Document:

Purchase and Sale Agreement

 

Exhibit 10.9

 

PURCHASE AND SALE AGREEMENT

 

 

AGREEMENT made as
of this _____ day of October 2017 by and between Greg
DiPaolo’s Pro Am Golf, LLC, having an address at 7060 East
Lake Rd.- Route 5, Westfield, NY 14787, email:
dumptruck1@fairpoint.net (the “Seller”) and WEED, Inc.,
a Nevada corporation, having an address at 4920 N. Post Trail,
Tucson, AZ 85750, email: gemartin21@aol.com, as agent for a limited
liability entity to be formed (the
“Purchaser”).

 

RECITALS:

 

WHEREAS
Seller is the owner of that certain improved real property located
at 7060 East Lake Rd., Westfield, New York known as Sugar Hill Golf
Course.

 

WHEREAS
Purchaser desires to purchase, and Seller desires to sell, such
real property on the terms and conditions set forth
herein.

 

NOW,
THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Purchaser and Seller agree as
follows:

 

1.            

Description. Seller hereby
agrees to sell and convey, and Purchaser agrees to purchase from
Seller, on the terms and conditions set forth herein, the
following:

 

1.1            

Premises. That certain real
estate located at 7060 East Lake Rd., Westfield, County of
Chautauqua, State of New York, with approximately 44.8 acres and
tax map numbers 160.00-2-06, 160.00-2-07 and 160.00-2-46, along
with all improvements situated thereon and all fixtures, machinery
and equipment attached or appurtenant to the land or building used
in connection with it (the “Premises”); together with
all right, title and interest of Seller, if any, in and to the land
lying in the bed of any street, highway, waterway and the lake
adjoining the Premises and to any taking by condemnation or any
damage to the Premises by reason of a change of grade of any street
or highway, and all of the estate and rights of Seller in and to
the Premises. The parties may, prior to Closing, enter into an
agreement for the purchase and sale of personal property used in
the operation of the golf course located at the
Premises.

 

2.            

          

Purchase Price. The total
consideration for the Premises shall be the sum of $800,000 (the
“Purchase Price”) and payable in the following
manner:

 

2.1            

Earnest Money Deposit. Upon
execution of this Agreement by all parties, Purchaser shall pay to
Gleichenhaus, Marchese & Weishaar, P.C. (the “Escrow
Agent”), to be held in a non-interest bearing escrow account,
subject to the terms of Section 16 of this Agreement, the sum of
$10,000 (the “Deposit”). The Deposit is non-refundable,
except as set forth in Sections 2.3 and 4.1.

 

 

 1

 

 

2.2            

Balance of Purchase Price. On
the Closing Date (as hereinafter defined), Purchaser shall pay the
Purchase Price, plus or minus prorations and adjustments in
accordance with this Agreement, to Seller in cash, bank wire, bank
check or certified check, less the Deposit.

 

2.3            

Default. If Seller is unable or
unwilling to perform or transfer its rights, title and interest to
Purchaser in accordance with the terms of this Agreement, or
willfully defaults under this Agreement, Purchaser shall have the
following remedies: (a) receive a refund of the Deposit, (b) bring
an action for specific performance, and (c) sue for damages. If
Purchaser shall fail to perform any of its obligations hereunder
and Seller is not in default hereunder, Seller's sole remedy shall
be to retain the Deposit as liquidated damages, and thereupon
Purchaser and Seller shall each be released from all liability
under this Agreement.

 

3.            

Initial Due Diligence Material.
Within 10 days after the date of this Agreement is executed by the
Seller, Seller shall deliver to Purchaser copies of the
following:

 

3.1            

The original
abstract of title and/or any title insurance policy in
Seller’s possession.

 

3.2            

An original of the
survey for the Premises dated January 2, 2007.

 

3.3            

All correspondence,
reports, evaluations, assessments, audits and other materials in
Seller’s possession that relate to environmental, soil
conditions and engineering reports, and related matters at the
Premises.

 

4.            

Title Documents. Purchaser may
obtain the following items at its expense, but Purchaser shall
receive a credit at closing for any such out of pocket expenses:
(i) a full land/title abstract covering the Premises (minimum 80
year search) together with a current title “date down”
dated subsequent to the date of this Agreement
(“Abstract”), (ii) complete tax search for the Premises
dated after the date of this Agreement (“Tax Search”),
(iii) legible recorded copies of all encumbrances for the Premises
(“Recorded Documents”), (iv) a survey according to
Chautauqua County Bar Association standards for the Premises
prepared by a land surveyor licensed in New York State which shall
be certified to the Purchaser and then redated within thirty (30)
days of the Closing Date (“Survey”) and (v) State and
County UCC searches for the Seller and previous owners of the
Premises for the five (5) years prior to the date of this Agreement
(“UCC Search”) (the Abstract, Tax Search, Recorded
Documents, Survey and UCC Searches are collectively referred to as
the “Title Documents”). Purchaser may, in its sole and
absolute discretion, disapprove any title exceptions or survey
matters set forth on the Title Documents and shall notify Seller of
any such disapproved title exceptions (“Disapproved
Encumbrances”). If within ten (10) days after receipt of
notice of the Disapproved Encumbrances, Seller is unable to cure,
cause the removal of, or obtain title insurance (at Seller’s
sole cost and expense) against the Disapproved Encumbrances, then
Purchaser will have the option to either (i) waive the Disapproved
Encumbrances and proceed to Closing (as hereinafter defined), or
(ii) terminate this Agreement by notice to Seller in which event
the Deposit and out of pocket expenses to third parties will be
immediately refunded to the Purchaser.

 

 

 2

 

 

5.            

Contingencies. The following
contingencies shall apply to the Purchaser’s obligation to
purchase the Premises.

 

5.1            

Inspection Contingency.
Purchaser shall have a period of 45 days from the date the Deposit
is delivered to the Escrow Agent (the “Inspection
Period”) to determine to its satisfaction whether the
Premises is acceptable to Purchaser in Purchaser’s sole and
absolute discretion. In the event Purchaser determines that the
Premises is not suitable then Purchaser may, at its sole and
absolute election (a) terminate this Agreement by giving Seller
written notice of its election to terminate during the Inspection
Period, or (b) waive this inspection contingency and proceed to
Closing. If Purchaser shall not have notified Seller of the release
of this inspection contingency in writing during the Inspection
Period, then the Inspection Period shall be extended until the
fifth business day following Purchaser’s receipt of
Seller’s written notice which shall require Purchaser to
waive this inspection contingency and proceed to Closing or
terminate this Agreement at which time the inspection contingency
shall be deemed to have not been satisfied and thereupon this
Agreement will be considered to have been terminated and Purchaser
and Seller shall each be released from all liability under this
Agreement.

 

5.2            

Financing Contingency.
Purchaser shall have a period of 90 days from the date the Deposit
is delivered to the Escrow Agent (the “Financing
Period”) to obtain a written commitment from a lender, in the
usual form of such lender, to make a secured loan to pay the
Purchase Price upon terms acceptable to Purchaser (the
“Commitment Letter”). Purchaser shall pay all fees,
costs and expenses of procuring such commitment and loan. If a
Commitment Letter is not issued within the Financing Period, this
agreement shall continue in full force and effect (but no longer
subject to the contingency provided in this Section 5.2) unless:
(1) Purchaser delivers to Seller's attorney, within three business
days after the expiration of the Financing Period, a written notice
that Purchaser was unable to procure such commitment and therefor
elects to terminate this agreement; or (2) Purchaser obtains
Seller's written consent to an extension of said Financing Period.
If this agreement is terminated as provided above, Purchaser shall
retain the Deposit, whereupon Seller and Purchaser shall have no
further rights against each other hereunder.

 

 3

 

 

6.         

Purchaser Right to Enter Premises and
Conduct Testing. During the Inspection Period, Purchaser
shall have the right to conduct due diligence on and inspect the
Premises and all buildings and improvements located on the Premises
on reasonable notice to the Seller. In connection therewith,
Purchaser or its engineers, architects, building consultants,
environmental investigators or other representatives or agents
shall have the right to do all environmental, surveying,
engineering, seismographic, soil borings and other tests with
respect to the Premises and the buildings and improvements located
on the Premises for the purpose of satisfying purchaser, in its
sole and absolute discretion, that the Premises is suitable for
Purchaser’s purposes and that the Premises meets or exceeds
all underwriting, legal and regulatory standards and requirements
of Purchaser. Purchaser shall restore the Premises, improvements
and buildings on the Premises to substantially the same condition
as it was immediately prior to Purchaser's inspection. Purchaser
shall defend, indemnify and hold Seller, its affiliates,
subsidiaries, officers, directors and agents harmless from and
against any injuries, loss, cost, expense or damage of any kind or
nature suffered or incurred by Seller or its employees or agents as
a result of such entry and inspection.

 

7.            

Seller’s Representations and
Warranties. Seller represents and warrants to the Purchaser
that the following matters are true and correct as of the date
hereof and as of the Closing Date. These provisions shall survive
the Closing, or if the Closing does not occur, the termination of
this Agreement:

 

7.1            

Authorization. Seller has the
requisite power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby, and to execute this
Agreement, the Deed, assignments and other instruments or documents
reasonably necessary to effect the transactions contemplated by
this Agreement.

 

7.2            

Ownership. Seller is the sole
and lawful owner of the Premises and there is no option to
purchase, right of first refusal to purchase, contract of sale,
mortgage, life estate or other limited estate, lease or tenancy
affecting any portion of the Premises, except for this Agreement
and any interest that will be terminated as of or before the
Closing.

 

7.3            

No Conflict. Neither the
execution or delivery nor the performance of Seller of this
Agreement or any of the other transaction documents to which Seller
is a party will conflict with, or will result in a breach of, or
will constitute a default under, (i) any judgment, statute, rule,
order, decree, writ, injunction or regulation of any court or other
governmental authority, or (ii) any agreement or instrument by
which Seller may be bound. The parties confirm that the Agreement
between them dated November 8, 2016 is terminated.

 

7.4            

[Reserved].

 

7.5            

Consents. No permit, approval,
or authorization of, or designation, declaration or filing with,
any governmental authority or any other person or entity on the
part of Seller is required in connection with the execution or
delivery by Seller of this Agreement or the consummation of the
transactions contemplated hereby, except with regard to M&T
Bank and the US Bankruptcy Court.

 

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7.6            

Litigation, etc. Except for
Seller’s bankruptcy filing and any judgments listed therein,
to the best of Seller’s knowledge after due inquiry, there is
no suit, action or litigation, administrative hearing, arbitration,
labor controversy or negotiation, or other proceeding or
governmental inquiry or investigation known to Seller, affecting
Seller or Seller’s properties (including, but not limited to,
environmental or land use proceedings) pending or, to the best of
Seller’s knowledge after due inquiry, threatened against the
Seller which, if resolved adversely, would have a material adverse
effect on the Premises or on the ability of Seller to consummate
the transactions contemplated hereby. There are no known judgments,
consent decrees or injunctions against, affecting or binding upon
Seller. Seller has received no notice of any violations of any
governmental law, ordinance, requirement, order or regulation the
violation of which would have a material adverse effect on the
Premises or on the ability of Seller to consummate the transactions
contemplated hereby, and to Seller’s best knowledge after due
inquiry Seller has received no notice of any claimed default with
respect to any of the foregoing.

 

7.7            

Condemnation. No condemnation
action has been filed or threatened against the
Premises.

 

7.8            

Zoning. The Premises are zoned
as follows: R-3 for tax parcels 160.00-2-6 and 160.00-2-7 and CR
for tax parcel 160.00-2-46. The use being made of the Premises at
present is in conformity with the special use permits issued by the
Town of Portland and NYS DEC permits (SPDES Permit (Permit ID:
9-0660-0035/00001, NY 006816) and Lake Erie Freshwater Withdrawal
permit (Permit ID: 9-0660-00163/00001)) issued for the Premises
(the “Permits”); all required certificates and permits
of that type have been issued, are in full force and effect; and
the Premises comply with all applicable building, fire, zoning and
other ordinances and regulations. No permits or licenses or
certificates of occupancy pertaining to the ownership or operation
of the Premises, other than the Permits, are required by any
governmental agency having jurisdiction over the Premises or its
operation.

 

7.9            

No Violations, Proceedings or
Restrictions. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to the
knowledge of the Seller, threatened against or relating to the
Seller, the Premises or the transaction contemplated by this
Agreement, nor, to the knowledge of the Seller, is there any basis
for such an action. The Premises and their present use and
condition do not violate any applicable deed restrictions or other
covenants, restrictions or agreements, site plan approvals, zoning
or subdivision regulations or urban redevelopment plans applicable
to the Premises, as modified by any duly issued variances. No notes
or notices of violation of law or municipal ordinances or of
federal, state, county or municipal or other governmental agency
regulation, orders or requirements relating to the Premises have
been entered or received by the Seller, and the Seller has no
reason to believe that any note or notice may or will be
entered.

 

 

 5

 

 

7.10            

Roads. The Seller has no
knowledge of any federal, state or local plans to change the
highway or road system in the vicinity of the Premises or to
restrict or change access from any highway or road to the Premises
or of any pending or threatened condemnation of the Premises or of
any plans for improvements which might result in a special
assessment against the Premises. All roads bounding the Premises
are public roads and the deed is the only instrument necessary to
convey to the Purchaser full access to and the right to the roads
freely as well as all rights appurtenant to the Premises in the
roads.

 

7.11            

Utilities. Water is supplied to
the Premises by private well. Natural gas is supplied by private
gas well subject to the terms and conditions of a gas purchase
agreement. There are electricity, data and telephone utilities
serving the Premises.

 

7.12            

Environmental Compliance.
Seller and, to the best of its knowledge after due inquiry, any
tenants who have occupied the Premises, are in compliance with all
applicable federal, state and local laws and regulations relating
to pollution control and environmental contamination including,
without limitation, all laws and regulations governing the
generation, use, collection, treatment, storage transportation,
recovery, removal, discharge or disposal of hazardous materials (as
defined below) and all laws and regulations with regard to record
keeping, notification and reporting requirements respecting
hazardous materials (as defined below). The Seller has not (i)
received any notice of, or (ii) been subject to any administrative
or judicial proceedings pursuant to such laws or regulations either
now or at any time. There are no present facts or circumstances
that could form the basis for the assertion of any claim against
the Seller or to the best of its knowledge after due inquiry, any
tenant relating to environmental matters including, without
limitation, any claim arising from past or present environmental
practices asserted under the comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), at
the Resource Conservation and Recovery Act (“RCRA”) or
any other federal, state or local environmental statute. No part of
the Premises contains any offensive toxic contaminated, hazardous
materials or any other substances which constitutes a health,
safety or environmental risk to any person or property. For
purposes of this paragraph, the term “hazardous
materials” means materials defined as “hazardous
substances”, “hazardous wastes” or “solid
wastes” in CERCLA, RCRA and in any similar federal, state or
local environmental statute.

 

7.13            

No Flood Plain. The Premises is
not located in a regulatory flood plain area (inclusive of flood
way area) as defined by the most recent FEMA mapping for the
community in which the Premises is located.

 

7.14            

Leases. There are no leases or
licenses affecting the Premises.

 

7.15            

No Other Contracts. There are
no unrecorded contracts or contracts which will affect the Premises
and/or Purchaser from and after the Closing.

 

 6

 

 

7.16            

No Rollback Taxes. The Premises
is not subject to any rollback taxes, any increase in taxes which
are due to change in the ownership or use of the
Premises.

 

7.17            

No Encumbrances. There are no
easements, rights of way, gas, timber, or mineral rights except as
set forth in the Search and Seller warrants that it will not
encumber the Premises without the Purchaser’s prior written
consent.

 

7.18            

Mechanic’s Liens. The
Seller represents and warrants that no services, material or work
have been supplied to the Seller’s contractors,
subcontractors or materialmen with respect to the Premises for
which payment has not been made in full. If, subsequent to the
Closing Date, any mechanic’s or other lien, charge or order
for the payment of money shall be filed against the Premises or
against the Purchaser or the Purchaser’s assigns, based upon
any act or omission, or alleged act or omission before or after the
Closing Date, of the Seller, its agents, servants or employees, or
any contractor, subcontractor or materialmen connected with the
construction and completion by the Seller of improvements at the
Premises, or repairs made to the Premises by or on behalf of the
Seller (whether or not the lien, charge or order shall be valid or
enforceable as such), within ten (10) days after notice to the
Seller of the filing of notice, the Seller shall take action, by
bonding, deposit, payment or otherwise, as will remove or satisfy
the lien of record against the Premises.

 

7.19            

Absence of Untrue Statements.
No representation or warranty contained herein by or on behalf of
the Seller, nor any statement or certificate furnished hereunder or
in connection herewith, contains or will contain an untrue
statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein
not misleading.

 

8.            

Covenants of Seller. Seller
hereby covenants with Purchaser, as follows:

 

8.1            

Transfers and Encumbrances.
Between the date hereof and the Closing Date or the
Purchaser’s earlier termination of this Agreement, as the
case may be, Seller may market the Premises for sale. In the event
Seller receives an acceptable bona fide offer from a third party
(an “Offeror”) to purchase the Premises or any portion
thereof, Seller shall give Purchaser written notice of such bona
fide offer, together with a copy of the proposed contract of sale
executed by the Offeror (the “Proposed Contract”).
Within fifteen (15) days of receipt of such notice and Proposed
Contract, Purchaser shall either exercise or waive its right of
first refusal. If Purchaser elects to exercise its right of first
refusal, it shall, within said fifteen (15) day period deliver to
Seller a written purchase offer executed by the Purchaser
containing the same terms and conditions stated in the Proposed
Contract. If Purchaser fails to deliver such executed purchase
offer to Seller within said fifteen (15) day period, Purchaser
shall be deemed to have waived its right of first refusal. If
Seller shall receive such an offer which is not consummated by
delivery of a deed to the Offeror (or its respective heirs,
successors and assigns), Purchaser’s right of first refusal
shall remain applicable to subsequent acceptable bona fide offers.
If the offer in question does not include all of the Premises, such
right of first refusal shall remain in effect with respect to the
remaining portion of the Premises. If such an offer is consummated
by delivery of a deed to the Offeror, then Purchaser shall receive
a refund of the Deposit.

 

 7

 

 

 

8.2            

Contracts. Seller shall not,
without the prior written consent of the Purchaser, which shall not
be unreasonably withheld, enter into any contract with respect to
the Premises that shall survive the Closing or will otherwise
affect the use, operation, enjoyment or development of the Premises
after Closing.

 

8.3            

Operation Pending Closing.
During the period commencing on the date hereof and ending on the
Closing Date (as hereinafter defined), Seller shall, at
Seller’s sole cost and expense, (i) maintain and operate the
Premises in compliance with all laws, ordinances and other
requirements of any governmental authority having jurisdiction and
substantially in the same manner in which it maintained and
operated the Premises immediately before entering into this
Agreement, as though Seller were retaining the Premises and (ii)
maintain and keep Seller’s insurance in full force and
effect.

 

8.4            

Violations. All notices of
violations of law, ordinances, orders or other governmental
requirements against or affecting the Premises
(“Violations”) on the Closing Date (as hereinafter
defined) issued by a governmental authority shall be complied with
by Seller and the Premises shall be conveyed free of same. Seller
shall furnish to Purchaser an authorization to make the necessary
searches therefore. If Seller shall receive any notice of Violation
during the term of this Agreement, it shall furnish a true copy of
same to Purchaser promptly after receipt by Seller. If any such
Violation shall, in Purchaser’s reasonably exercised opinion
or in the opinion of Purchaser’s counsel, constitute an
impediment to Purchaser’s application for the Required
Approvals (as hereinafter defined), Seller shall, after written
request by Purchaser, promptly perform all such work as shall be
required to cure and shall cause the Violation to be removed. In
the event such Violation cannot be removed then Purchaser shall
have the right to terminate this Agreement and the Deposit with all
interest accrued thereon shall be returned to the Purchaser and
Seller shall immediately thereafter refund to Purchaser all
payments made by Purchaser to Seller in connection with the
Agreement.

 

9.            

Seller’s Closing
Documents. The Premises shall be conveyed and transferred by
Seller to Purchaser on the Closing Date by the following
instruments; the parties shall agree upon the instrument no later
than 5 days prior to the Closing Date:

 

9.1            

Premises. A warranty deed with
lien covenants in proper statutory form for recording, duly
executed by Seller and acknowledged (the “Deed”) so as
to convey the Purchaser good and marketable title in fee simple to
the Premises, free and clear of all claims, liabilities,
obligations, security interest, liens, judgments and encumbrances
except as specifically provided otherwise herein and such other
documents as may be appropriate or necessary to convey the real
property interest intended to be conveyed.

 

 8

 

 

9.2            

Termination of Lease. Seller
will deliver at Closing a termination the Lease executed by Seller
and its tenant.

 

9.3            

FIRPTA. An affidavit required
by Section 1445 of the Internal Revenue Code of 1986, as amended
(the “Code”), and the Regulations pursuant thereto, and
acceptable to the Purchaser (the “FIRPTA
Affidavit”).

 

9.4            

Closing Statement. A Closing
Statement showing all closing costs and expenses of each party, all
credits, debits and all pro-rations and showing the net amount due
from Purchaser at Closing.

 

9.5            

Seller’s Closing
Certificate. A certificate, dated as of the Closing Date,
duly executed by Seller, stating that the representations and
warranties of Seller contained in this Agreement are true and
correct in all material respects on the Closing Date (with
appropriate modifications of those representations and warranties
made in Section 7 hereof to reflect any changes therein or
identifying any representation or warranty which is not, or is no
longer, true and correct in all material respects and explaining
the state of facts giving rise to the change).

 

10.            

Prorations and Adjustments. The
following shall be prorated and adjusted between Seller and
Purchaser as of midnight on the day preceding the Closing, except
as otherwise specified:

 

10.1         

Real Estate Taxes and Assessments,
etc. All rent, real estate taxes and assessments (including
water and sewer assessments) with respect to the Premises and such
other items as are customarily adjusted in transactions of this
nature shall be prorated and adjusted as of midnight on the day
preceding the Closing Date. All adjustments shall survive
Closing.

 

11.            

Closing. The Purchaser and the
Seller agree that the purchase and sale contemplated by this
Agreement will be consummated as follows:

 

11.1            

Title Transfer. The Seller
agrees to convey all of Seller’s right, title and interest in
the title to the Premises to the Purchaser by the Deed and such
other appropriate or necessary transfer instruments by 10:00 A.M.
on the Closing Date and, effective on the delivery of the Deed and
other transfer instruments by the Seller to the Purchaser. At the
Closing, the Purchaser will not be required to assume or to pay or
discharge any liabilities of the Seller.

 

 

 9

 

 

11.2            

Closing Date. The closing (the
“Closing”) of this transaction will take place at the
offices of the Chautauqua County Clerk, or at such other location
as shall be agreed to by the parties hereto, on February 1, 2018
and after the satisfaction of all contingencies contained in this
Agreement (the “Closing Date”). Either party may, after
the above date, declare time is of the essence and set a specific
time for Closing on a business day at least seven (7) business days
after receipt of written notice that time is of the essence has
been declared.

 

12. 

Closing Costs. The expenses of
Closing shall be paid in the following manner:

 

12.1            

Seller’s Costs. In
connection with the consummation of this transaction, Seller shall
pay (i) any and all prorations or adjustments required by this
Agreement in favor of Purchaser or according to local custom; (ii)
any and all transfer taxes, and conveyance fees; and (iii) the cost
associated with any title insurance policy obtained for Purchaser
as required in Section 4.

 

12.2            

Purchaser’s Costs. In
connection with the consummation of this transaction, Purchaser
shall pay (i) all fees in connection with the recording of the
Deed, (ii) any and all prorations or adjustments required by this
Agreement in favor of Seller or according to local custom; and
(iii) the cost of Title Documents, but Purchaser shall receive a
credit at Closing for such documented costs.

 

13.          

Eminent Domain. If, prior to
the Closing Date, eminent domain proceedings materially affecting
the Premises shall be threatened or commenced by any competent
public authority against the Premises or any portion thereof which
would materially and adversely affect Purchaser’s ability to
use the Premises, Purchaser shall have the option to (i) proceed
with this transaction and pay the Purchase Price at the Closing and
receive an assignment from Seller of all of Seller’s right,
title and interest in and to such condemnation proceeding, in which
event any compensation paid or payable as a result of such eminent
domain proceedings shall be and become the sole property of
Purchaser or (ii) terminate this Agreement in which event Seller
shall retain such award, and the Deposit plus interest accrued
thereon shall be returned to Purchaser, and all documents furnished
or delivered pursuant to the terms of this Agreement shall be
returned to the party who furnished them and thereafter both
parties shall be released from any further liability hereunder.
Seller agrees that it shall give to Purchaser written notice of any
such threatened or actual eminent domain proceedings within five
(5) days after Seller first becomes aware thereof. If the eminent
domain proceedings do not materially affect the Premises, Purchaser
shall have no right to terminate this Agreement, but shall receive
a credit or an assignment, at Closing, of any compensation paid or
payable as a result of such eminent domain proceedings. In the
event of any such non-material taking, Seller shall not compromise,
settle or adjust any claims to such award without Purchaser’s
prior written consent (which will not be unreasonably withheld), it
being understood and agreed that Purchaser has an interest in all
such proceeds.

 

 

 10

 

 

 

14.            

Broker’s Commissions.
Purchaser represents and warrants that Purchaser has not entered
into any agreement which might result in the obligation to pay any
brokerage commission, finder’s fee or other compensation with
respect to the transaction contemplated hereby. Purchaser agrees to
indemnify Seller and hold Seller harmless from and against any
losses, liabilities, damages, costs and expenses (including
attorneys’ fees) incurred by Seller by reason of any breach
or inaccuracy of the representation and warranty contained in this
Section 14. Seller represents and warrants that Seller has not
entered into any agreement which might result in the obligation to
pay any brokerage commission, finder’s fee or other
compensation with respect to the transaction contemplated hereby.
Seller agrees to indemnify Purchaser and hold Purchaser harmless
from and against any losses, liabilities, damages, costs and
expenses (including attorney’s fees) incurred by Purchaser by
reason of any breach or inaccuracy of the representation and
warranty contained in this Section 14. The provisions of this
Section 14 shall survive the Closing, or if the Closing does not
occur, the termination of this Agreement.

 

15.          

Miscellaneous.

 

15.1            

Capacity. Each individual and
entity executing this Agreement hereby individually represents and
warrants that he and/or it has the capacity set forth on the
signature pages hereof with full power and authority to bind the
party on whose behalf he and/or it is executing this Agreement to
the terms hereof.

 

15.2            

Entire Agreement. This
Agreement constitutes the entire Agreement between the Purchaser
and the Seller relating to this sale and supersedes all other prior
agreements and representations in connection with said sale. There
are no agreements, understandings, warranties or representations
between the Purchaser and the Seller except as set forth
herein.

 

15.3            

No Amendment or Waiver. This
Agreement shall not be altered, amended, changed, waived,
terminated or otherwise modified in any respect or particular
unless the same shall be in writing and signed by the parties
hereto. No waiver by any party of any breach hereunder shall be
deemed a waiver of any other or subsequent breach.

 

15.4            

Counterparts and Facsimile
Documents. This Agreement may be executed in any number of
counterparts, each of which will be considered to be an original,
but all of which when taken together shall constitute one and the
same instrument. Signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same instrument.
The signature page of any counterpart may be detached therefrom
without impairing the legal effect of the signature(s) thereon
provided such signature page is attached to any other counterpart
identical thereto except having additional signature pages executed
by other parties to this Agreement attached thereto.

 

 

 11

 

 

15.5            

Notice. Any notice, demand,
request or communication of any kind required or permitted
hereunder shall be sufficiently given if sent by (i) hand delivery,
(ii) reputable overnight carrier, (iii) United States registered or
certified mail, postage prepaid, return receipt requested or (iv)
or email (with confirmation of receipt thereof) to the parties at
their address set forth above or at such other address each may
designate from time to time. A copy of any such notice, demand,
request or communication sent to Purchaser shall be sent to the
attention of Robert A. Biltekoff, Esq., Biltekoff Law Office, LLC,
43 Court St., Suite 930, Buffalo, NY 14202. A copy of any such
notice, demand, request or communication sent to Seller shall be
sent to the attention of Robert B. Gleichenhaus, Esq.,
Gleichenhaus, Marchese & Weishaar, PC, 43 Court St., Suite 930,
Buffalo, NY 14202. Any such notice, demand, request or
communication shall be deemed to have been duly given or served on
the date shown on the return receipt or other evidence of delivery,
if mailed, or on the date shown on the confirmation receipt, if
telecopied or emailed.

 

15.6            

Governing Law. This Agreement
shall be interpreted and enforced in accordance with the laws of
the State of New York. If any provisions of this Agreement shall be
unenforceable or invalid, the same shall not affect the remaining
provisions of this Agreement.

 

15.7            

Parties. Except as otherwise
provided in this Agreement, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and to their
respective heirs, executors, administrators, successors and
assigns.

 

15.8            

No Assignment. Neither party
shall have the right to assign this Agreement without the prior
written consent of the other party.

 

15.9            

Headings. Section headings of
this Agreement have been inserted for convenience of reference only
and will in no way modify or restrict any provisions hereof or be
used to construe any such provision.

 

15.10        

Exhibits. All Exhibits attached
hereto are incorporated herein by reference and made a part
hereof.

 

15.11        

Additional Acts. Each party
hereto shall from time to time perform such additional acts as the
other party may reasonably request to effectuate the intent of this
Agreement.

 

15.12        

Interpretation and Enforcement.
If suit or action is filed to interpret or enforce this Agreement,
the prevailing party shall be entitled to be awarded its reasonable
attorneys’ fees and disbursements through all appeals in
addition to other costs and disbursements allowed by law, including
those incurred on appeal. 

 

 

 12

 

 

16.        

Escrow Conditions. Upon
execution of this Agreement by all parties, Purchaser shall deliver
to Gleichenhaus, Marchese & Weishaar, PC, having a mailing
address at 43 Court St., Suite 930, Buffalo, NY 14202 ("Escrow
Agent"), Purchaser's check in the amount of $10,000 being the
amount to be paid by Purchaser upon the execution of this agreement
(the "Deposit").

 

Escrow
Agent shall hold the Deposit in accordance with this agreement, or
a joint instruction signed by Seller and Purchaser, or separate
instructions of like tenor signed by Seller and Purchaser, or a
final judgment of a court of competent jurisdiction. If Escrow
Agent shall receive an instruction from Seller or Purchaser, Escrow
Agent may act in accordance with such instruction if the other
party shall fail to notify Escrow Agent not to act in accordance
with such instruction within ten days after delivery of such
instruction by Escrow Agent to said other party. Escrow Agent at
any time may deposit the Deposit with a court of competent
jurisdiction, and upon notice to Seller and Purchaser of such
deposit Escrow Agent shall have no further responsibility or
liability hereunder. Escrow Agent hereby is authorized and directed
to deliver the Deposit to Seller if, as and when title
closes.

 

Seller
and Purchaser acknowledge that Escrow Agent is merely a
stakeholder, and that Escrow Agent shall not be liable for any act
or omission unless taken or suffered in bad faith, in willful
disregard of this agreement or involving gross
negligence.

 

Without
limiting the generality of the foregoing, Escrow Agent shall have
no responsibility to protect, demand payment of, collect, or
enforce any obligation with respect to the Deposit, or for any
diminution of the value, or the failure to earn income, of the
Deposit for any cause. Escrow Agent shall not be required to invest
the Deposit in an interest bearing account or other income
producing investment.

 

All
instructions or notices given pursuant to this Section 16 shall be
in writing and delivered in accordance with the requirements for
notices pursuant to this agreement. For purposes of this Section
16, such instructions and notices shall be deemed delivered on the
date of delivery, if by hand, or on the date of mailing, if mailed,
except that no instruction or notice to Escrow Agent shall be
deemed effectively delivered to Escrow Agent until actual receipt
thereof by Escrow Agent.

 

17.
Termination. This
Agreement shall terminate and be null and void if not executed by
Seller and returned to Purchaser on or before 5:00 P.M. on the
27th day
of October, 2017.

 

 

[Signature Page Follows]

 

  13

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above
written.

 

 

	

 SELLER: 

	
 

	
 

	
 PURCHASER:

	
 

	

 Greg
DiPaolo’s Pro Am Golf, LLC 

	
 

	
 

	
 WEED,
Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
  By:

	
 

	
 

	
  By:

	
 

	
 

	

 
Gregory DiPaolo, its Managing Member

	
 

	

 
Glenn E. Martin, its President

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
  By:

	
 

	
 

	
 

	
 

	
 

	

  Patti Ann Brown,
its Managing Member

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

  ESCROW
AGENT:

	
 

	
 

	
 

	
 

	

 
Gleichenhaus,
Marchese & Weishaar, PC

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
  By:

	
 

	
 

	
 

	
 

	
 

	

  Name:

	
 

	
 

	
 

	
 

	

  Title:

	
 

	
 

	
 

	
 

	

   

	
 

	
 

	
 

	
 

	

   

	
 

	
 

	
 

	
 

	

 Seller’s
Attorney 

	
 

	
 

	
 Purchaser’s
Attorney

	
 

	

  

	
 

	
 

	
  

	
 

	

 Robert
B. Gleichenhaus, Esq.

 Gleichenhaus,
Marchese & Weishaar, PC

 43
Court St, Ste 930

 Buffalo, NY
14202

 (716)
845-6446 

 
gleich4@yahoo.com

	
 

	
 

	
 Robert A.
Biltekoff, Esq.

 Biltekoff Law
Office, LLC

 43 Court St,
Ste 930

 Buffalo, NY
14202

 (716)
748-7314

 rob@biltekoffllc.com

	
 

	

   

	
 

	
 

	
 

	
 

 

  14Exhibit 10.1

 

EXECUTION VERSION

 

$600,000,000

 

PDC ENERGY, INC.

 

5.750% Senior Notes due 2026

 

Purchase Agreement

 

November 14, 2017

 

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

 

	
As   Representative of the several Initial Purchasers listed in Exhibit A   hereto
    	
 
    

 

c/o Merrill Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, New York 10036

 

Ladies and Gentlemen:

 

PDC Energy, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several initial purchasers listed in Exhibit A hereto (the “Initial Purchasers”), for whom you are acting as representative (the “Representative”), $600,000,000 principal amount of its 5.750% Senior Notes due 2026 (the “Notes”).  The Notes will be guaranteed (the “Guarantee”) by PDC Permian, Inc., a Delaware corporation (the “Subsidiary Guarantor”).  The Notes and the Guarantees are collectively referred to herein as the “Securities.”  The Securities will be issued pursuant to an Indenture to be dated as of November 29, 2017 (the “Indenture”) between the Company, the Subsidiary Guarantor and U.S. Bank National Association, as trustee (the “Trustee”).

 

The Securities will be sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon an exemption therefrom.  The Company has prepared a preliminary offering memorandum dated November 14, 2017 (the “Preliminary Offering Memorandum”) and will prepare an offering memorandum dated the date hereof (the “Offering Memorandum”) setting forth information concerning the Company and the Securities.  Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this purchase agreement (the “Agreement”).  The Company hereby confirms that it has

 

 

authorized the use of the Preliminary Offering Memorandum, the other Time of Sale Information (as defined below) and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in the manner contemplated by this Agreement.  References herein to the Preliminary Offering Memorandum, the Time of Sale Information and the Offering Memorandum shall be deemed to refer to and include any document incorporated by reference therein and any reference to “amend,” “amendment” or “supplement” with respect to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any documents filed after such date and incorporated by reference therein.

 

At or prior to the time when sales of the Securities were first made (the “Time of Sale”), the Company had prepared the following information (collectively, the “Time of Sale Information”): the Preliminary Offering Memorandum, as supplemented and amended by the written communications listed on Exhibit B hereto.

 

Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of a Registration Rights Agreement, to be dated the Closing Date (as defined below) and substantially in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will agree to file one or more registration statements with the Securities and Exchange Commission (the “Commission”) providing for the registration under the Securities Act of the Securities or the Exchange Securities referred to (and as defined) in the Registration Rights Agreement.

 

The Company and the Subsidiary Guarantor, jointly and severally, hereby confirm their agreement with the several Initial Purchasers concerning the purchase and resale of the Securities, as follows:

 

1.             Purchase and Resale of the Securities.

 

(a)           The Company and the Subsidiary Guarantor agree to issue and sell the Securities to the several Initial Purchasers as provided in this Agreement, and each Initial Purchaser, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase from the Company and the Subsidiary Guarantor the respective principal amount of Securities set forth opposite such Initial Purchaser’s name in Exhibit A hereto at a price equal to 99.00% of the principal amount thereof plus accrued interest, if any, from November 29, 2017 to the Closing Date.  The Company and the Subsidiary Guarantor will not be obligated to deliver any of the Securities except upon payment for all the Securities to be purchased as provided herein.

 

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

 

2

 

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

 

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

 

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

 

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

 

(B)          in accordance with the restrictions set forth in Exhibit D hereto.

 

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

 

(d)           The Company acknowledges and agrees that the Initial Purchasers may offer and sell Securities to or through any affiliate of an Initial Purchaser and that any such affiliate may offer and sell Securities purchased by it to or through any Initial Purchaser; provided, however, that any such affiliate shall be subject to the same obligations as its affiliated Initial Purchaser hereunder, and that such Initial Purchaser shall be liable for any breach of those obligations by such affiliate.

 

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

 

3

 

thereto. Any review by the Representative or any Initial Purchaser of the Company and the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Representative or such Initial Purchaser, as the case may be, and shall not be on behalf of the Company or any other person.

 

2.             Payment and Delivery.

 

(a)           Payment for and delivery of the Securities will be made at the offices of Davis Polk & Wardwell LLP at 10:00 A.M., New York City time, on November 29, 2017, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representative and the Company may agree upon in writing.  The time and date of such payment and delivery is referred to herein as the “Closing Date”.

 

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

 

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

 

(a)           Preliminary Offering Memorandum, Time of Sale Information and Offering Memorandum.  The Preliminary Offering Memorandum, as of its date, did not, the Time of Sale Information, at the Time of Sale, did not, and at the Closing Date, will not, and the Offering Memorandum, in the form first used by the Initial Purchasers to confirm sales of the Securities and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representative expressly for use in the Preliminary Offering Memorandum, the Time of Sale Information or the Offering Memorandum.

 

(b)           Additional Written Communications.   The Company (including its agents and representatives, other than the Initial Purchasers in their capacity as such) has not made, used, authorized, approved or referred to and will not make, use, authorize, approve or refer to any written communication that constitutes an offer to sell or solicitation of an offer to buy the Securities (each such communication by the Company or its agents and representatives (other than a communication referred to in clauses (i) and (ii) below) an “Issuer Written Communication”) other than (i) the Preliminary

 

4

 

Offering Memorandum, (ii) the Offering Memorandum, (iii) the documents listed on Exhibit B hereto, including a term sheet substantially in the form of Exhibit E hereto, which constitute part of the Time of Sale Information, and (iv) any electronic road show or other written communications, in each case used in accordance with Section 4(c).  Each such Issuer Written Communication, when taken together with the Time of Sale Information at the Time of Sale, did not, and at the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in each such Issuer Written Communication in reliance upon and in conformity with information relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representative expressly for use in any Issuer Written Communication.

 

(c)           Incorporated Documents.  The documents incorporated by reference in each of the Time of Sale Information and the Offering Memorandum, when filed with the Commission, conformed or will conform, as the case may be, in all material respects to the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder, and did not and will not 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, in the light of the circumstances under which they were made, not misleading.

 

(d)           Financial Statements.  The financial statements and the related notes thereto included or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum present fairly the financial position of the Company and its consolidated subsidiaries (including PDC Permian, Inc.) as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby; and the other financial information relating to the Company and its consolidated subsidiaries included or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum has been derived from the accounting records of the Company and its consolidated subsidiaries, and presents fairly the information shown thereby. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in each of the Preliminary Offering Memorandum, the Time of Sale Information and the Offering Memorandum fairly presents the information called for in all material respects and was prepared in accordance with the Commission’s rules and guidelines applicable thereto.

 

(e)           Pro Forma Financial and Other Information.  The pro forma consolidated financial statements of the Company and its subsidiaries and the related notes thereto incorporated by reference in the Time of Sale Information and the Offering Memorandum present fairly the information shown therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein,

 

5

 

and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.

 

(f)            No Material Adverse Change.  Since the date of the most recent financial statements of the Company included or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum (i) there has not been (A) any change in the capital stock or other equity interest (other than grants, exercises, forfeitures, withholdings and similar ordinary course changes relating to awards under existing equity incentive plans described in the Time of Sale Information and the Offering Memorandum), (B) any change in short-term debt or long-term indebtedness for borrowed money of the Company (other than under the Credit Facility (as hereinafter defined) or ordinary course capital leases) or any of the Subsidiaries (as hereinafter defined), or (C) any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or (D) any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and the Subsidiaries taken as a whole; (ii) none of the Company, any of the Subsidiaries, or, to the best knowledge of the Company after due inquiry, any drilling partnership of the Company (which are fully set forth in Exhibit F hereto (each, a “Drilling Partnership” and collectively, the “Drilling Partnerships”), has entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and the Subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and the Subsidiaries taken as a whole; and (iii) neither the Company nor any of the Subsidiaries has sustained any loss or interference with its business that is material to the Company and the Subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case of the foregoing clauses (i), (ii) and (iii), as otherwise disclosed in each of the Time of Sale Information and the Offering Memorandum.

 

(g)           Organization and Good Standing.  Each subsidiary of the Company is listed on Exhibit G hereto (collectively, the “Subsidiaries”); provided that none of the Drilling Partnerships shall, for purposes of this Agreement, constitute a Subsidiary of the Company. The Company and each Subsidiary and Drilling Partnership have been duly organized or formed and are validly existing and in good standing under the laws of their respective jurisdictions of organization or formation, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all organizational power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified, in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, management, financial position, stockholders’ equity,

 

6

 

results of operations or prospects of the Company, the Subsidiaries and the Drilling Partnerships taken as a whole or on the performance by the Company of its obligations under this Agreement and the Securities (a “Material Adverse Effect”).  The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the Subsidiaries listed in Exhibit G hereto and the Drilling Partnerships listed on Exhibit F hereto.

 

(h)           Stock Options.  There are no currently outstanding options to purchase the common stock of the Company (“Stock Options”) granted pursuant to the stock-based compensation plans of the Company and the Subsidiaries. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company of granting, Stock Options prior to, or otherwise coordinating the grant of Stock Options with, the release or other public announcement of material information regarding the Company or the Subsidiaries or their results of operations or prospects.

 

(i)            Capitalization.  The Company has an authorized capitalization as set forth in the Time of Sale Information and the Offering Memorandum under the heading “Capitalization,” and all the outstanding shares of capital stock or other equity interests of each Subsidiary and, to the best knowledge of the Company after due inquiry, each Drilling Partnership owned, directly or indirectly, by the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party, except for liens, charges, encumbrances, security interests, restrictions on voting or transfer or other claims disclosed in the Time of Sale Information and the Offering Memorandum pursuant to the Third Amended and Restated Credit Agreement dated as of May 21, 2013, as amended, among the Company, the guarantor parties thereto, the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Facility”).

 

(j)            Due Authorization.  The Company has full corporate right, power and authority to execute and deliver this Agreement, the Securities, the Indenture, the Exchange Securities, the Registration Rights Agreement (collectively, the “Transaction Documents”) and to perform its obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery by it of each of the Transaction Documents and the consummation by it of the transactions contemplated thereby has been duly and validly taken. The Subsidiary Guarantor has full corporate right, power and authority to execute and deliver the Transaction Documents and to perform its obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery by such Subsidiary Guarantor of each of the Transaction Documents and the consummation by it of the transactions contemplated thereby has been duly and validly taken.

 

(k)           The Indenture.  The Indenture has been duly authorized by the Company and the Subsidiary Guarantor, and on the Closing Date will be duly executed and delivered by the Company and the Subsidiary Guarantor and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a

 

7

 

valid and legally binding agreement of the Company and the Subsidiary Guarantor enforceable against the Company or the Subsidiary Guarantor, as applicable, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (collectively, the “Enforceability Exceptions”).

 

(l)            The Securities.  The Notes have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, and will be entitled to the benefits of the Indenture, subject to the Enforceability Exceptions. The Guarantee has been duly authorized by the Subsidiary Guarantor and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Subsidiary Guarantor enforceable against the Subsidiary Guarantor in accordance with its terms, and will be entitled to the benefits of the Indenture, subject to the Enforceability Exceptions.

 

(m)          The Exchange Securities.  On the Closing Date, the Exchange Securities will have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as contemplated by the Registration Rights Agreement, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company, as issuer, enforceable against the Company in accordance with their terms, and will be entitled to the benefits of the Indenture, subject to the Enforceability Exceptions.

 

(n)           Purchase and Registration Rights Agreements.  This Agreement has been duly authorized, executed and delivered by the Company; and the Registration Rights Agreement has been duly authorized by the Company and on the Closing Date will be duly executed and delivered by the Company and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions, and except that rights to indemnity and contribution hereunder and thereunder may be limited by applicable law and public policy.

 

(o)           Descriptions of the Transaction Documents.  Each Transaction Document conforms in all material respects to the description thereof contained in each of the Time of Sale Information and the Offering Memorandum.

 

(p)           No Violation or Default.  None of the Company, any of the Subsidiaries or, to the best knowledge of the Company after due inquiry, any of the Drilling Partnerships is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or

 

8

 

instrument to which the Company, any of the Subsidiaries or any of the Drilling Partnerships is a party or by which the Company, any of the Subsidiaries or any of the Drilling Partnerships is bound or to which any of the property, right or assets of the Company, any of the Subsidiaries or any of the Drilling Partnerships is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, as disclosed in each of the Time of Sale Information and the Offering Memorandum or for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(q)           No Conflicts.  The execution, delivery and performance by the Company of each of the Transaction Documents to which each is a party, the issuance and sale of the Securities, the issuance of the Exchange Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, result in the termination, modification or acceleration of, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, any of the Subsidiaries or, to the best knowledge of the Company after due inquiry, any Drilling Partnership pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company, any of the Subsidiaries or any Drilling Partnership is a party or by which the Company, any of the Subsidiaries or any Drilling Partnership is bound or to which any of the property or assets of the Company or any of the Subsidiaries or any Drilling Partnership is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Company or any of the Subsidiaries or any Drilling Partnership or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clause (i) above, as disclosed in each of the Time of Sale Information and the Offering Memorandum or, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(r)            No Consents Required.  No consent, approval, authorization, order, license, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company of each of the Transaction Documents to which each is a party, the issuance and sale of the Securities, the issuance of the Exchange Securities and compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, orders and registrations or qualifications as may be required (i) under applicable state securities laws in connection with the purchase and resale of the Securities by the Initial Purchasers and, (ii) with respect to the Exchange Securities under the Securities Act, the Trust Indenture Act and applicable state securities laws as contemplated by the Registration Rights Agreement.

 

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(s)            Legal Proceedings.  Except as described in each of the Time of Sale Information and the Offering Memorandum, there are no legal, governmental or regulatory investigations, actions, suits, or proceedings pending (“Actions”) to which the Company or any of the Subsidiaries is a party or to which any property of the Company or any of the Subsidiaries is the subject and, to the best knowledge of the Company after due inquiry, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which any Drilling Partnership is a party or to which any property of any Drilling Partnership is subject, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and no such Actions are threatened or, to the best knowledge of the Company after due inquiry, contemplated by any governmental or regulatory authority or threatened by others.

 

(t)            Independent Accountants.  PricewaterhouseCoopers LLP, which has certified certain financial statements of the Company and its Subsidiaries, is an independent registered public accounting firm with respect to the Company and its Subsidiaries, and EKS&H LLLP, which has certified certain financial statements of PDC Permian, Inc. (formerly known as Arris Petroleum Corporation), was an independent registered public accounting firm with respect to PDC Permian, Inc. as of the date at such certification, each as within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.

 

(u)           Real and Personal Property.  The Company and each of its Subsidiaries have (i) valid and defensible title to substantially all their respective interests in their natural gas and oil properties leased or owned by them, (ii) good and marketable title to all real property owned by them (other than the oil and gas properties referred to in clause (i) above) and (iii) good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except as encumbered by the Credit Facility and as described in the Time of Sale Information and the Offering Memorandum or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property in the aggregate by the Company and its Subsidiaries; and all assets held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made of such properties and proposed to be made of such properties by the Company or any of its Subsidiaries.

 

(v)           Intellectual Property.  The Company and the Subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses as currently conducted and as proposed to be conducted, and the conduct of their respective businesses will not conflict in any material respect with any such rights of others. The Company, the Subsidiaries and, to the best knowledge of the Company after due inquiry, the Drilling Partnerships have not received any notice of any

 

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claim of infringement, misappropriation or conflict with any such rights of others in connection with its patents, patent rights, licenses, inventions, trademarks, service marks, trade names, copyrights and know-how, which could reasonably be expected to result in a Material Adverse Effect.

 

(w)                               No Undisclosed Relationships.    No relationship, direct or indirect, exists between or among the Company or any of the Subsidiaries or any Drilling Partnership, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of the Subsidiaries, on the other, that would be required by the Securities Act to be described in a registration statement on Form S-1 to be filed with the Commission and that is not so described in each of the Time of Sale Information and the Offering Memorandum.

 

(x)                                 Investment Company Act.  The Company is not, and immediately after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in each of the Time of Sale Information and the Offering Memorandum, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Investment Company Act”).

 

(y)                                 Taxes.  The Company and the Subsidiaries have paid all material federal, state, local and foreign taxes and filed all material tax returns required to be paid or filed through the date hereof; and except as otherwise disclosed in each of the Time of Sale Information and the Offering Memorandum, there is no material tax deficiency that has been, or could reasonably be expected to be, asserted against the Company and the Subsidiaries or any of their respective properties or assets.

 

(z)                                  Licenses and Permits.  The Company and the Subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in each of the Time of Sale Information and the Offering Memorandum (other than drilling and similar operational permits reasonably expected to be granted in the ordinary course with respect to exploration and development activities), except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and except as described in each of the Time of Sale Information and the Offering Memorandum, none of the Company or any of the Subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course except as would not, individually or in the aggregate, have a Material Adverse Effect.

 

(aa)                          No Labor Disputes.  No labor disturbance by or dispute with employees of the Company or any of the Subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of the Company’s or the

 

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Subsidiaries’ principal suppliers, contractors or customers, except as would not, individually or in the aggregate, have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries have received any notice of cancellation or termination with respect to any collective bargaining agreement to which it is a party.

 

(bb)                          Compliance with and Liability under Environmental Laws.  The Company, its Subsidiaries and, to the best knowledge of the Company after due inquiry, the Drilling Partnerships (i) are in compliance with any and all applicable foreign, federal, state and local laws, including common law, and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or other wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses (other than permits reasonably expected to be granted in the ordinary course with respect to exploration and development activities) and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, have a Material Adverse Effect. Except as disclosed in the Time of Sale Information and the Offering Memorandum, there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, individually or in the aggregate, have a Material Adverse Effect.

 

(cc)                            Hazardous Materials.  Except as disclosed in the Time of Sale Information and the Offering Memorandum, (a) there has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances by the Company, any of its Subsidiaries or, to the best knowledge of the Company after due inquiry, the Drilling Partnerships, or any of their respective predecessors in interest, at, upon or from any of the property now or previously owned, leased or operated by the Company, its Subsidiaries or, to the best knowledge of the Company after due inquiry, the Drilling Partnerships, or any of their respective predecessors in interest, in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or would not be reasonably likely to have, individually or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; and (b) there has been no spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances for which the Company, any of its Subsidiaries or, to the best knowledge of the Company after due inquiry, the Drilling Partnerships, would be liable, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be

 

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reasonably likely to have, individually or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms “hazardous wastes”, “toxic wastes”, “solid wastes”, “hazardous substances” and “medical wastes” shall have the meanings specified in any applicable local, state, federal and foreign laws, including Environmental Laws.

 

(dd)                          Compliance with ERISA.  (i) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each, a “Plan”) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code, except for noncompliance that could not reasonably be expected to result in material liability to the Company, the Subsidiaries or the Drilling Partnerships;  (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption, that could reasonably be expected to result in a material liability to the Company, the Subsidiaries or the Drilling Partnerships; (iii) for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, as applicable, has been satisfied (without taking into account any waiver thereof or extension of any amortization period) and is reasonably expected to be satisfied in the future (without taking into account any waiver thereof or extension of any amortization period); (iv) the fair market value of the assets of each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (v) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur that either has resulted, or could reasonably be expected to result, in material liability to the Company, the Subsidiaries or the Drilling Partnerships; (vi) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any material liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(a)(3) of ERISA); and (vii) to the best knowledge of the Company, there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental agency or any foreign regulatory agency with respect to any Plan that could reasonably be expected to result in material liability to the Company, the Subsidiaries or the Drilling Partnerships.  None of the following events has occurred or is reasonably likely to occur: (x) a material increase in the aggregate amount of contributions required to be made to all Plans by the Company or the Subsidiaries in the current fiscal year of the Company and the Subsidiaries compared to the amount of such contributions made in the Company and the Subsidiaries’ most recently completed fiscal year; or (y) a material increase in the Company and the Subsidiaries’ “accumulated post-retirement benefit obligations” (within

 

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the meaning of Statement of Financial Accounting Standards 106) compared to the amount of such obligations in the Company and the Subsidiaries’ most recently completed fiscal year.

 

(ee)                            Disclosure Controls.  The Company and the Subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.  The Company and the Subsidiaries have carried out evaluations of the effectiveness of their disclosure controls and procedures as required by Rule 13a-15 of the Exchange Act.

 

(ff)                              Accounting Controls.  The Company maintains a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by, or under the supervision of, its respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (v) the interactive data in eXtensible Business Reporting Language incorporated by reference in the Time of Sale Information and the Offering Memorandum fairly presents the information called for in all material respects and was prepared in accordance with the Commission’s rules and guidelines applicable thereto.  Except as disclosed in the Time of Sale Information and the Offering Memorandum, there are no material weaknesses in the Company’s internal controls.  The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of:  (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

(gg)                            Insurance.  The Company and the Subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in

 

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amounts and insures against such losses and risks as are adequate to protect the Company, the Subsidiaries, and their respective businesses with respect to matters covered by such insurance consistent with customary industry standards; and none of the Company or any of the Subsidiaries has (i) received notice from any insurer or agent of such insurer that material capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

 

(hh)                          No Unlawful Payments.  None of the Company, any of the Subsidiaries or, to the best knowledge of the Company after due inquiry, any Drilling Partnership or, to the best knowledge of the Company, any director, officer, agent, employee, affiliate or other person associated with or acting on behalf of the Company or any of the Subsidiaries has while so acting (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise, or authorization of any direct or indirect unlawful payment to any foreign or domestic government official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977 or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit.

 

(ii)                                  Compliance with Anti-Money Laundering Laws.  The operations of the Company, the Subsidiaries and, to the best knowledge of the Company after due inquiry, the Drilling Partnerships are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions to which the Company is subject, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency with jurisdiction over the Company (collectively, the “Anti-Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company, any of the Subsidiaries or any Drilling Partnership with respect to the Anti-Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

 

(jj)                                Compliance with OFAC.  None of the Company, any of the Subsidiaries or, to the best knowledge of the Company after due inquiry, any Drilling Partnership, or, to the best knowledge of the Company, any director, officer, agent, employee, affiliate or  representative of the Company, any Subsidiaries or any Drilling Partnership is an individual or entity (“Person”) currently subject to or the target of any sanctions

 

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administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, Cuba, Iran, North Korea, Sudan, Syria and Crimea (each a “Sanctioned Country”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person or entity (i) to fund or facilitate any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject or target of Sanctions (ii) to fund or facilitate any activities of or business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

 

(kk)                          Solvency.  On and immediately after the Closing Date, the Company (after giving effect to the issuance and sale of the Securities and the other transactions related thereto as described in each of the Time of Sale Information and the Offering Memorandum) will be Solvent.  As used in this paragraph, the term “Solvent” means, with respect to a particular date and entity, that on such date (i) the fair value (and present fair saleable value) of the assets of such entity is not less than the total amount required to pay the probable liability of such entity on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured; (ii) such entity is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business; (iii) assuming consummation of the issuance and sale of the Securities as contemplated by this Agreement, the Time of Sale Information and the Offering Memorandum, such entity does not have, intend to incur or believe that it will incur debts or liabilities beyond its ability to pay as such debts and liabilities mature; (iv) such entity is not engaged in any business or transaction, and does not propose to engage in any business or transaction, for which its property would constitute unreasonably small capital; and (v) such entity is not a defendant in any civil action that is reasonably likely to result in a judgment that such entity is or would become unable to satisfy.

 

(ll)                                  No Restrictions on Subsidiaries.  No Subsidiary is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s properties or assets to the Company.

 

(mm)                  No Broker’s Fees.  Neither the Company nor any of the Subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or any Initial Purchaser for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Securities, except as described in each of the Time of Sale Information and the Offering Memorandum.

 

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(nn)                          Rule 144A Eligibility.  On the Closing Date, the Securities will not be of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in an automated inter-dealer quotation system; and each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains or will contain all the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act.

 

(oo)                          No Integration.  Neither the Company nor any of its affiliates (as defined in Rule 501(b) of Regulation D) has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act), that is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act.

 

(pp)                          No General Solicitation or Directed Selling Efforts.  None of the Company or any of its affiliates or any other person acting on its or their behalf (other than the Initial Purchasers, as to which no representation is made) has (i) solicited offers for, or offered or sold, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act or (ii) in connection with offers and sales of Securities outside the United States, engaged in any directed selling efforts within the meaning of Regulation S under the Securities Act (“Regulation S”), and all such persons have complied with the offering restrictions requirement of Regulation S.

 

(qq)                          Securities Law Exemptions.  Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 1(b) (including Exhibit D hereto) and their compliance with their agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement, the Time of Sale Information and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act.

 

(rr)                                No Stabilization.  The Company has not taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Securities.

 

(ss)                              Margin Rules.  Neither the issuance, sale and delivery of the Securities nor the application of the proceeds thereof by the Company as described in each of the Time of Sale Information and the Offering Memorandum will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.

 

(tt)                                Forward-Looking Statements.  No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) included or incorporated by reference in any of the Time of Sale Information or the Offering

 

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Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

(uu)                          Industry Statistical and Market Data.  Nothing has come to the attention of the Company that has caused the Company to believe that the industry statistical and market-related data included or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum is not based on or derived from sources that are reliable and accurate in all material respects.

 

(vv)                          Sarbanes-Oxley Act.  There is and has been no failure on the part of the Company or, to the best knowledge of the Company, any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications.

 

(ww)                      Significant Subsidiaries. The Company has no “significant subsidiaries” (within the meaning of Rule 1-02(w) of Regulation S-X) other than PDC Permian, Inc.

 

(xx)                          Oil and Gas Reserve Estimates.  The information underlying the estimates of the oil and gas reserves of the Company and its Subsidiaries as described in the Time of Sale Information and the Offering Memorandum is complete and accurate in all material respects (or, with regard to any information underlying the estimates prepared by any petroleum engineers retained by the seller of such oil and gas reserves, is, to the best knowledge of the Company after reasonable investigation, complete and accurate in all material respects); other than production of the Company’s reserves and intervening product price fluctuations described in the Time of Sale Information and the Offering Memorandum, the Company is not aware of any facts or circumstances that would result in a material adverse change in such reserves or the present value of future net cash flows therefrom as described in the Time of Sale Information and the Offering Memorandum.  Estimates of such reserves and present values comply in all material respects with the applicable requirements of Regulation S-X and Subpart 1200 of Regulation S-K.

 

(yy)                          Independent Petroleum Engineers.  Each of Ryder Scott Company, L.P. and Netherland, Sewell & Associates, Inc., the petroleum engineers who have consented to being named as having reviewed certain reserve data included in the Time of Sale Information and the Offering Memorandum, is an independent engineering firm with respect to the Company and its Subsidiaries.  The information underlying the estimates of oil and natural gas reserves of the Company and its Subsidiaries, which the Company prepared and supplied to Ryder Scott Company, L.P.  and Netherland, Sewell & Associates, Inc. for the purpose of preparing the reports referred to in the Time of Sale Information and the Offering Memorandum was true and correct in all material respects on the dates such estimates were made and such information was supplied and was prepared in accordance with customary industry practices.

 

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(zz)                            Certificates.  Any certificate signed by an officer of the Company or any of its Subsidiaries and delivered to the Representative or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to each Initial Purchaser as to the matters covered thereby.

 

4.                                      Further Agreements of the Company.  The Company covenants and agrees with each Initial Purchaser that:

 

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

 

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

 

(c)                                  Additional Written Communications.  Before making, using, authorizing, approving or referring to any Issuer Written Communication, the Company will furnish to the Representative and counsel for the Initial Purchasers a copy of such written communication for review and will not make, use, authorize, approve or refer to any such written communication to which the Representative reasonably objects.

 

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

 

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suspending the use of any of the Time of Sale Information, any Issuer Written Communication or the Offering Memorandum or suspending any such qualification of the Securities and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

 

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

 

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

 

(g)                                  Blue Sky Compliance.  The Company will qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representative shall reasonably request and will use reasonable best efforts to continue such qualifications in effect so long as required for the initial offering and resale of the Securities; provided that the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject.

 

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(h)                                 Clear Market.  During the period from the date hereof through and including the date that is 45 days after the date hereof, the Company will not, without the prior written consent of the Representative, offer, sell, contract to sell or otherwise dispose of any debt securities issued or guaranteed by the Company and having a tenor of more than one year.

 

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

 

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

 

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

 

(l)                                     No Resales by the Company.  The Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been acquired by any of them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act.

 

(m)                             No Integration.  Neither the Company nor any of its affiliates (as defined in Rule 501(b) of Regulation D) will, directly or through any agent, sell, offer for sale, solicit offers to buy or otherwise negotiate in respect of, any security (as defined in the Securities Act), that is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act.

 

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

 

(o)                                 No Stabilization.  The Company will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Securities.

 

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

 

6.                                     Conditions of Initial Purchasers’ Obligations.  The obligation of each Initial Purchaser to purchase Securities on the Closing Date as provided herein is subject to the performance by the Company and the Subsidiary Guarantor of their respective covenants and other obligations hereunder and to the following additional conditions:

 

(a)                                 Representations and Warranties.  The representations and warranties of the Company and the Subsidiary Guarantor contained herein shall be true and correct on the date hereof and on and as of the Closing Date; and the statements of the Company and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date.

 

(b)                                 No Downgrade.  Subsequent to the earlier of (A) the Time of Sale and (B) the execution and delivery of this Agreement, (i) no downgrading shall have occurred in the rating accorded the Securities or any other debt securities or preferred stock issued or guaranteed by the Company or any of the Subsidiaries by any “nationally recognized statistical rating organization”, as such term is defined under Section 3(a)(62) under the Exchange Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, or has changed its outlook with respect to, its rating of the Securities or of any other debt securities or preferred stock issued or guaranteed by the Company or any of the Subsidiaries (other than an announcement with positive implications of a possible upgrading).

 

(c)                                  No Material Adverse Change.  No event or condition of a type described in Section 3(f) hereof shall have occurred or shall exist, which event or condition is not described in each of the Time of Sale Information (excluding any amendment or supplement thereto) and the Offering Memorandum (excluding any amendment or supplement thereto) the effect of which in the judgment of the Representative makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement, the Time of Sale Information and the Offering Memorandum.

 

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(d)                                 Officers’ Certificate.  At the Closing Date, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) or the Time of Sale Information, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and, at the Closing Date, the Representative shall have received a certificate of the Chief Executive Officer or an Executive Vice President or Senior Vice President of the Company and of the Chief Financial Officer of the Company, dated as of Closing Date, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company and the Subsidiary Guarantor in this Agreement are true and correct with the same force and effect as though expressly made at and as of Closing Date, (iii) the Company and the Subsidiary Guarantor have complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Date under or pursuant to this Agreement, and (iv) there has been no decrease in or withdrawal of the rating of any securities of the Company or any of its Subsidiaries by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act) nor has any notice been given of any intended or potential decrease in or withdrawal of any such rating.

 

(e)                                  Accountants’ Comfort Letters.  (i) On the date of this Agreement and on the Closing Date, PricewaterhouseCoopers LLP shall have furnished to the Representative, at the request of the Company, letters, dated the respective dates of delivery thereof and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative, containing statements and information of the type customarily included in accountants’ “comfort letters” to initial purchasers with respect to the financial statements and certain financial information of the Company contained or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum; and (ii) on the date of this Agreement and on the Closing Date, EKS&H LLLP shall have furnished to the Representative, at the request of the Company, letters, dated the respective dates of delivery thereof and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative, containing statements and information of the type customarily included in accountants’ “comfort letters” to initial purchasers with respect to the financial statements and certain financial information concerning PDC Permian, Inc. contained or incorporated by reference in each of the Time of Sale Information and the Offering Memorandum; provided that the letters delivered on the Closing Date shall use a “cut-off” date no more than three business days prior to the Closing Date.

 

(f)                                   Engineers’ Letters.  On the date of this Agreement and on the Closing Date, the Representative shall have received letters from Ryder Scott Company, L.P. and Netherland, Sewell & Associates, Inc. dated the respective dates of delivery thereof and in the form and substance reasonably satisfactory to the Representative, together with signed or reproduced copies of such letters for each of the other Initial Purchasers,

 

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containing statements and information with respect to such matters as the Representative may require.

 

(g)                                  Opinion and 10b-5 Statement of Counsel for the Company.  Davis Graham & Stubbs LLP, counsel for the Company, shall have furnished to the Representative, at the request of the Company, their written opinion and 10b-5 statement, dated the Closing Date and addressed to the Initial Purchasers, in form and substance reasonably satisfactory to the Representative, to the effect set forth in Exhibit H hereto.

 

(h)                                 Opinion and 10b-5 Statement of Counsel for the Initial Purchasers.  The Representative shall have received on and as of the Closing Date an opinion and 10b-5 statement, addressed to the Initial Purchasers, of Davis Polk & Wardwell LLP, counsel for the Initial Purchasers, with respect to such matters as the Representative may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

 

(i)                                     No Legal Impediment to Issuance.  No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance or sale of the Securities.

 

(j)                                    Good Standing.  The Representative shall have received on and as of the Closing Date satisfactory evidence of the good standing of the Company and the Subsidiaries in their respective jurisdictions of organization and their good standing in such other jurisdictions as the Representative may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

 

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

 

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

 

(m)                             Indenture and Securities.  The Indenture shall have been duly executed and delivered by a duly authorized officer of each of the Company and the Subsidiary Guarantor, and the Trustee, and the Securities shall have been duly executed and delivered by a duly authorized officer of the Company and the Subsidiary Guarantor and duly authenticated by the Trustee.

 

(n)                                 Additional Documents.  On or prior to the Closing Date, the Company shall have furnished to the Representative such further certificates and documents as the Representative may reasonably request.

 

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(o)                                 Credit Facility.  The Initial Purchasers shall have received evidence to their satisfaction that the issuance of the Securities will not result in a breach of the Company’s obligations under the Credit Facility.

 

(p)                                 Chief Financial Officer’s Certificate. On the date of this Agreement and on the Closing Date, the Initial Purchasers shall have received from the Chief Financial Officer of the Company a certificate to the effect as set forth in Exhibit I hereto.

 

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

 

7.                                     Indemnification and Contribution.

 

(a)                                 Indemnification of the Initial Purchasers.  The Company and the Subsidiary Guarantor, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser, its officers, directors, employees, partners, members, agents and affiliates (as defined in Rule 405) and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses reasonably incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, any of the other Time of Sale Information, any Issuer Written Communication or the Offering Memorandum (or any amendment or supplement thereto) or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representative expressly for use therein.

 

(b)                                 Indemnification of the Company.  Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, the Subsidiary Guarantor and their respective directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representative expressly for use in the Preliminary Offering Memorandum, any of the other Time of Sale Information, any Issuer Written Communication or the Offering Memorandum (or any amendment or supplement thereto), it being understood and agreed that the only such information consists of the following paragraphs in the

 

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Preliminary Offering Memorandum and the Offering Memorandum:  the paragraph under the caption “Commissions and Discounts” and the paragraphs under the caption “Short Positions.”

 

(c)                                  Notice and Procedures.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under paragraph (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 Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under paragraph (a) or (b) above.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 7 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred.  Any such separate firm for any Initial Purchaser, its affiliates, directors and officers and any control persons of such Initial Purchaser shall be designated in writing by Merrill Lynch, Pierce, Fenner & Smith Incorporated and any such separate firm for the Company, Subsidiary Guarantor, their respective directors and officers and any control persons of the Company shall be designated in writing by the Company.  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment.

 

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No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

 

(d)                                 Contribution.  If the indemnification provided for in paragraph (a) or (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company on the one hand and the Initial Purchasers on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Initial Purchasers on the other shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Company from the sale of the Securities and the total discounts and commissions received by the Initial Purchasers in connection therewith, as provided in this Agreement, bear to the aggregate offering price of the Securities.  The relative fault of the Company on the one hand and the Initial Purchasers on the other 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 or by the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

(e)                                  Limitation on Liability.  The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above.  The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Person in connection with any such action or claim.  Notwithstanding the provisions of this Section 7, in no event shall an Initial Purchaser be required to contribute any amount in excess of the amount by which the total discounts and

 

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commissions received by such Initial Purchaser with respect to the offering of the Securities exceeds the amount of any damages that such Initial Purchaser has 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.  The Initial Purchasers’ obligations to contribute pursuant to this Section 7 are several in proportion to their respective purchase obligations hereunder and not joint.

 

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

 

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

 

9.            Defaulting Initial Purchaser.

 

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

 

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purposes of this Agreement unless the context otherwise requires, any person not listed in Exhibit A hereto that, pursuant to this Section 9, purchases Securities that a defaulting Initial Purchaser agreed but failed to purchase.

 

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

 

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

 

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

 

10.          Payment of Expenses.

 

(a)           Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder, including without limitation, (i) the reasonable costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (ii) the reasonable costs incident to the preparation and printing of the Preliminary Offering Memorandum, any other Time of Sale Information, any Issuer Written Communication and the Offering Memorandum (including any amendment or supplement thereto) and the distribution thereof; (iii) the reasonable costs of reproducing and distributing each of the Transaction Documents; (iv) the fees and expenses of the Company’s counsel and independent accountants and EKS&H LLLP; (v) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Securities under the laws of such jurisdictions as the Representative may reasonably designate and the preparation, printing and distribution

 

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of a Blue Sky Memorandum (including the related fees and expenses of counsel for the Initial Purchasers); (vi) any fees charged by rating agencies for rating the Securities; (vii) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such parties); (viii) all expenses and application fees incurred in connection with the approval of the Securities for book-entry transfer by DTC; and (ix) all expenses incurred by the Company in connection with any “road show” presentation to potential investors.

 

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

 

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

 

12.          Survival.  The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, the Subsidiary Guarantor and the Initial Purchasers contained in this Agreement or made by or on behalf of the Company, the Subsidiary Guarantor or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Company, the Subsidiary Guarantor or the Initial Purchasers.

 

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

 

14.          Compliance with USA Patriot Act.  In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Initial Purchasers are required to obtain, verify and record information that identifies

 

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their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Initial Purchasers to properly identify their respective clients.

 

15.          Miscellaneous.

 

(a)           Authority of the Representative.  Any action by the Initial Purchasers hereunder may be taken by Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the Initial Purchasers, and any such action taken by Merrill Lynch, Pierce, Fenner & Smith Incorporated shall be binding upon the Initial Purchasers.

 

(b)           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Initial Purchasers shall be given to the Representative c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, New York, New York 10036; Attention: Lex Maultsby.  Notices to the Company shall be given to it at PDC Energy, Inc., 1775 Sherman Street, Suite 3000, Denver, Colorado 80203, Attention: David Honeyfield and Nicole Martinet.

 

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

 

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

 

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

 

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

 

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

 

31

 

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

 

32

 

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

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
PDC ENERGY, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
As Issuer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By 
    	
David W. Honeyfield
    
	
 
    	
 
    	
Name: David W. Honeyfield
    
	
 
    	
 
    	
Title:   Senior Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
PDC PERMIAN, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
As Subsidiary Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By 
    	
David W. Honeyfield
    
	
 
    	
 
    	
Name: David W. Honeyfield
    
	
 
    	
 
    	
Title:   Chief Financial Officer
    

 

[Signature Page to the Purchase Agreement]

 

 

	
Accepted:   November 14, 2017
    	
 
    
	
 
    	
 
    
	
MERRILL LYNCH, PIERCE,   FENNER & SMITH
    	
 
    
	
INCORPORATED
    	
 
    
	
 
    	
 
    
	
For itself and on   behalf of the several Initial Purchasers listed in Exhibit A hereto.
    	
 
    
	
 
    	
 
    
	
By: 
    	
/s/ J. Lex Maultsby
    	
 
    
	
 
    	
Authorized   Signatory
    	
 
    

 

[Signature Page to the Purchase Agreement]

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