Document:

Exhibit 4.2

 

Execution Copy

 

$400,000,000

 

PETROHAWK ENERGY CORPORATION

 

7.25% SENIOR NOTES DUE 2018

 

REGISTRATION RIGHTS AGREEMENT

 

January 31, 2011

 

BARCLAYS CAPITAL INC.

745 Seventh Avenue

New York, New York 10019

 

Ladies and Gentlemen:

 

Petrohawk Energy Corporation, a Delaware corporation (the “Issuer”), proposes to issue and sell to Barclays Capital Inc. ( the “Initial Purchaser”), upon the terms set forth in a purchase agreement dated January 14, 2011 (the “Purchase Agreement”), $400,000,000 aggregate principal amount of its 7.25% Senior Notes due 2018 (the “Initial Securities”) to be unconditionally guaranteed (the “Guarantees”) by certain of the Issuer’s subsidiaries who are signatories hereto as guarantors (collectively, the “Guarantors” and together with the Issuer, the “Company”).  The Initial Securities will be issued pursuant to an Indenture, dated as of August 17, 2010 (the “Indenture”), among the Issuer, the Guarantors named therein and U.S. Bank National Association (the “Trustee”).  As an inducement to the Initial Purchaser, the Company agrees with the Initial Purchaser, for the benefit of the holders of the Initial Securities (including, without limitation, the Initial Purchaser ), the Exchange Securities (as defined below) and the Private Exchange Securities (as defined below) (collectively, the “Holders”), as follows:

 

1.     Registered Exchange Offer.  The Company shall, at its own cost, prepare and, not later than 90 days after (or if the 90th day is not a business day, the first business day thereafter) the date of original issue of the Initial Securities (the “Issue Date”), file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Exchange Offer Registration Statement”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”), with respect to a proposed offer (the “Registered Exchange Offer”) to the Holders of Transfer Restricted Securities (as defined in Section 6(d) hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities (the “Exchange Securities”) of the Company issued under the Indenture and identical in all material respects to the Initial Securities (except for the transfer restrictions relating to the Initial Securities and the provisions relating to the matters described in Section 6(d) hereof) that would be registered under the Securities Act. The Company shall use its reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 270 days (or if the 270th day is not a business day, the first business day thereafter) after the Issue Date and shall keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders.

 

 

If the Company commences the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof provided that the Company has accepted all the Initial Securities theretofore validly tendered, and not withdrawn, in accordance with the terms of the Registered Exchange Offer.

 

Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder’s business and has no arrangements or understanding with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States; provided, however, that the Exchanging Dealers (as defined below) will be required to deliver a prospectus in connection with resales of Exchange Securities.

 

The Company acknowledges that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an “Exchanging Dealer”), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if the Initial Purchaser elects to sell Exchange Securities acquired in exchange for Initial Securities constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

 

The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or the Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchaser  have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Registered Exchange Offer.

 

If, upon consummation of the Registered Exchange Offer, the Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to the Initial Purchaser upon the written request of the Initial Purchaser, in exchange (the “Private Exchange”) for the Initial Securities held by the Initial Purchaser, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United 

 

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States, but excluding provisions relating to the matters described in Section 6 hereof) to the Initial Securities (the“Private Exchange Securities”). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the “Securities.”

 

In connection with the Registered Exchange Offer, the Company shall:

 

(a)   deliver to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate Letter of Transmittal and related documents;

 

(b)   keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders;

 

(c)   utilize the services of a depositary for the Registered Exchange Offer, which may be the Trustee or an affiliate of the Trustee;

 

(d)   permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and

 

(e)   otherwise comply with all applicable laws.

 

As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall:

 

(x)    accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; and

 

(y)   cause the Trustee to deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange.

 

The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter.

 

Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the Issue Date.

 

Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of its business, (ii) such Holder has no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend 

 

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to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.

 

Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto comply in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto do not, when they become effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, do not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

2.     Shelf Registration.  If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 310 days of the Issue Date, (iii) the Initial Purchaser so requests with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Securities on the date of the exchange, the Company shall take the following actions:

 

(a)   The Company shall, at its cost, as promptly as practicable (but in no event more than 30 days after so required or requested pursuant to this Section 2) file with the Commission and thereafter shall use its reasonable best efforts to cause to be declared effective (unless it becomes effective automatically upon filing) a registration statement (the “Shelf Registration Statement” and, together with the Exchange Offer Registration Statement, a “Registration Statement”) on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”) on or prior to the 270th day following the Issue Date in the case of clause (i) above and on or prior to the 180th day after the date on which the Shelf Registration Statement is required to be filed in the case of clauses (ii), (iii) and (iv) above; provided, however, that no Holder (other than the Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

 

(b)   The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) may be sold without any limitations by non-affiliates of the Company under clause (d)(1)(i) of Rule 144 under the Securities Act, or any successor rule thereof, provided, however, that the six month period shall be replaced with one 

 

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year) (the “Shelf Registration Period”). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Registration Period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law.

 

(c)   Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause (i) the Shelf Registration Statement and any amendment thereto and any related prospectus and any supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, to comply in all material respects with the Securities Act and the rules and regulations thereunder, (ii) the Shelf Registration Statement and any amendment thereto not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and (iii) the prospectus related to the Shelf Registration Statement, and any supplement to such prospectus, not to include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

3.     Registration Procedures.  In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

 

(a)   The Company shall (i) furnish to the Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that the Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by the Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled “Plan of Distribution,” reasonably acceptable to the Initial Purchaser , which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a “Participating Broker-Dealer”), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchaser  based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include in the prospectus included in the Shelf Registration Statement (or, if permitted by Commission Rule 430B(b), in a prospectus supplement that becomes a part thereof pursuant to Commission Rule 430B(f)) that is delivered 

 

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to any Holder pursuant to Section 3(d) and (f), the names of the Holders, who propose to sell Securities pursuant to the Shelf Registration Statement, as selling securityholders.

 

(b)   The Company shall give written notice to the Initial Purchaser , the Holders of the Securities proposed to be sold under the Shelf Registration Statement and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

 

(i)    when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;

 

(ii)   of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;

 

(iii)  of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, of the issuance by the Commission of a notification of objection to the use of the form on which the Registration Statement has been filed, and of the happening of any event that causes the Company to become an “ineligible issuer,” as defined in Commission Rule 405;

 

(iv)  of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

(v)   of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

 

(c)   The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement.

 

(d)   The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment or supplement thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).  The Company shall not, without the prior consent of the Initial Purchaser, make any offer relating to the Securities that would constitute a “free writing prospectus,” as defined in Commission Rule 405.

 

(e)   The Company shall deliver to the Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

 

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(f)    The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

 

(g)   The Company shall deliver to the Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by the Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.

 

(h)   Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

 

(i)    To the extent the Securities are not in book-entry form, the Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement.

 

(j)    Upon the occurrence of any event contemplated by clauses (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Initial Purchaser, the Holders of the Securities and any known Participating Broker-Dealer in accordance with clauses (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchaser, the Holders of the Securities and any such Participating Broker-Dealers shall suspend

 

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use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchaser , the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). During the period during which the Company is required to maintain an effective Shelf Registration Statement pursuant to this Agreement, the Company will prior to the three-year expiration of that Shelf Registration Statement file, and use its reasonable best efforts to cause to be declared effective (unless it becomes effective automatically upon filing) within a period that avoids any interruption in the ability of Holders of Securities covered by the expiring Shelf Registration Statement to make registered dispositions, a new registration statement relating to the Securities, which shall be deemed the “Shelf Registration Statement” for purposes of this Agreement.

 

(k)   Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the Trustee with certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company.

 

(l)    The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.

 

(m)  The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification.  In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

 

(n)   The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request.

 

(o)   The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.

 

(p)   In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained

 

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by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company’s officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchaser  by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof; provided further, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or other agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information is or becomes available to the public generally or through a third party without, to the knowledge of any recipient of confidential information, an accompanying obligation of confidentiality or is independently developed.

 

(q)   In the case of any Shelf Registration, the Company, if requested by any Holder of the Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation or organization and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations or other business entities; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and (A) as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein and (B) as of an applicable time identified by such Holders or managing underwriters, the absence from such prospectus taken together with any other documents identified by such Holders or managing underwriters, in the case of (A) and (B), of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such incorporated documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in

 

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connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

 

(r)    In the case of the Registered Exchange Offer, if requested by the Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to the Initial Purchaser or such Participating Broker-Dealer signed opinions in the form set forth in Sections 7(d), 7(e), 7(q), and 7(r) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Registration Statement to deliver to the Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Sections 7(g) and 7(i) of the Purchase Agreement, with appropriate date changes.

 

(s)   If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or cause to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied.

 

(t)    The Company will use its reasonable best efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Shelf Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Shelf Registration Statement to be rated with the appropriate rating agencies, but in each case only if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any.

 

(u)   In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or “assist in the distribution” (within the meaning of the Conduct Rules (the “Rules”) of the Financial Industry Regulatory Authority (“FINRA”)) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a “qualified independent underwriter” (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

 

(v)   The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

 

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4.     Registration Expenses.  The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses, if any, of counsel for the Initial Purchaser  incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Securities covered thereby for the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Initial Securities covered thereby to act as counsel for the Holders of the Initial Securities in connection therewith.  Each Holder shall be responsible for paying all underwriting discounts and commissions, if any, relating to the sale or disposition of such Holder’s Securities pursuant to a Shelf Registration Statement.

 

5.     Indemnification.

 

(a)   The Company and each of the Guarantors, jointly and severally, agree to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or “issuer free writing prospectus,” as defined in Commission Rule 433 (“Issuer FWP”), relating to a Shelf Registration, or arise out of, or are 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, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that the Company and each Guarantor will not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein.

 

(b)   Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each Guarantor, their directors and officers and each person, if any, who controls the Company or such Guarantor within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such Guarantor, their directors and officers or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or

 

11

 

necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company or any such Guarantor, their directors and officers or any such controlling person for any legal or other expenses reasonably incurred by the Company or any such Guarantor, their directors and officers or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof.  This indemnity agreement will be in addition to any liability that such Holder may otherwise have to the Company, any Guarantor, their directors and officers or any such controlling person.

 

(c)   Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above.  In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)   If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable

 

12

 

considerations.  The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d).  Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  For purposes of this subsection (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company and the Guarantors.

 

(e)   The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

 

6.     Additional Interest Under Certain Circumstances.

 

(a)   Additional interest (the “Additional Interest”) with respect to the Initial Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (vi) below a “Registration Default”):

 

(i)    If an Exchange Offer Registration Statement is not filed with the Commission on or prior to the 90th day after the Issue Date;

 

(ii)   If an Exchange Offer Registration Statement or, if required pursuant to Section 2(a)(i) above, a Shelf Registration Statement has not been declared effective by the Commission (or become effective automatically) on or prior to the 270th day after the Issue Date;

 

(iii)  If the Registered Exchange Offer has not been consummated on or before the 40th day after the Exchange Offer Registration Statement is declared effective;

 

(iv)  If obligated to file the Shelf Registration Statement pursuant to pursuant to Section 2 above, the Company fails to file the Shelf Registration Statement with the Commission on or prior to the 30th day after the date (the “Shelf Filing Date”) on which the obligation to file a Shelf Registration Statement arises;

 

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(v)   If obligated to file a Shelf Registration Statement pursuant to Sections 2(a)(ii-iv) above, the Shelf Registration Statement is not declared effective on or prior to the 180th day after the Shelf Filing Date; or

 

(vi)  If after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared (or becomes automatically) effective (A) such Registration Statement thereafter ceases to be effective during the periods specified in Sections 1 and 2, as applicable; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in subsection (b)) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder, or (3) such Registration Statement is a Shelf Registration Statement that has expired before a replacement Shelf Registration Statement has become effective.

 

Additional Interest shall accrue on the Initial Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured.  In the event such Registration Defaults are not previously cured, all Registration Defaults shall be cured on the date that each Security is no longer a Transfer Restricted Security.  The rate of the Additional Interest will be 0.50% per year for the first 90-day period immediately following the occurrence of a Registration Default, and such rate will increase by an additional 0.50% per year with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional Interest rate of 1.50% per year.  The Issuer will pay such Additional Interest on regular interest payment dates.  Such Additional Interest will be in addition to any other interest payable from time to time with respect to the Initial Securities and the Exchange Securities.  The Company will not be required to pay Additional Interest for more than one Registration Default at any given time. Following the cure of all Registration Defaults, the accrual of Additional Interest will cease and the interest rate will revert to the original rate, 7.25%.

 

(b)   A Registration Default referred to in Section 6(a)(vi)(B) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a continuous period in excess of 60 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default would have been deemed to occur but for this Section 6(b) until such Registration Default is cured.

 

14

 

(c)          Any amounts of Additional Interest due pursuant to Section 6(a) above will be payable in cash on the regular interest payment dates with respect to the Initial Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Initial Securities, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

 

(d)         “Transfer Restricted Securities” means each Security until (i) the date on which such Transfer Restricted Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Initial Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Initial Securities are distributed to the public pursuant to Rule 144 under the Securities Act or are saleable by non-affiliates of the Company pursuant to Rule 144(d)(l)(i) under the Securities Act, provided, however, that the six month period shall be replaced with one year.

 

7.               Rules 144 and 144A.  The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Initial Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Initial Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Initial Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchaser upon request.  Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

 

8.               Underwritten Registrations.  If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering.

 

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

 

9.               Miscellaneous.

 

(a)          Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may

 

15

 

not be given, except by the Company and the written consent of the Holders of a majority in principal amount of (or, in the case of any Additional Interest, all) the Securities affected by such amendment, modification, supplement, waiver or consent.

 

(b)         Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier that guarantees overnight delivery:

 

(i)             if to a Holder of the Securities, at the most current address given by such Holder to the Company.

 

(ii)          if to the Initial Purchaser :

 

Barclays Capital Inc.

745 Seventh Avenue
 New York, New York 10019

Attention: Syndicate Registration.

 

with a copy to:

 

Vinson & Elkins L.L.P.

2300 First City Tower

1001 Fannin Street

Houston, Texas 77002

Fax No.: (713) 615-5531

Attention: James M. Prince

 

(iii)       if to the Company:

 

Petrohawk Energy Corporation

1000 Louisiana, Suite 5600

Houston, Texas 77002

Fax No.: (832) 204-2872

Attention: David S. Elkouri, Executive Vice President and General Counsel

 

with a copy to:

 

Thompson & Knight LLP

333 Clay Street, Suite 3300

Houston, Texas 77002

Fax No.: (713) 654-1871

Attention: William T. Heller IV

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

 

Unless otherwise indicated, all references herein to “days” are to calendar days.

 

16

 

(c)          No Inconsistent Agreements.  The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof.

 

(d)         Successors and Assigns.  This Agreement shall be binding upon the Issuer, the Guarantors and their respective successors and assigns.

 

(e)          Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

(f)            Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(g)         Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

(h)         Severability.  If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

(i)             Securities Held by the Company.  Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

 

(j)             Submission to Jurisdiction.  By the execution and delivery of this Agreement, the Issuer and each Guarantor submit to the nonexclusive jurisdiction of any competent federal or state court in the City and State of New York in any suit or proceeding arising out of or relating to this Agreement or brought under federal or state securities laws.

 

[Signature pages follow.]

 

17

 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchaser, the Issuer and the Guarantors in accordance with its terms.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
PETROHAWK   ENERGY CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Elkouri
    
	
 
    	
 
    	
David   S. Elkouri
    
	
 
    	
 
    	
Executive   Vice President — General Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUARANTORS
    
	
 
    	
 
    
	
 
    	
PETROHAWK   OPERATING COMPANY
    
	
 
    	
P-H   ENERGY, LLC
    
	
 
    	
HAWK   FIELD SERVICES, LLC
    
	
 
    	
WINWELL   RESOURCES, L.L.C.
    
	
 
    	
WSF, INC.
    
	
 
    	
KCS   RESOURCES, LLC
    
	
 
    	
KCS   ENERGY SERVICES, INC.
    
	
 
    	
MEDALLION   CALIFORNIA PROPERTIES COMPANY PROLIQ, INC.
    
	
 
    	
ONE   TEC, LLC
    
	
 
    	
ONE   TEC OPERATING, LLC
    
	
 
    	
BISON   RANCH LLC
    
	
 
    	
PETROHAWK   HOLDINGS, LLC
    
	
 
    	
HK   TRANSPORTATION LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Elkouri
    
	
 
    	
 
    	
David   S. Elkouri
    
	
 
    	
 
    	
Executive   Vice President — General Counsel and Secretary
    

 

Signature Page to the Registration Rights Agreement

 

 

	
 
    	
HK   ENERGY MARKETING, LLC
    
	
 
    	
BIG   HAWK SERVICES, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Elkouri
    
	
 
    	
 
    	
David   S. Elkouri
    
	
 
    	
 
    	
Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PETROHAWK   PROPERTIES, LP
    
	
 
    	
 
    
	
 
    	
By:
    	
P-H   Energy, LLC,
    
	
 
    	
 
    	
Its   General Partner
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Elkouri
    
	
 
    	
 
    	
David   S. Elkouri
    
	
 
    	
 
    	
Executive   Vice President — General Counsel and Secretary
    

 

Signature Page to the Registration Rights Agreement

 

 

	
The   foregoing Registration Rights Agreement is hereby confirmed and accepted as   of the date first above written.
    	
 
    

 

	
BARCLAYS   CAPITAL INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Benjamin J. Burton
    	
 
    
	
 
    	
Name:
    	
Benjamin   J. Burton
    	
 
    
	
 
    	
Title:
    	
Managing   Director
    	
 
    

 

Signature Page to the Registration Rights Agreement

 

 

ANNEX A

 

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities.  The Company has agreed that, for a period of 180 days after the consummation of the Registered Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale.  See “Plan of Distribution.”

 

 

ANNEX B

 

Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.  See “Plan of Distribution.”

 

 

ANNEX C

 

PLAN OF DISTRIBUTION

 

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.  This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities.  The Company has agreed that, for a period of 180 days after the consummation of the Registered Exchange Offer, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.  In addition, until                            , 20         (90 days after the consummation of the Registered Exchange Offer), all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.

 

The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers.  Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices.  Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities.  Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act.  The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

 

For a period of 180 days after the consummation of the Registered Exchange Offer, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents as provided in the Letter of Transmittal.  The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

 

 

ANNEX D

 

o            CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

 

	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities.  If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.Exhibit 10.50

 

Confidential Treatment Requested.  Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

MEMBER
 ETHANOL FUEL MARKETING AGREEMENT

 

THIS AGREEMENT, entered into as of this 1st day of February, 2011, (“Effective Date”) by and between RPMG, Inc., a Minnesota corporation, hereinafter referred to as “RPMG”); and Highwater Ethanol, LLC, a Minnesota limited liability company, hereinafter referred to as (“Member”).

 

WITNESSETH:

 

WHEREAS, RPMG is a Minnesota corporation engaged in the business of marketing fuel grade ethanol for the members of Renewable Products Marketing Group, LLC (“LLC”) and others, and

 

WHEREAS, Member is the operator of a plant in Lamberton, Minnesota for the production of ethanol (the “Facility”) and is a member of LLC, and

 

WHEREAS, as a condition to its membership in LLC, Member has agreed to market all of the fuel grade ethanol produced by Member at the Facility through RPMG and RPMG has agreed to market such ethanol production; and

 

WHEREAS, the parties desire to enter into this Agreement, for purposes of setting out the terms and conditions of the marketing arrangement;

 

NOW THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows:

 

1.          Exclusive Marketing Representative.  RPMG shall, subject to the terms and conditions of this Agreement, be the sole marketing representative for the entire fuel grade ethanol production of Member at the Facility during the term of this Agreement.*

 

2.          Ethanol Specifications.  All of the ethanol produced by Member at the Facility for marketing by RPMG will, when delivered to a common carrier by Member, be fuel grade ethanol at least 200 proof (denatured), and conform to the specifications described in A.S.T.M. 4806 and such other specifications that may be, from time to time, promulgated by the industry for E-Grade denatured fuel ethanol (herein referred to as “fuel grade ethanol” or “ethanol”).

 

3.          Purchaser/Seller.  Member shall sell to RPMG and RPMG shall purchase all fuel grade ethanol produced by Member at the Facility during the term of this Agreement.  Delivery by Member to RPMG of all such ethanol shall be made at the time the product crosses the loading flange.  The ethanol will be marketed by RPMG on a collective basis with other producers under contract with RPMG.

 

*  insert any exceptions i.e. alcohol sold for human consumption, limited sale of E85.

 

1

 

4.          Risk of Loss.  RPMG shall be responsible for and shall bear the risk of loss of (subject to the terms of this Agreement) all ethanol marketed for Member by RPMG from the time the product crosses the loading flange at the Facility in either a railcar and/or tank truck.

 

5.          Specific Marketing Tasks.  RPMG shall be responsible for and shall have complete discretion in the marketing, sale and delivery of all fuel grade ethanol produced by the Facility during the term of this Agreement, including, but not limited to:

 

·                  Scheduling sufficient railcar, tank trucks and other transport;

·                  Negotiating the rates and tariffs to be charged for delivery of production to the customer;

·                  Promoting and advertising the sale of ethanol;

·                  Tracking delivery;

·                  Negotiation of all purchase agreements with consumers and any complaints in connection therewith;

·                  Accounting for all sales and related expenses and collection of accounts, including any legal collection procedures as may be necessary; and

·                  Hedging long and short ethanol positions for the benefit of all member participants and non-member participants in the Corridor Marketing Model

 

6.          Negotiation of Ethanol Price.  RPMG will use commercially reasonable efforts to obtain the best price for all ethanol sold by it subject to the terms of this Agreement, but shall have complete discretion to fix the price, terms and conditions of the sale of Member’s ethanol production.

 

7.          Ethanol Marketing.  RPMG shall market the ethanol production of Member under the Corridor Netback Model arrangement maintained by RPMG for some of its LLC members and other non-member participants.  Under such arrangement, RPMG will market the aggregate production of the LLC member participants and other contracting non-member participants in the Corridor Netback Model to customers.  Member shall furnish estimates of production to RPMG as hereinafter provided and based on such estimates and the estimated production of all other participants, RPMG shall contract for the sale of such estimated production.  Determination of Member’s share of net revenue, allocation of expenses and payment to Member shall be made by RPMG according to the Corridor Netback Model as described below (the “Corridor Netback Model”).

 

(a)           Corridor Netback Model.  The Corridor Netback Model shall be used in calculating netback payments to Member and other LLC members and non-member participants in the Corridor Netback Model for all ethanol sold by RPMG on behalf of Member, all other LLC member participants and non-member participants in the Corridor Netback Model (the “Netback Price”).  The Corridor Netback Model includes components that will be fixed on a quarterly basis (the “Fixed Components”) and components that will vary through the quarter (the “Variable Components”).  Changes to the Corridor Netback Model to reflect changing economic circumstances may be made by management of RPMG.

 

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(b)           Quarter Model.  The Fixed Components and Variable Components of the Corridor Netback Model shall be reviewed and updated quarterly by RPMG management with changes made based upon the prevailing and expected market conditions (the “Quarter Model”).  RPMG management shall present the Quarter Model to all LLC member participants and non-member participants in the Corridor Netback Model prior to the beginning of each fiscal quarter.  Except as provided below, the Quarter Model shall be final and binding on all LLC member participants and non-member participants in the Corridor Netback Model.  The Variable Components of the Quarter Model shall be adjusted by RPMG management monthly throughout the quarter to reflect updated estimates and actual inputs for such Variable Components in order to arrive at the Estimated Netback Price and Actual Netback Price as defined below.

 

(c)           The Corridor Committee.  If Member disagrees with a decision of RPMG management, the Corridor Netback Model or the Quarter Model presented by RPMG management, it may within fifteen (15) days after the effective date of the Quarter Model, appeal by written notice the decision to the Corridor Committee who shall approve or modify the decision of RPMG management or approve or modify the Corridor Netback Model or Quarter Model by a majority vote of all the members of the Corridor Committee, which shall be delivered in a written response to Member within fifteen (15) days of the written notice of appeal.  The Corridor Committee shall consist of at least one representative from each of the primary corridor markets as determined based on delivery destination in the Corridor Netback Model.  The members of the LLC of each of the primary corridor markets as determined based on delivery destination in the Corridor Netback Model shall elect a Corridor Committee member representative annually, provided that if a Corridor Committee member is no longer a member of the primary corridor market in which he or she was elected to represent he or she shall no longer serve as a Corridor Committee member and the representatives of such primary corridor market shall elect a new Corridor Committee member representative.  Any modification in the Corridor Netback Model or Quarter Model approved by the Corridor Committee shall be promptly presented to all LLC member participants and non-member participants in the Corridor Netback Model.

 

(d)           Appeal.  If Member disagrees with a decision of the Corridor Committee, it may within fifteen (15) days after the decision of the Corridor Committee, appeal the decision by written notice to the LLC Board of Governors who shall approve or modify the decision of the Corridor Committee by a majority vote of all the members of the Board that represent LLC members participating in the Corridor Netback Model.  The decision of the Board of Governors shall be final and binding and shall be retroactive to the first day of the fiscal quarter that is the subject of the appeal.

 

(e)           Payment of the Estimated Netback Price.  Each calendar month, RPMG shall estimate for Member (in good faith) the Netback Price per gallon of all ethanol that RPMG has committed to sell to its customers through operation of the Quarter Model by making adjustments to the Variable Components of the Quarter Model to reflect anticipated market conditions and expenses in the upcoming month (the “Estimated Netback Price”).  RPMG, on a weekly basis, will calculate and pay Member on an average net 10-day basis (e.g. payment on Wednesday shall be for ethanol delivered 

 

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during the seven-day period ending on the previous Wednesday) an amount equal to the Estimated Netback Price for the preceding week multiplied by the number of gallons of ethanol delivered by Member to RPMG for the period.

 

(f)            Reconciliation to the Actual Netback Price.  At the end of each calendar month, promptly after the information necessary to calculate the Netback Price becomes available, RPMG will calculate the actual Netback Price for the preceding month under the Quarter Model by adjusting the Variable Components to reflect the actual selling price for all ethanol sold during the month and the actual expenses incurred during the period (the “Actual Netback Price”).  Within fifteen days after the end of each month, RPMG shall furnish to Member a reconciliation of the Estimated Netback Price to the Actual Netback Price for the preceding month.  If the Estimated Netback Price paid to Member exceeded the Actual Netback Price, Member will refund to RPMG the overpayment within ten (10) days after receipt of the reconciliation.  On the other hand, if the Estimated Netback Price paid was less than the Actual Netback Price owed to Member, then RPMG will pay Member the additional amount owed to Member within ten (10) days after the completion of the reconciliation.  In lieu of Member directly refunding any amounts to RPMG by separate payment, and RPMG directly refunding any amounts to Member by separate payment, under this Section 7 the parties may offset or apply the such amounts to subsequent payments.

 

(g)           Adjustments Outside of Corridor Netback Model.  Member shall be charged monthly directly through a reduction in the Netback Price for any demurrage charges incurred by RPMG for railcars located at Member’s Facility and other direct distribution expenses that result from actions taken by Member and that are not reflected in the Quarter Model.

 

(h)           Audit.  Within ninety (90) days following the end of RPMG’s fiscal year end, Member shall have the right to inspect the books and records of RPMG for the purpose of auditing calculations of the aggregate netback paid to member participants and non-member participants in the Corridor Netback Model for the preceding year.  Member shall give written notice to RPMG of its desire to conduct an audit and RPMG shall provide reasonable access to all financial information necessary to complete such audit.  The audit shall be conducted by an accounting firm agreeable to both parties and shall be completed within 45 days after the completion of RPMG’s annual audit, but no later than 150 days following RPMG’s fiscal year.  The cost of the audit shall be the responsibility of Member unless the auditor determines that RPMG underpaid Member by more than 3% for the period audited, in which case RPMG shall pay the cost of the audit.  If the auditor determines that RPMG underpaid Member, RPMG shall promptly pay such underpayment to Member and if the auditor determines that RPMG overpaid Member, Member shall promptly pay the overpayment to RPMG.  The determination of the auditor shall be final and binding on both parties.  If Member fails to exercise its right to audit as provided in this Section 7 for any year, it shall be deemed to have waived any claim to dispute the actual Netback for such year.

 

8.          Estimated 12-Month Volume.  As of the Effective Date Member will provide RPMG with Member’s best estimate of its anticipated monthly ethanol production for the next 

 

4

 

twelve (12) months to assist RPMG in developing appropriate marketing strategies for the ethanol to be produced by Member.

 

9.          Updated Monthly Volume Estimates.  On or before the first day of each month after the Effective Date, Member will provide RPMG with its updated best estimate of Member’s anticipated monthly ethanol production for each of the next twelve (12) months, so that RPMG will have rolling ethanol production estimates from Member for each of the next twelve (12) months during the entire time that this Agreement is in effect.  RPMG shall be entitled to rely upon such estimates in marketing and selling the ethanol production of all member and non-member participants.  From time to time RPMG may enter into forward contracts to sell estimated production beyond the 12-month period covered by the estimated production of Member.  Any such commitment will be based on market conditions and projected production based on all member and non-member participants estimated and historical production.  Member acknowledges that such commitments are in the best interest of all member and non-member participants and RPMG may rely on Member’s continued production beyond the 12 month estimates for such purpose.  RPMG shall provide Member with a schedule of committed production at least monthly.

 

10.        Obligation to Deliver after Termination.  Notwithstanding termination of this Agreement, Member shall be obligated to deliver to RPMG for marketing by RPMG in accordance with this Agreement, the estimated production of Member for the twelve (12) months following termination of this Agreement and Member’s percentage of any committed production at the time of termination beyond such twelve (12) month period based upon Member’s average monthly percentage contribution to the total production for the preceding 12 months; provided, however, that in the event of termination of this Agreement pursuant to Section 14(f), which provides for twelve (12) months advance notice of termination of this Agreement, Member shall only be required to fulfill its percentage of any committed production following termination of this Agreement that was committed at the time of the termination notice beyond the twelve (12) month notice period.

 

11.        Ethanol Shortage/Open Market Purchase.  If Member is unable to deliver its estimated monthly ethanol production and if as a consequence of the non-delivery and in order to meet its sale obligations to third parties, RPMG is required to purchase ethanol in the marketplace, RPMG may purchase ethanol in the marketplace at such reasonable price and in such reasonable quantity as is required to meet its delivery obligations; provided, however, that prior to making such purchases RPMG shall communicate the terms and conditions of such purchases to Member and Member shall have the right to meet such terms and conditions.  If Member is unable or unwilling to deliver the required ethanol on such terms and conditions, RPMG may complete the purchase.  If it does so, and as a result thereof incurs a financial loss, Member will reimburse RPMG for any such loss or RPMG may elect to set off such financial loss against future payments to Member over a period not to exceed twenty four (24) months.

 

12.        No “Take or Pay”.  The parties agree that this is not a “take or pay contract” and that RPMG’s liability is limited to payment for ethanol delivered by Member pursuant to this Agreement.

 

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*** Confidential material redacted and filed separately with the Commission.

 

13.        Term.  The term of this Agreement shall commence on the Effective Date and shall continue until terminated as provided in Section 14.

 

14.        Termination.  This Agreement may be terminated under the circumstances set out below.

 

(a)           Termination of Membership.  This Agreement shall automatically terminate when Member ceases to be a member of LLC.

 

(b)           Termination for Intentional Misconduct.  If either party engages in intentional misconduct reasonably likely to result in significant adverse consequences to the other party, the party harmed or likely to be harmed by the intentional misconduct may terminate this Agreement immediately, upon written notice to the party engaging in the intentional misconduct.

 

(c)           Termination for Uncured Breach.  If one of the parties breaches the terms of this Agreement, the other party may give the breaching party a notice in writing which specifically sets out the nature and extent of the breach, and the steps that must be taken to cure the breach.  After receiving the written notice, the breaching party will then have thirty (30) days to cure the breach, if the breach does not involve a failure to market and distribute ethanol as required by this Agreement.  If the breach involves a failure to market and distribute ethanol as required by this Agreement, then the breaching party will have five (5) days after receiving the written notice to cure the breach.  If the breaching party does not cure any breach within the applicable cure period, then the non-breaching party will have the right to terminate this Agreement immediately.

 

(d)           Member Insolvency, etc.  RPMG may terminate this Agreement if Member becomes insolvent, has a receiver appointed over its business or assets and such receiver is not discharged within 30 days, files a petition in bankruptcy or has a petition in bankruptcy filed against it which, in either case, is not dismissed within 30 days, or ceases to produce ethanol for 30 days or more.

 

(e)           Termination by Mutual Written Agreement.  This Agreement may also be terminated upon any terms and under any conditions which are mutually agreed upon in writing by the parties.

 

(f)            Termination by Member.  Member may terminate this Agreement for any reason upon at least one (1) year’s advance notice to RPMG.

 

15.        Effect of Termination.  The termination of this Agreement shall constitute a Triggering Event (as defined in LLC’s Member Control Agreement) requiring LLC to redeem all of Member’s interest in RPMG.  In addition, upon termination, Member shall accept assignment of the lease or leases for the number of railcars determined as follows:

 

***

 

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The term and cost of the lease shall equal the average term and price of the current RPMG fleet.  If the lessor refuses to consent to such assignment, Member will sublet such railcars from RPMG and hold RPMG harmless for any claim or loss with respect thereto.

 

16.        Licenses and Permits; Records.  Member at all times shall have and maintain all of the licenses and permits necessary to construct and operate the Facility.  Member shall comply with all laws, regulations, rules and requirements of governmental authorities, including but not limited to the Renewable Fuels Standard of RINS reporting.  In addition, Member shall establish record keeping and reporting systems compatible with the RPMG load out reporting system, currently ETS and AccuLoad III.

 

17.        Good and Marketable Title.  Member represents that it will have good and marketable title to all of the ethanol marketed for it by RPMG and that said ethanol will be free and clear of all liens and encumbrances.

 

18.        Subordination.  In order to satisfy the payment obligations in Section 7 of this Agreement, RPMG may be required to obtain working capital from financing resources.  Member agrees and acknowledges that the payment terms in this Agreement are a benefit to Member and agrees that it will subordinate its right to payment hereunder to the rights of any lender providing working capital to RPMG, provided that all members of LLC are required to agree to such subordination.  Member shall execute such subordination agreement and other documents as may be necessary to evidence this undertaking.

 

19.        Independent Contractor.  Nothing contained in this Agreement will make RPMG the agent of Member for any purpose whatsoever.  RPMG and its employees shall be deemed to be independent contractors with full control over the manner and method of performance of the services they will be providing on behalf of Member under this Agreement.

 

20.        Samples.  Member will take and retain for a minimum of 60 days at least 2 samples of product per day at the point of delivery.  At the request of RPMG, Member agrees to provide RPMG with samples of its ethanol produced at the Facility so that it may be tested for product quality on a regular basis.

 

21.        Insurance.  During the entire term of this Agreement, Member will maintain insurance coverage.  At a minimum, Member’s insurance coverage must include:

 

(a)           Commercial general product and public liability insurance, with liability limits of at least $5 million in the aggregate;

 

(b)           Property and casualty insurance adequately insuring its production facilities and its other assets against theft, damage and destruction on a replacement cost basis;

 

(c)           Workers’ compensation insurance to the extent required by law; and

 

(d)           RPMG shall be added as an additional insured under the commercial general product and public liability insurance policy and the property and casualty insurance policy.

 

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Member will not change its insurance coverage during the term of this Agreement if such change results in a failure to maintain the minimums set out above, and the policies shall provide that they may not be cancelled or terminated without at least 30 days prior written notice to RPMG.

 

22.        Indemnification and Hold Harmless — Member.  If a third party makes a claim against RPMG or any person or organization related to it as the result of the actions or omissions of Member or any person or organization related to Member including, but not limited to, claims relating to the quality of ethanol produced by Member or the performance of its obligations under this Agreement, Member shall indemnify RPMG and its related persons and organizations and hold them harmless from any liabilities, damages, costs and/or expenses, including costs of litigation and reasonable attorneys fees which they incur as a result of any such claims.

 

23.        Indemnification and Hold Harmless — RPMG.  The indemnification obligations of the parties under this Agreement will be mutual and RPMG, therefore, makes the same commitment to indemnify Member and its related persons or organizations to the extent any claim is made against Member or its related person arising out of any action or omission of RPMG.

 

24.        Survival of Terms/Dispute Resolution.  All representations, warranties and agreements made in connection with this Agreement will survive the termination of this Agreement.  The parties will, therefore, be able to pursue claims related to those representations, warranties and agreements after the termination of this Agreement, unless those claims are barred by the applicable statute of limitations.  Similarly, any claims that the parties have against each other that arise out of actions or omissions that take place while this Agreement is in effect will survive the termination of this Agreement.  This means that the parties may pursue those claims even after the termination of this Agreement, unless applicable statutes of limitation bar those claims.  The parties agree that should a dispute between them arise in connection with this Agreement, the parties will complete, in good faith, attempt to mediate the dispute prior to the filing of any action in any court.  Such mediation session shall occur at a place that is mutually agreeable, and shall be conducted by a mediator to be selected by mutual agreement of the parties.

 

25.        Choice of Law.  This Agreement shall be governed by, interpreted under and enforced in accordance with Minnesota law, without regard to conflicts of law principles.

 

26.        Assignment.  Neither party may assign its rights or obligations under this Agreement without the written consent of the other party, which consent will not be unreasonably withheld.  Member shall be entitled to grant a security intent in its rights under this Agreement solely for financing purposes.

 

27.        Entire Agreement.  This Agreement constitutes the entire agreement between the parties covering everything agreed upon or understood in the transaction and supersedes any other preexisting Agreement between the parties with respect to the same subject matter.  There are no oral promises, conditions, representations, understandings, interpretations, or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties, 

 

8

 

except as expressed in this Agreement.  No change or addition shall be made to this Agreement except by a written document signed by all parties hereto.

 

28.        Execution of Counterparts.  This Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts, each of such counterparts being deemed by the parties to be an original instrument; and all of such counterparts, taken together, shall be deemed to constitute one and the same instrument.

 

29.        Duplicate Counterpart Includes Facsimile.  The parties specifically agree and acknowledge that a duplicate hereof shall include, but not be limited to, a counterpart produced by virtue of a facsimile (“fax”) machine or a .pdf copy.

 

30.        Binding Effect.  This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and there respective heirs, personal representatives, successors and assigns.

 

31.        Confidential Information.  The parties acknowledge that they will be exchanging information about their businesses under this Agreement which is confidential and proprietary, and the parties agree to handle that confidential and proprietary information in the manner described in this Section 31.

 

(a)           Definition of Confidential Information.  For purposes of this Agreement, the term “Confidential Information” will mean information related to the business operations of Member or RPMG that meets all of the following criteria:

 

(i)            The information must not be generally known to the public and must not be a part of the public domain;

 

(ii)           The information must belong to the party claiming it is confidential and must be in that party’s possession;

 

(iii)          The information must have been protected and safeguarded by the party claiming it is confidential by measures that were reasonable under the circumstances before the information was disclosed to the other party’

 

(iv)          Written information must be clearly designated in writing as “Confidential Information” by the party claiming it is confidential before it is disclosed to the other party, except that all information about costs and prices will always be considered Confidential Information under this Agreement without the need for specifically designating it as such; and

 

(v)           Verbal Confidential Information which is disclosed to the other party must be summarized in writing, designated in writing as “Confidential Information” and transmitted to the other party within ten (10) days of the verbal disclosure.

 

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(b)           Limitations on the Use of Confidential Information.  Each party agrees that it will not use any Confidential Information that it obtains about the other party for any purpose other than to perform its obligations under this Agreement.

 

(c)           The Duty not to Disclose Confidential Information.  The parties agree that they will not disclose any Confidential Information about each other to any person or organization, other than their respective legal counsel and accountants, without first getting written consent to do so from the other party.  Notwithstanding the foregoing, if a party or anyone to whom such party transmits Confidential Information in accordance with this Agreement is requested or required (by deposition, interrogatories, requests for information or documents in legal proceedings, subpoenas, civil investigative demand or similar process, SEC filings or administrative proceedings) in connection with any proceeding, to disclose any Confidential Information, such party will give the disclosing party prompt written notice of such request or requirement so that the disclosing party may seek an appropriate protective order or other remedy and/or waive compliance with the provisions of this Agreement, and the receiving party will cooperate with the disclosing party to obtain such protective order.  The fees and costs of obtaining such protective order, including payment of reasonable attorney’s fees, shall be paid for by the disclosing party.  If such protective order or other remedy is not obtained or the disclosing party waives compliance with the relevant provisions of this Agreement, the receiving party (or such other persons to whom such request is directed) will furnish only that portion of the Confidential Information which, in the opinion of legal counsel, is legally required to be disclosed, and upon the disclosing party’s request, use commercially reasonable efforts to obtain assurances that the confidential treatment will be accorded to such information.  This will be the case both while this Agreement is in effect and for a period of five (5) years after it has been terminated.

 

(d)           The Duty to Notify the Other Party in Cases of Improper Use or Disclosure.  Each party agrees to immediately notify the other party if either party becomes aware of any improper use of or any improper disclosure of the Confidential Information of the other party at any time while this Agreement is in effect, and for a period of five (5) years after it has been terminated.

 

(e)           Protection of the Confidential Information.  Each party agrees to develop effective procedures for protecting the Confidential Information that it obtains from the other party, and to implement those procedures with the same degree of care that it uses in protecting its own Confidential Information.

 

(f)            Return of the Confidential Information.  Immediately upon the termination of this Agreement, each party agrees to return to the other party all of the other party’s Confidential Information that is in its possession or under its control.

 

32.        Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be considered delivered in all respects when it has been delivered by hand or mailed by first class mail postage prepaid, addressed as follows:

 

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TO:
    	
RPMG, Inc.
    
	
 
    	
1157   Valley Park Drive South, Suite 100
    
	
 
    	
Shakopee,   MN 55379
    
	
 
    
	
With a copy to:
    
	
 
    
	
TO:
    	
Highwater   Ethanol, LLC
    
	
 
    	
24500   US Hwy 14
    
	
 
    	
PO   Box 96
    
	
 
    	
Lamberton,   MN 56152
    
	
 
    
	
With a copy to:
    
	
 
    
	
[Intentionally left blank]
    

 

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IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first written above.

 

	
 
    	
RPMG, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Douglas E. Punke
    
	
 
    	
Its
    	
CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MEMBER:
    
	
 
    	
HIGHWATER   ETHANOL, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Brian Kletscher
    
	
 
    	
Its:
    	
CEO/GM
    

 

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