors, and the total discount received by the Initial Purchasers,
bear to the aggregate initial offering price of the Securities. The relative
fault of the Company and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact or any such inaccurate
or alleged inaccurate representation or warranty relates to information supplied
by the Company or the Guarantors, on the one hand, or the Initial Purchasers, on
the other hand, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
     The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8 with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8 for purposes of indemnification.
     The Company, the Guarantors and the Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 9 were
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 which does
not take account of the equitable considerations referred to in this Section 9.
     Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the discount received by
such Initial Purchaser in connection with the Securities distributed by it. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
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 pursuant to this Section 9 are several, and not joint,
in proportion to their respective commitments as set forth opposite their names
in Schedule A. For purposes of this Section 9, each director, officer and
employee of an Initial Purchaser and each person, if any, who controls an
Initial Purchaser within the meaning of the Securities Act and the Exchange Act
shall have the same rights to contribution as such Initial Purchaser, and each
director, officer and employee of the Company or any Guarantor, and each person,
if any, who controls the Company or any Guarantor within the meaning of the
Securities Act and the Exchange Act shall have the same rights to contribution
as the Company or any Guarantor.
     SECTION 10. Termination of this Agreement. Prior to the Closing Date, this
Agreement may be terminated by the Initial Purchasers by notice given to the
Company if at any time: (i) trading or quotation in any of the Company’s
securities shall have been suspended or limited by

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the SEC or by the American Stock Exchange, or trading in securities generally on
the American Stock Exchange, the Nasdaq Stock Market or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the SEC
or the NASD; (ii) a general banking moratorium shall have been declared by any
of federal or New York authorities; (iii) there has been a material disruption
in commercial banking or securities settlement, payment or clearance services in
the United States; (iv) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States’ or international political, financial or economic conditions, as in the
judgment of the Initial Purchasers is material and adverse and makes it
impracticable to market the Securities in the manner and on the terms described
in the Preliminary Offering Memorandum and the Offering Memorandum or to enforce
contracts for the sale of securities; (v) in the reasonable judgment of the
Initial Purchasers there shall have occurred any Material Adverse Change; or
(vi) the Company or any Guarantor shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Initial Purchasers would reasonably be expected to result in a
Material Adverse Change. Any termination pursuant to this Section 10 shall be
without liability on the part of (i) the Company or any Guarantor to any Initial
Purchaser, except that the Company and the Guarantors shall be obligated to
reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6
hereof, (ii) any Initial Purchaser to the Company or any Guarantor or (iii) any
party hereto to any other party except that the provisions of Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
     SECTION 11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and the Guarantors, of its officers and of the several
Initial Purchasers set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation made by or on behalf
of any Initial Purchaser or the Company or the Guarantors or any of its or their
respective partners, officers or directors or any controlling person, as the
case may be, and will survive delivery of and payment for the Securities sold
hereunder and any termination of this Agreement.
     SECTION 12. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:

RBC Capital Markets Corporation
1211 Avenue of the Americas, 32nd Floor
New York, NY 10036
Facsimile: (212) 703-2295
Attention: High Yield Capital Markets
Morgan Joseph & Co., Inc.
600 Fifth Avenue
New York, NY 10020

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Facsimile: (212) 218-3718
Attention: Thalia Cody, Esq.
with a copy (which shall not constitute notice) to:

Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Facsimile: (212) 848-7179
Attention: Bruce Czachor, Esq.
If to the Company, the Guarantors or the Guarantors:

Allis-Chalmers Energy Inc.
5075 Westheimer, Suite 890
Houston, TX 77056
Facsimile: (713) 369-0555
Attention: Theodore F. Pound III, Esq.
with a copy (which shall not constitute notice) to:

Andrews Kurth LLP
600 Travis, Suite 400
Houston, TX 77002
Facsimile: (713) 238-7135
Attention: Robert V. Jewell, Esq.
     Any party hereto may change the address for receipt of communications by
giving written notice to the others in accordance with this Section 12.
     SECTION 13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Initial Purchaser or
Initial Purchasers pursuant to Section 18 hereof, and to the benefit of the
employees, officers, directors and controlling persons referred to in Section 8
and Section 9, and in each case their respective successors, and no other person
will have any right or obligation hereunder. The term “successors” shall not
include any purchaser of the Securities as such from any of the Initial
Purchasers merely by reason of such purchase.
     SECTION 14. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
     SECTION 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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     SECTION 16. Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby (“Related Proceedings”) may be instituted in the federal courts of the
United States of America located in the City and County of New York or the
courts of the State of New York in each case located in the City and County of
New York (collectively, the “Specified Courts”), and each party irrevocably
submits to the non-exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related
Judgment”), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party’s address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
     SECTION 17. New York Contacts. Initial Purchasers hereby acknowledge and
agree that their chief executive office or an office from which it has conducted
a substantial part of the negotiations relating to the transactions contemplated
by this Agreement is located in the State of New York.
     SECTION 18. Default of One or More of the Several Initial Purchasers. If
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Securities that it or they have agreed to purchase hereunder on the
Closing Date, and the aggregate number of Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
does not exceed 10% of the aggregate number of the Securities to be purchased on
such date, the other Initial Purchasers shall be obligated, severally, in the
proportions that the number of Securities set forth opposite their respective
names on Schedule A bears to the aggregate number of Securities set forth
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as may be specified by the Initial Purchasers with the consent
of the non-defaulting Initial Purchasers, to purchase the Securities which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused
to purchase on such date. If any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities and the aggregate number of Securities
with respect to which such default occurs exceeds 10% of the aggregate number of
Securities to be purchased on the Closing Date, and arrangements satisfactory to
the Initial Purchasers and the Company for the purchase of such Securities are
not made within 48 hours after such default, this Agreement shall terminate
without liability of any party to any other party except that the provisions of
Sections 4, 6, 8, 9, 12, 14, 15, 16, 17, 18 and 19 shall at all times be
effective and shall survive such termination. In any such case either the
Initial Purchasers or the Company shall have the right to postpone the Closing
Date, as the case may be, but in no event for longer than seven days in order
that the required changes, if any, to the Offering Memorandum or any other
documents or arrangements may be effected.
     As used in this Agreement, the term “Initial Purchaser” shall be deemed to
include any person substituted for a defaulting Initial Purchaser under this
Section 18. Any action taken under this Section 18 shall not relieve any
defaulting Initial Purchaser from liability in respect of any default of such
Initial Purchaser under this Agreement.

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     SECTION 19. No Fiduciary Duty. The Company and each Guarantor hereby
acknowledges that the Initial Purchasers are each acting solely as an initial
purchaser in connection with the purchase and sale of the Securities. The
Company further acknowledges that the Initial Purchasers are acting pursuant to
a contractual relationship created solely by this Agreement entered into on an
arm’s length basis and in no event do the parties intend that the Initial
Purchasers act or be responsible as a fiduciary to the Company or any Guarantor,
their management, stockholders, creditors or any other person in connection with
any activity that the Initial Purchasers may undertake or has undertaken in
furtherance of the purchase and sale of the Securities, either before or after
the date hereof. The Initial Purchasers hereby expressly disclaim any fiduciary
or similar obligations to the Company or any Guarantor, either in connection
with the transactions contemplated by this Agreement or any matters leading up
to such transactions, and the Company and each Guarantor hereby confirms its
understanding and agreement to that effect. The Company, each Guarantor and the
Initial Purchasers agree that they are each responsible for making their own
independent judgments with respect to any such transactions, and that any
opinions or views expressed by the Initial Purchasers to the Company or any
Guarantor regarding such transactions, including but not limited to any opinions
or views with respect to the price or market for the Securities, do not
constitute advice or recommendations to the Company or any Guarantor. The
Company and each Guarantor hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company or any Guarantor may have against
the Initial Purchasers with respect to any breach or alleged breach of any
fiduciary or similar duty to the Company or any Guarantor in connection with the
transactions contemplated by this Agreement or any matters leading up to such
transactions.
     SECTION 20. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.

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     If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.

            Very truly yours,

COMPANY:

ALLIS-CHALMERS ENERGY INC.
      By:   /s/ Victor M. Perez         Name:   Victor M. Perez        Title:  
Chief Financial Officer     

            GUARANTORS:

ALLIS-CHALMERS GP, LLC
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            ALLIS-CHALMERS LP, LLC
      By:   /s/ Jeffrey R. Freedman         Name:   Jeffrey R. Freedman       
Title:   Vice President and Secretary     

            ALLIS-CHALMERS MANAGEMENT, LP
      By:   Allis-Chalmers GP, LLC, its sole general partner
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

 

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            ALLIS-CHALMERS PRODUCTION SERVICES, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            ALLIS-CHALMERS RENTAL SERVICES, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            ALLIS-CHALMERS TUBULAR SERVICES, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            AIRCOMP L.L.C.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            MOUNTAIN COMPRESSED AIR, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

 

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            OILQUIP RENTALS, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            PETRO RENTALS, INCORPORATED
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

            STRATA DIRECTIONAL TECHNOLOGY, INC.
      By:   /s/ Theodore F. Pound III         Name:   Theodore F. Pound III     
  Title:   Vice President and Secretary     

 

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     The foregoing Purchase Agreement is hereby confirmed and accepted by the
Initial Purchasers as of the date first above written.

            RBC CAPITAL MARKETS CORPORATION
      By:   /s/ David Capaldi         Name:   David Capaldi        Title:  
Director     

            MORGAN JOSEPH & CO., INC
      By:   /s/ Andrew J. Silver         Name:   Andrew J. Silver       
Title:   Managing Director     

 

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SCHEDULE A

              Aggregate Principal     Amount of Securities Initial Purchaser  
to be Purchased
RBC Capital Markets Corporation
  $ 228,000,000  
Morgan Joseph & Co., Inc.
  $ 22,000,000  
Total
  $ 250,000,000  

Schedule A

 

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SCHEDULE B
DOMESTIC SUBSIDIARIES OF THE COMPANY (Guarantors)

      Name   State of Organization
Allis-Chalmers GP, LLC
  Delaware
Allis-Chalmers LP, LLC
Allis-Chalmers Management LP
  Delaware
Texas
Allis-Chalmers Production Services, Inc.
  Texas
Allis-Chalmers Rental Services, Inc.
  Texas
Allis-Chalmers Tubular Services, Inc.
  Texas
Aircomp, L.L.C.
  Delaware
Mountain Compressed Air Inc.
  Texas
OilQuip Rentals, Inc.
  Delaware
Petro-Rentals, Incorporated
  Louisiana
Strata Directional Technology, Inc.
  Texas
 
   
FOREIGN SUBSIDIARIES OF THE COMPANY (Non-Guarantors)
   
 
    Name   Jurisdiction of Organization
DLS Drilling, Logistics & Services Corporation
  British Virgin Islands
DLS Argentina Limited
  British Virgin Islands

Schedule B

 

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SCHEDULE C

      Name of Accountants   Name of Entity
UHY Mann Frankfort Stein & Lipp CPAs, LLP
  Allis-Chalmers Energy Inc.
Specialty Rental Tools, Inc.
UHY LLP
  Allis-Chalmers Energy Inc.
Oil & Gas Rental Services, Inc.
Gordon, Hughes and Banks, LLP
  Allis-Chalmers Energy Inc.
Accounting & Consulting Group, LLP
  W. T. Enterprises, Inc.
Wright, Moore, Dehart, Dupuis & Hutchinson, LLC
  Delta Rental Service, Inc.
Curtis Blakely & Co., PC
  Capcoil Tubing Services, Inc.
Sibille (la firma argentina miembro de KPMG International, una cooperativa
suiza)
  DLS Drilling, Logistics & Services Corporation
Broussard, Poche, Lewis & Breaux, L.L.P.
  Petro-Rentals, Incorporated

Schedule C-1

 

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SCHEDULE D
     The Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2006 (the “Third Quarter 2006 Form 10-Q”), as originally filed
with the Commission on November 8, 2006, did not include each of the following
documents as exhibits thereto, each of which was subsequently filed with the
Commission on December 29, 2006 as an exhibit to Amendment No. 1 on Form 10-Q/A
to the Third Quarter 2006 Form 10-Q:

•   Strategic Agreement dated July 1, 2003 (the “Strategic Agreement”) between
Pan American Energy LLC Sucursal Argentina and DLS Argentina Limited Sucursal
Argentina;   •   Amendment No. 1 dated May 18, 2005 to the Strategic Agreement;
and   •   Amendment No. 2 dated January 1, 2006 to the Strategic Agreement.

Schedule D-1

 

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EXHIBIT A-1
Opinion of Andrews Kurth LLP
Exhibit A-1-1

 

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EXHIBIT A-2
Opinion of Liskow & Lewis
Exhibit A-2-1

 

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ANNEX I
     Resale Pursuant to Regulation S. The Initial Purchaser understands that:
     The Initial Purchaser agrees that it has not offered or sold and will not
offer or sell the Securities in the United States or to, or for the benefit or
account of, a U.S. Person (other than a distributor), in each case, as defined
in Rule 902 under the Securities Act (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering of the Securities pursuant hereto and the Closing Date, other than in
accordance with Regulation S of the Securities Act or another exemption from the
registration requirements of the Securities Act. The Initial Purchaser agrees
that, during such 40-day restricted period, it will not cause any advertisement
with respect to the Securities (including any “tombstone” advertisement) to be
published in any newspaper or periodical or posted in any public place and will
not issue any circular relating to the Securities, except such advertisements as
permitted by and include the statements required by Regulation S.
     The Initial Purchaser agrees that, at or prior to confirmation of a sale of
Securities by it to any distributor, dealer or person receiving a selling
concession, fee or other remuneration during the 40-day restricted period
referred to in Rule 903 under the Securities Act, it will send to such
distributor, dealer or person receiving a selling concession, fee or other
remuneration 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 and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the Offering and the
Closing Date, except in either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to Accredited Institutions in transactions that
are exempt from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Notes covered hereby in
reliance on Regulation S during the period referred to above to any distributor,
dealer or person receiving a selling concession, fee or other remuneration, you
must deliver a notice to substantially the foregoing effect. Terms used above
have the meanings assigned to them in Regulation S.”
     The Initial Purchaser agrees that (i) the Initial Purchaser and its
affiliates or any person acting on its or their behalf have not engaged in any
directed selling efforts within the meaning of Regulation S with respect to the
Securities, (ii) the Securities offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions and (iii) the sale of Securities offered and
sold by the Initial Purchaser pursuant hereto in reliance on Regulation S is not
part of a plan or scheme to evade the registration provisions of the Securities
Act.

Annex I-1