Document:

exv10w1

 

EXHIBIT 10.1

$100,000,000

KCS ENERGY, INC.

7 1/8% SENIOR NOTES DUE 2012

PURCHASE AGREEMENT

April 5, 2005

	 	 	 
	Credit Suisse First Boston LLC
	J.P. Morgan Securities Inc.
	Harris Nesbitt Corp.
	BNP Paribas Securities Corp.
	Greenwich Capital Markets, Inc.
	c/o:

	 	Credit Suisse First Boston LLC
	

	 	Eleven Madison Avenue
	

	 	New York, New York 10010-3629

Dear Sirs:

     1. Introductory. KCS Energy, Inc., a Delaware corporation (the “Company”), proposes, subject
to the terms and conditions stated herein, to issue and sell to the several initial purchasers
named in Schedule A hereto (the “Purchasers”) U.S. $100,000,000 aggregate principal amount of its
7 1/8% Senior Notes due 2012 (the “Offered Securities”) to be issued as additional securities under an
indenture, dated as of April 1, 2004, (the “Original Indenture”) as amended by the First
Supplemental Indenture thereto (the “First Supplemental Indenture”), dated as of April 8, 2005 (the
Original Indenture as amended and supplemented by the First Supplemental Indenture, the
“Indenture”), among the Company, KCS Resources, Inc., a Delaware corporation, Medallion California
Properties Company, a Texas corporation, KCS Energy Services, Inc., a Delaware corporation, and
Proliq, Inc., a New Jersey corporation (collectively, the “Guarantors”), and U.S. Bank National
Association, as Trustee. The Offered Securities are Additional Securities (as defined in the
Indenture) to the $175,000,000 aggregate principal amount of 7 1/8% Senior Notes due 2012 previously
issued and outstanding, and shall constitute a single class therewith under the Indenture.

     The holders of the Offered Securities will be entitled to the benefits of a Registration
Rights Agreement, to be dated as of the Closing Date (as defined below), among the Company, the
Guarantors and the Purchasers (the “Registration Rights Agreement”), pursuant to which the Company
agrees to file a registration statement with the Securities Exchange Commission (the “Commission”)
registering the resale of the Offered Securities under the United States Securities Act of 1933, as
amended (the “Securities Act”).

     The Company and the Guarantors hereby agree with the several Purchasers as follows:

     2. Representations and Warranties of the Company and the Guarantors. The Company and the
Guarantors, jointly and severally, represent and warrant to, and agree with, the several Purchasers
that:

     (a) A preliminary offering circular and an offering circular relating to the
Offered Securities to be offered by the Purchasers have been prepared by the Company. Such
preliminary offering circular and offering circular (the “Offering Circular”), as
supplemented as of the date of this Agreement, together with any other document incorporated
by reference therein and any other document approved by the Company for use in connection
with the contemplated resale of the Offered Securities are hereinafter collectively referred
to as the “Offering Document.” On the date of this
Agreement, the Offering Document does
not include any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Offering Document based upon
written information furnished to the Company by any Purchaser through Credit Suisse First
Boston LLC (“CSFB”) specifically for use therein, it being understood and agreed that the only such information is that described as such
in Section 7(b) hereof. Except as disclosed in the Offering Document, on the date of this

 

 

Agreement, the Company’s Annual Report on Form 10-K most recently filed with the Commission
and all subsequent reports (collectively, the “Exchange Act Reports”) that have been filed
by the Company with the Commission or sent to stockholders pursuant to the Securities
Exchange Act of 1934 (the “Exchange Act”) do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Such documents, when
they were filed with the Commission, conformed in all material respects to the requirements
of the Exchange Act and the rules and regulations of the Commission thereunder.

     (b) The Company has been duly incorporated and is a validly existing corporation in
good standing under the laws of the State of Delaware, with corporate power and authority to
own or lease and operate its properties and conduct its business as described in the
Offering Document and to enter into and perform its obligations under this Agreement; the
Company is duly qualified to transact business as a foreign corporation and is in good
standing in all other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its subsidiaries taken as a
whole (“Material Adverse Effect”); and, to the Company’s knowledge, no proceeding has been
instituted in any jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or curtail, such power and authority or qualification; and the Company does not own, lease
or license any asset or property or conduct any material business outside of the United
States.

     (c) The entities listed on Schedule B hereto are the only subsidiaries, direct or
indirect, of the Company (the “Subsidiaries”).

     (d) Each Subsidiary has been duly incorporated and is a validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation, with corporate power
and authority to own and lease and operate its properties and conduct its business as
described in the Offering Document and to enter into and perform its obligations under this
Agreement; each Subsidiary is duly qualified to transact business as a foreign corporation
in good standing in all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; and all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly issued and is fully
paid and nonassessable and is owned by the Company, directly or through subsidiaries, free
from liens, encumbrances and defects, except for liens resulting from the Company’s credit
facility and pledges under such credit facility.

     (e) Except for the Registration Rights Agreement, there are no contracts, agreements or
understandings between the Company or any Subsidiary and any person granting such person the
right to require the Company or such Subsidiary to file a registration statement under the
Securities Act with respect to any securities of the Company or such Subsidiary or to
require the Company or such Subsidiary to include such securities with the Offered
Securities and Subsidiary Guarantees registered pursuant to any registration statement.

     (f) The Original Indenture and the First Supplemental Indenture have been duly
authorized by all necessary corporate action; the Offered Securities have been duly
authorized by all necessary corporate action; the Original Indenture has been, and when the
Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date
(as defined in Section 3), the First Supplemental Indenture will have been duly executed and
delivered, such Offered Securities will have been duly executed, authenticated, issued and
delivered and will conform in all material respects to the description thereof contained in
the Offering Document and the Indenture and such Offered Securities will constitute valid
and legally binding obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.

     (g) As of the Closing Date, the Original Indenture has been qualified under, and the
Indenture conforms in all material respects to, the requirements of the United States Trust
Indenture Act of 1939, as amended (the “Trust Indenture Act”), and the rules and regulations
of the Commission applicable to an indenture which is qualified thereunder.

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     (h) On the Closing Date, the Exchange Securities (as defined in the Registration Rights
Agreement) will have been duly authorized by the Company and the Guarantors; and when the
Exchange Securities are issued, executed and authenticated in accordance with the terms of
the Registration Rights Agreement and the Indenture, the Exchange Securities will be
entitled to the benefits of the Indenture and will be the valid and legally binding
obligations of the Company and the Guarantors, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.

     (i) The Subsidiary Guarantee (as defined in the Indenture) to be endorsed on the
Exchange Securities by each Guarantor has been duly authorized by each such Guarantor and,
when issued, will have been duly executed and delivered by each such Guarantor and will
conform to the description thereof contained in the Offering Document; and when the Exchange
Securities have been issued, executed and authenticated in accordance with the terms of the
Registration Rights Agreement and the Indenture, the Subsidiary Guarantee of each Guarantor
endorsed thereon will constitute valid and legally binding obligations of such Guarantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights and to general equity principles.

     (j) There are no contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any Purchaser for a
brokerage commission, finder’s fee or other like payment, other than the fees and
compensation to be paid to the Purchasers in accordance with this Agreement.

     (k) The Registration Rights Agreement has been duly authorized by the Company and each
of the Guarantors and, on the Closing Date, will have been duly executed and delivered by
the Company and each of the Guarantors; when the Registration Rights Agreement has been duly
executed and delivered by the Company and the Guarantors and duly authorized, executed and
delivered by the Purchasers, the Registration Rights Agreement will be a valid and binding
agreement of the Company and each of the Guarantors, enforceable against the Company and
each Guarantor in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights and to general equity principles; and on the Closing Date,
the Registration Rights Agreement will conform in all material respects as to legal matters
to the description thereof in the Offering Circular.

     (l) No consent, approval, authorization, or order of, or filing with, any governmental
agency or body or any court is required for the consummation of the transactions
contemplated by this Agreement or the Registration Rights Agreement in connection with the
issuance and sale of the Offered Securities by the Company except for (i) such
consents as may be required under applicable state securities laws in connection with the
purchase and resale of the Notes by the Purchasers and (ii) such consents, with respect to
the Exchange Securities (including the related Guarantee), as may be required under
applicable state securities laws and the Securities Act, including the order of the
Commission declaring the Exchange Offer Registration Statement or the Shelf Registration
Statement (each as defined in the Registration Rights Agreement) effective.

     (m) Neither the Company nor any of the Subsidiaries is in violation of its respective
charter or by-laws or in default in the performance of any obligation, agreement, covenant
or condition contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and the Subsidiaries, taken as a whole, to
which the Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or their respective property is bound (collectively, “Agreements and
Instruments”), except for such defaults that would not result in a Material Adverse Effect;
the execution, delivery and performance by the Company of its obligations under
the Indenture, this Agreement and the Registration Rights Agreement, and the issuance
and sale of the Offered Securities and compliance with the terms and provisions thereof, do
not and will not, whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to, the Agreements and
Instruments, nor will such action result in any violation of (i) the provisions of the
charter or by-laws of the Company or any of the Subsidiaries or (ii) any applicable law,
statute, rule, regulation, judgment, order, writ or decree of

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any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the Company or any
of the Subsidiaries or any of their assets, properties or operations, which violations, in
the case of clause (ii), would, individually or in the aggregate, either have a Material
Adverse Effect or a material adverse effect on the consummation of the transactions
contemplated herein; and the Company has full power and authority to authorize, issue and
sell the Offered Securities as contemplated by this Agreement. As used herein, “Repayment
Event” means any event or condition that gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness by the
Company or any of the Subsidiaries.

     (n) This Agreement has been duly authorized, executed and delivered by the Company and
each of the Guarantors.

     (o) The Company and the Subsidiaries have good and indefeasible title to all of their
interests in oil and gas properties (other than interests earned under farm-out,
participation or similar agreements in which an assignment or transfer is pending) and all
other real property owned by the Company and the Subsidiaries and good title to all other
properties owned by them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind except such as (i) are
described in the Offering Document, (ii) liens and encumbrances under operating agreements,
unitization and pooling agreements, production sales contracts, farm-out agreements and
other oil and gas exploration participation and production agreements, in each case that
secure payment of amounts not yet due and payable for the performance of other unmatured
obligations and are of a scope and nature customary in the oil and gas industry or arise in
connection with drilling and production operations, or (iii) do not, individually or in the
aggregate, materially affect the value of the affected property and do not interfere with
the use made and proposed to be made of such property by the Company or the Subsidiaries, as
the case may be; all of the leases and subleases of real property that are material to the
business of the Company or any of the Subsidiaries and under which the Company or any of the
Subsidiaries holds properties described in the Offering Document, are in full force and
effect, and neither the Company nor any of the Subsidiaries has received notice of any
material claim of any sort that has been asserted by anyone adverse to the rights of the
Company or any of the Subsidiaries under any of such leases or subleases, or affecting or
questioning the rights of the Company or such Subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.

     (p) The Company and the Subsidiaries possess such permits, licenses, approvals,
consents and other authorizations (collectively, “Governmental Licenses”) issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business in the manner described in the Offering Document, subject to such
qualifications as may be set forth in the Offering Document and except for such Governmental
Licenses which, if not obtained, would not, individually or in the aggregate, have a
Material Adverse Effect; the Company and the Subsidiaries are in compliance with the terms
and conditions of all such Governmental Licenses, subject to such qualifications as may be
set forth in the Offering Document and except for such noncompliance which would not,
individually or in the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, subject to such qualifications as may be
set forth in the Offering Document and except for such Governmental Licenses which, if not
valid and in full force and effect, would not, individually or in the aggregate, have a
Material Adverse Effect; and neither the Company nor any of the Subsidiaries has received
any notice of proceedings relating to the revocation or modification of any such
certificate,
authority or permit that, if determined adversely to the Company or any of the
Subsidiaries, would, individually or in the aggregate, have a Material Adverse Effect.

     (q) No labor dispute with the employees of the Company or any Subsidiary exists or, to
the knowledge of the Company, is imminent that could reasonably be expected to result in a
Material Adverse Effect.

     (r) The Company and the Subsidiaries own or possess, or can acquire on reasonable
terms, adequate trademarks, trade names and other rights to inventions, know-how (including
unpatented and/or unpatentable proprietary or confidential information, systems or
procedures), patents, copyrights, confidential information and other intellectual property
(collectively, “intellectual property rights”) necessary to conduct the business now
operated by them, or presently employed by them, and have not received any notice of
infringement of or

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conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of the Subsidiaries,
would, individually or in the aggregate, have a Material Adverse Effect.

     (s) (i) neither the Company nor any of the Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including, without limitation,
laws and regulations relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum
products (collectively, “Hazardous Materials”) or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, “Environmental Laws”); (ii) the Company and the Subsidiaries have
all permits, authorizations and approvals required under any applicable Environmental Laws
and are each in compliance with their requirements; (iii) to the knowledge of the Company,
there are no pending or threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation, investigation
or proceedings relating to any Environmental Law against the Company or any of the
Subsidiaries; and (iv) there are no events or circumstances that could reasonably be
expected to form the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or affecting the
Company or any of the Subsidiaries relating to Hazardous Materials or any Environmental
Laws, except in the case of clauses (i), (ii), (iii) or (iv) where such violation, failure
to receive required permits, authorizations and approvals or failure to comply with the
requirements of such permits, authorizations and approvals, action or liabilities related to
Hazardous Materials or any Environmental Laws would not, individually or in the aggregate,
have a Material Adverse Effect.

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

     (u) There are no pending actions, suits or proceedings against or affecting the
Company, any of the Subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of the Subsidiaries, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, or that might reasonably be
expected to materially and adversely affect the ability of the Company or any Guarantor to
perform its obligations under the Indenture, this Agreement or the Registration Rights
Agreement, or which are otherwise material in the context of the sale of the Offered
Securities; to the Company’s knowledge, no such actions, suits or proceedings are
threatened or contemplated; and the aggregate of all pending legal or governmental
proceedings to which the Company or any of the Subsidiaries is a party or of which any of
their respective properties or assets is the subject that are not described in the Offering
Document, including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.

     (v) The financial statements included in the Offering Document, together with the
related schedules and notes thereto, present fairly the financial position of the Company
and its consolidated subsidiaries as of the dates shown and their results of operations and
cash flows for the periods shown, and, except as otherwise disclosed in the Offering
Document, such financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States (“GAAP”) applied on a consistent basis
throughout the periods involved.

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     (w) Except as disclosed in the Offering Document dated the date hereof, since the date
of the latest audited financial statements included in the Offering Document, there has been
no material adverse change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business, properties, results of
operations or business prospects of the Company and the Subsidiaries taken as a whole; the
Company and the Subsidiaries have not incurred any liability or obligations, direct or
contingent, nor entered into any transaction, other than those in the ordinary course of
business, which are material with respect to the Company or the Subsidiaries; there has been
no dividend or distribution of any kind declared, paid or made by the Company on any class
of its capital stock; and there has not been any material adverse change in the capital
stock, short-term debt or long term debt of the Company or any of the Subsidiaries.

     (x) The Company is subject to the reporting requirements of either Section 13 or
Section 15(d) of the Exchange Act and files reports with the Commission on the Electronic
Data Gathering, Analysis, and Retrieval (EDGAR) system.

     (y) Neither the Company nor any of the Guarantors is an open-end investment company,
unit investment trust or face-amount certificate company that is, or is required to be,
registered under Section 8 of the United States Investment Company Act of 1940 (the
“Investment Company Act”); and the Company and each of the Guarantors are not and, after
giving effect to the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an “investment company”
as defined in the Investment Company Act.

     (z) Except for the Initial Securities, no securities of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on
any national securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.

     (aa) Neither the Company nor any of the Subsidiaries nor any agent thereof acting on
the behalf of them has taken, and none of them will take, any action that could reasonably
be expected to cause this Agreement or the issuance or sale of the Offered Securities to
violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System.

     (bb) No “nationally recognized statistical rating organization” as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act (i) has imposed (or has informed the
Company or any Guarantor that it is considering imposing) any condition (financial or
otherwise) on the Company’s or any Guarantor’s retaining any rating assigned to the Company
or any Guarantor, any securities of the Company or any Guarantor or (ii) has indicated to
the Company or any Guarantor that it is considering (A) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (B) any change in the outlook for any
rating of the Company, any Guarantor or any securities of the Company or any Guarantor.

     (cc) No form of general solicitation or general advertising (as defined in Regulation D
under the Securities Act) was used by the Company, the Guarantors or any of their respective
representatives (other
than the Purchasers, as to whom the Company and the Guarantors make no representation
or warranty) in connection with the offer and sale of the Offered Securities contemplated
hereby, including, but not limited to, articles, notices or other communications published
in any newspaper, magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general solicitation or general
advertising.

     (dd) The sale of the Offered Securities pursuant to Regulation S under the Securities
Act (“Regulation S”) is not part of a plan or scheme to evade the registration provisions of
the Securities Act.

     (ee) No registration under the Securities Act of the Offered Securities or the
Subsidiary Guarantees is required for the sale of the Offered Securities and the Subsidiary
Guarantees to the Purchasers as contemplated hereby or for the Exempt Resales assuming the
accuracy of the Purchaser’s representations set forth in Section 4 hereof.

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     (ff) Neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf (i) has, within the six-month period prior to the date hereof, offered or sold
in the United States or to any U.S. person (as such terms are defined in Regulation S under
the Securities Act) the Offered Securities or any security of the same class or series as
the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A)
in the United States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S, by means of any directed selling
efforts within the meaning of Rule 902(c) of Regulation S. The Company, its affiliates and
any person acting on its or their behalf (other than the Purchasers, as to whom the Company
and the Guarantors make no representation) have complied and will comply with the offering
restrictions requirement of Regulation S. The Company has not entered and will not enter
into any contractual arrangement with respect to the distribution of the Offered Securities
except for this Agreement.

     (gg) Ernst & Young LLP, which is reporting on the audited financial statements of the
Company included in the Offering Document, are independent public accountants within the
meaning of the Securities Act.

     (hh) There are no contracts or documents that are required to be described in the
Offering Document or the documents incorporated by reference therein or to be filed as
exhibits thereto that have not been so described and filed as required.

     (ii) The statistical and market-related data included or incorporated by reference in
the Offering Document are based on or derived from sources that the Company believes to be
reliable and accurate or represent the Company’s good faith estimates that are made on the
basis of data derived from such sources.

     (jj) All United States federal income tax returns of the Company and the Subsidiaries
required by law to be filed have been filed (or extensions with respect to such tax returns
have been obtained); all taxes shown by such filed tax returns or otherwise assessed, that
are due and payable, have been paid, except those which are being contested in good faith
and as to which adequate reserves have been provided in accordance with generally accepted
accounting principles; the Company has not received any notice from the Internal Revenue
Service that it intends to audit the Company’s federal income tax returns for any year
during the three year period ended December 31, 2004 and no audit proceeding by the Internal
Revenue Service has been conducted during such period; the Company and the Subsidiaries have
filed all other tax returns (or obtained extensions with respect to such tax returns) that
are required to have been filed by them pursuant to applicable foreign, state, local or
other law, and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and the Subsidiaries, except those which are being
contested in good faith and as to which adequate reserves have been provided in accordance
with generally accepted accounting principles; and the charges, accruals and reserves on the
books of the Company in respect of any income and corporation tax liability for any years
not finally determined are adequate in all material respects to meet any assessments or
reassessments for additional income tax for any years not finally determined.

     (kk) The Company and the Subsidiaries carry or are covered by insurance, with
financially sound and reputable insurers, in such amounts and covering such risks as is
generally maintained by companies similar to the Company engaged in the same or similar
business, and all such insurance is in full force and effect.

     (ll) No relationship, direct or indirect, exists between or among any of the Company or
any affiliate of the Company, on the one hand, and any director, officer, stockholder,
customer or supplier of any of them, on the other hand, which is required by the Exchange
Act to be described in the Company’s Annual Report on Form 10-K for the year ended December
31, 2004, which is not so described or is not described as required.

     (mm) The written engineering report audited by Netherland, Sewell & Associates, Inc.,
an oil and gas engineering consulting firm (“NSAI”), dated March 3, 2005, setting forth the
proved reserves attributed to the oil and gas properties of the Company and the Subsidiaries
accurately reflects in all material respects the ownership interests of the Company and the
Subsidiaries in the properties therein as of December 31, 2004, except as otherwise
disclosed in the Offering Document; the information furnished by the Company to NSAI for
purposes of conducting its audit, including, without limitation, production, costs of
operation and

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development, current prices for production, agreements relating to current and
future operations and sales of production, was true, correct and complete in all material
respects on the date supplied and was prepared in accordance with customary industry
practices, as indicated in the letter of NSAI dated March 3, 2005; and NSAI is independent
with respect to the Company.

     (nn) The principal executive officer and principal financial officer of the Company
have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) or any related rules and regulations promulgated by the Commission, and the statements
contained in any such certification are complete and correct; the Company maintains
“disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act),
and such controls and procedures are designed (i) to ensure that material information
required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms and (ii) to ensure that material information
required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management, including its
principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure; the Company does not have any material weaknesses
in internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act), and there has been no fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act); and the
Company is otherwise in compliance in all material respects with all applicable effective
provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated by the
Commission.

     3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations,
warranties and agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not
jointly, to purchase from the Company, at a purchase price of 98.6125% of the principal amount
thereof plus accrued interest from April 1, 2005 to the Closing Date (as defined below), the
respective principal amounts of the Offered Securities set forth opposite the names of the several
Purchasers in Schedule A hereto.

     The Company will deliver against payment of the purchase price the Offered Securities to be
offered and sold by the Purchasers in reliance on Regulation S (the “Regulation S Securities”) in
the form of one or more permanent global Securities in registered form without interest coupons
(the “Regulation S Global Securities”), which will be deposited with the Trustee as custodian for
The Depository Trust Company (“DTC”) and registered in the name of Cede & Co., as nominee for DTC.
The Company will deliver against payment of the purchase price the Offered Securities to be
purchased by each Purchaser hereunder and to be offered and sold by each Purchaser in reliance on
Rule 144A under the Securities Act (the “144A Securities”) in the form of one or more permanent
global securities in definitive form without interest coupons (the “Restricted Global Securities”)
deposited with
the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC.
The Regulation S Global Securities and the Restricted Global Securities shall be assigned separate
CUSIP numbers. The Restricted Global Securities shall include the legend regarding restrictions on
transfer set forth under “Transfer Restrictions” in the Offering Document.

     Payment for the Regulation S Securities and the 144A Securities shall be made by the
Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFB
drawn to the order of the Company at the office of Vinson & Elkins L.L.P. at 9:00 A.M. (New York
time), on April 8, 2005, or at such other time not later than five full business days thereafter as
CSFB and the Company determine, such time being herein referred to as the “Closing Date,” against
delivery to the Trustee as custodian for DTC of (i) the Regulation S Global Securities representing
all of the Regulation S Securities and (ii) the Restricted Global Securities representing all of
the 144A Securities. The Regulation S Global Securities and the Restricted Global Securities will
be made available for checking at the above office of Vinson & Elkins L.L.P. at least 24 hours
prior to the Closing Date.

4. Representations by Purchasers; Resale by Purchasers.

     (a) Each Purchaser severally represents and warrants to the Company that it is an
“accredited investor” within the meaning of Regulation D under the Securities Act.

8

 

     (b) Each Purchaser severally acknowledges that the Offered Securities have not been
registered under the Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S
or pursuant to an exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the Offered
Securities, and will offer and sell the Offered Securities (i) as part of its distribution
at any time and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 or Rule 144A under the
Securities Act (“Rule 144A”). Accordingly, neither such Purchaser nor its affiliates, nor
any persons acting on its or their behalf, have engaged or will engage in any directed
selling efforts with respect to the Offered Securities, and such Purchaser, its affiliates
and all persons acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. Each Purchaser severally agrees that, at
or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to
Rule 144A, such Purchaser will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the Offered Securities from it
during the restricted period a confirmation or notice to substantially the following effect:

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

     Terms used in this subsection (b) have the meanings given to them by Regulation S.

     (c) Each Purchaser severally agrees that it and each of its affiliates have not entered
and will not enter into any contractual arrangement with respect to the distribution of the
Offered Securities except for any such arrangements with the other Purchasers or affiliates
of the other Purchasers with the prior written consent of the Company.

     (d) Each Purchaser severally agrees that it and each of its affiliates will not offer
or sell the Offered Securities in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the Securities
Act, including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio; or (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising. Each Purchaser severally
agrees, with respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such Offered Securities
has been made in reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.

     (e) Each of the Purchasers severally represents and agrees that (i) it has not offered
or sold and prior to the expiry of a period of six months from the Closing Date, will not
offer or sell any Offered Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii)
it has only communicated or caused to be communicated and will only communicate or cause to
be communicated any invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received
by it in connection with the issue or sale of any Offered Securities in circumstances in
which Section 21(1) of the FSMA does not apply to the Company or any of the Guarantors; and
(iii) it has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom.

9

 

     5. Certain Agreements of the Company and the Guarantors. The Company and the Guarantors,
jointly and severally, agree with the several Purchasers that:

     (a) The Company will advise CSFB promptly of any proposal to amend or supplement the
Offering Document and will not effect such amendment or supplementation without CSFB’s
consent. If, at any time prior to the completion of the resale of the Offered Securities by
the Purchasers, any event occurs as a result of which the Offering Document as then amended
or supplemented would include an 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 if it is necessary at any such
time to amend or supplement the Offering Document to comply with any applicable law, the
Company promptly will notify CSFB of such event and promptly will prepare, at its own
expense, an amendment or supplement which will correct such statement or omission or effect
such compliance. Neither CSFB’s consent to, nor the Purchasers’ delivery to offerees or
investors of, any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.

     (b) The Company will furnish to CSFB copies of any preliminary offering circular, the
Offering Document and all amendments and supplements to such documents, in each case as soon
as available and in such quantities as CSFB requests. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish or
cause to be furnished to CSFB and, upon request, to each of the other Purchasers, and, upon
request of holders and prospective purchasers of the Offered Securities, to such holders and
purchasers, copies of the information required to be delivered to holders and prospective
purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The Company will pay the
expenses of printing and distributing to the Purchasers all such documents.

     (c) The Company will arrange for the qualification of the Offered Securities for sale
and the determination of their eligibility for investment under the laws of such
jurisdictions in the United States and Canada as CSFB designates and will continue such
qualifications in effect so long as required for the resale of the Offered Securities by the
Purchasers, provided that the Company will not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such state.

     (d) During the period of two years after the Closing Date, the Company will, upon
request, furnish to CSFB, each of the other Purchasers and any holder of the Offered
Securities a copy of the restrictions on transfer applicable to the Offered Securities.

     (e) During the period of two years after the Closing Date, 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 Offered Securities that have been reacquired by any of them.

     (f) During the period of two years after the Closing Date, the Company will not be or
become, an open-end investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the Investment Company
Act.

     (g) The Company and the Guarantors, jointly and severally, will pay all expenses
incidental to the performance of its obligations under this Agreement, the First
Supplemental Indenture and the Registration Rights Agreement, including (i) the fees and
expenses of the Trustee and its professional advisers; (ii) all expenses in connection with
the execution, issue, authentication, packaging and initial delivery of the Offered
Securities and, as applicable, the Exchange Securities, the preparation and printing of this
Agreement, the Registration Rights Agreement, the Offered Securities, the First Supplemental
Indenture, the Offering Document and amendments and supplements thereto, and any other
document relating to the issuance, offer, sale and delivery of the Offered Securities and,
as applicable, the Exchange Securities; (iii) the cost of listing the Offered Securities and
qualifying the Offered Securities for trading in The PortalSM Market and any
expenses incidental thereto; (iv) the cost of any advertising approved by the Company in
connection with the issue of the Offered Securities; (v) any expenses (including fees and
disbursements of counsel) incurred in connection with qualification of the Offered
Securities or the Exchange Securities for sale under the laws of such jurisdictions in the
United States and Canada as CSFB designates and the printing of memoranda relating

10

 

thereto;
(vi) any fees charged by investment rating agencies for the rating of the Offered Securities
or the Exchange Securities; and (vii) expenses incurred in distributing preliminary offering
circulars and the Offering Document (including any amendments and supplements thereto) to
the Purchasers. The Company and the Guarantors on the one hand and the Purchasers on the
other will each pay half of the travel expenses and any other expenses of the Purchasers and
the Company incurred in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities.

     (h) In connection with the offering, until CSFB has notified the Company and the other
Purchasers of the completion of the resale of the Offered Securities, neither the Company
nor any of its affiliates has or will, either alone or with one or more other persons, bid
for or purchase for any account in which it or any of its affiliates has a beneficial
interest any Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither it nor any of its affiliates will make bids or purchases for the
purpose of creating actual, or apparent, active trading in, or of raising the price of, the
Offered Securities.

     (i) For a period of 90 days after the date of the initial offering of the Offered
Securities by the Purchasers, none of the Company nor any of the Guarantors will offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Commission a registration statement under the Act (other than the Exchange Offer
Registration Statement or the Shelf Registration Statement (each as defined in the
Registration Rights Agreement)) relating to, any United States dollar-denominated debt
securities issued or guaranteed by the Company or any Guarantor and having a maturity of
more than one year from the date of issue; provided that this provision shall not prohibit
the issuance of the Exchange Securities. Neither the Company nor any Guarantor will at any
time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
any securities under circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor
of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered
Securities.

     (j) The Company will use its reasonable best efforts to cause the Offered Securities to
be eligible for The PortalSM Market.

     (k) The Fourth Amendment to the Second Amended and Restated Credit Agreement shall be
in full force and effect.

        6. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers
to purchase and pay for the Offered Securities on the Closing Date will be subject to the accuracy
of the representations and warranties on the part of the Company and each of the Guarantors herein
on the date hereof and the Closing Date, to the accuracy of the statements of officers of the
Company and each of the Guarantors made pursuant to the provisions hereof, to the performance by
the Company and each of the Guarantors of their respective obligations hereunder and to the
following additional conditions precedent:

     (a) The Purchasers shall have received a letter, dated the date of this Agreement, of
Ernst & Young LLP confirming that they are independent public accountants within the meaning
of the Securities Act and the applicable published rules and regulations thereunder (“Rules
and Regulations”) and to the effect that:

     (i) in their opinion, the financial statements examined by them and included in the
Offering Document and in the Exchange Act Reports comply as to form in all material
respects with the applicable accounting requirements of the Securities Act and the
related published Rules and Regulations;

     (ii) on the basis of a reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have responsibility for
financial and accounting matters and other specified procedures, nothing came to their
attention that caused them to believe that:

     (A) at the date of the latest available balance sheet read by such accountants,
or at a subsequent specified date not more than three business days prior to the
date of this Agreement, there was any change in the capital stock or any increase in
short-term indebtedness or long-term debt of the Company and its consolidated
subsidiaries or, at the date of the latest available balance sheet read by such
accountants, there was any decrease in consolidated net current assets or net
assets, as compared

11

 

with amounts shown on the latest balance sheet included or
incorporated by reference in the Offering Document; or

     (B) for the period from the closing date of the latest income statement
included or incorporated by reference in the Offering Document to the closing date
of the latest available income statement read by such accountants there were any
decreases, as compared with the corresponding period of the previous year and with
the period of corresponding length ended the date of the latest income statement
included in the Offering Document, in consolidated net sales, net operating income,
consolidated net income or in the ratio of earnings to fixed charges;

except in all cases set forth in clauses A and B above for changes, increases
or decreases which the Offering Document disclose have occurred or may occur or which
are described in such letter; and

     (iii) they have compared specified dollar amounts (or percentages derived from such
dollar amounts) and other financial information contained in the Offering Document and
the Exchange Act Reports (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the general accounting
records of the Company and the Subsidiaries subject to the internal controls of the
Company’s accounting system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to be in agreement with such
results, except as otherwise specified in such letter.

     (b) Subsequent to the execution and delivery of this Agreement, there shall not have
occurred (i) any change, or any development or event involving a prospective change, in the
condition (financial or other), business, properties or results of operations of the Company
and the Subsidiaries taken as one enterprise which, in the judgment of a majority in
interest of the Purchasers, including CSFB, is material and adverse and makes it impractical
or inadvisable to proceed with completion of the offering or the sale of and payment for the
Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company
by any “nationally recognized statistical rating organization” (as defined for purposes of
Rule 436(g) under the Securities Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt securities of the
Company (other than an announcement with positive implications of a possible upgrading, and
no implication of a possible downgrading, of such rating) or any announcement that the
Company has been placed on negative outlook; (iii) any change in U.S. or international
financial, political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of a majority in interest of the Purchasers, including CSFB, be
likely to prejudice materially the success of the proposed issue, sale or distribution of
the Offered Securities, whether in the primary market or in respect of dealings in the
secondary market; (iv) any material suspension or material limitation of trading in
securities generally on the New York Stock Exchange or any setting of minimum prices for
trading on such exchange, or any suspension of trading of any securities of the Company on
any exchange or in the over-the-counter market; (v) any banking moratorium declared by U.S.
Federal or New York authorities; (vi) any major disruption of settlements of securities or
clearance services in the United States; or (vii) any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any declaration of war by
Congress or any other national or international calamity or emergency if, in the judgment of
a majority in interest of the Purchasers, including CSFB, the effect of any such attack,
outbreak, escalation, act, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and payment for the
Offered Securities.

     (c) The Purchasers shall have received an opinion, dated the Closing Date, of Andrews
Kurth LLP, counsel for the Company, that:

     (i) The Company is validly existing as a corporation in good standing under the
laws of the State of Delaware.

     (ii) The Company has the corporate power and authority to own or lease and operate
its properties and to conduct its business, in each case as described in the Offering
Circular.

     (iii) Each of KCS Resources, Inc., Medallion California Properties Company and KCS
Energy Services, Inc. is a validly existing corporation in good standing under the laws
of the jurisdiction of its

12

 

incorporation, with the corporate power and authority to own
or lease and operate its properties and to conduct its business in each case as
described in the Offering Circular; and all of the issued and outstanding capital stock
of each of KCS Resources, Inc., Medallion California Properties Company and KCS Energy
Services, Inc. has been duly authorized and validly issued and is owned of record and,
to such counsel’s knowledge, beneficially by the Company, directly or through
subsidiaries.

     (iv) Each of this Agreement, the Original Indenture and the First Supplemental
Indenture and the Registration Rights Agreement has been duly authorized, executed and
delivered by the Company, KCS Resources, Inc., Medallion California Properties Company
and KCS Energy Services, Inc.; and, to the extent such matters are governed by the
Applicable Laws (as defined in such counsel’s opinion) of the State of New York, each of
this Agreement, the Original Indenture and the First Supplemental Indenture and the
Registration Rights Agreement has been duly executed and delivered by Proliq, Inc.

     (v) The issuance and sale of the Offered Securities has been duly authorized by the
Company; the Subsidiary Guarantee to be endorsed on the Offered Securities has been duly
authorized, executed and delivered on behalf of each of KCS Resources, Inc., Medallion
California Properties Company and KCS Energy Services, Inc.; to the extent such matters
are governed by the Applicable Laws of the State of New York, the Subsidiary Guarantee
has been duly executed and delivered on behalf of Proliq, Inc.; the Exchange Securities
have been duly authorized by the Company; and the Subsidiary Guarantee to be endorsed on
the Exchange Securities (the “Exchange Notes Guarantee”) has been duly authorized by
each of KCS Resources, Inc., Medallion California Properties Company and KCS Energy
Services, Inc.

     (vi) Under the Applicable Laws of the State of New York, the Indenture (as defined
in the Purchase Agreement) constitutes a valid and legally binding obligation of the
Company and the Guarantors, enforceable against each of them in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting creditors’
rights and to general equity principles.

     (vii) The Indenture conforms in all material respects to the requirements of the
Trust Indenture Act and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.

     (viii) Under the Applicable Laws of the State of New York, the Registration Rights
Agreement constitutes a valid and legally binding obligation of the Company and the
Guarantors, enforceable against each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights and to general
equity principles.

     (ix) Under the Applicable Laws of the State of New York, when validly issued by the
Company and authenticated by the Trustee in the manner provided in the Indenture and
delivered to and paid for by the Purchasers in accordance with this Agreement, the
Offered Securities will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity principles; and, under the Applicable
Laws of the State of New York, when the Offered Securities have been validly issued by
the Company and authenticated by the Trustee in the manner provided in the Indenture and
delivered to and paid for by the Purchasers in accordance with this Agreement and when
the Subsidiary Guarantee has been duly executed and delivered by the Guarantors, the
Subsidiary Guarantee will constitute a valid and binding obligation of each of the
Guarantors, enforceable against each of the Guarantors in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights and to
general equity principles.

     (x) Under the Applicable Laws of the State of New York, when validly issued by the
Company and authenticated by the Trustee in the manner provided in the Indenture and
delivered in exchange for the Offered Securities pursuant to the exchange offer
contemplated by the Registration Rights Agreement,

13

 

the Exchange Securities will
constitute valid and binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights and to general
equity principles; and, under the Applicable Laws of the State of New York, when the
Exchange Securities have been validly issued by the Company and authenticated by the
Trustee in the manner provided in the Indenture and delivered in exchange for the
Offered Securities pursuant to the exchange offer contemplated by the Registration
Rights Agreement and when the Exchange Notes Guarantee has been duly executed and
delivered by the Guarantors, the Exchange Notes Guarantee will constitute a valid and
binding obligation of each of the Guarantors, enforceable against each of the Guarantors
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity principles.

     (xi) To such counsel’s knowledge, neither the Company nor KCS Resources, Inc.,
Medallion California Properties Company or KCS Energy Services, Inc. is in violation of
its charter or by-laws.

     (xii) None of (i) the execution and delivery on behalf of, or the incurrence or
performance by the Company, KCS Resources, Inc., Medallion California Properties Company
or KCS Energy Services, Inc. of their respective obligations under, each of the
Transaction Agreements (as defined in such counsel’s opinion), each in accordance with
its terms, (ii) the offering, issuance, sale and delivery of
the Offered Securities pursuant to this Agreement, (iii) the issuance of the
Offered Notes Guarantee, (iv) the offering, issuance, exchange and delivery of the
Exchange Securities pursuant to the exchange offer contemplated by the Registration
Rights Agreement in the manner therein contemplated or (v) the issuance of the Exchange
Notes Guarantee at such time as the Exchange Securities are issued pursuant to the
exchange offer contemplated by the Registration Rights Agreement in the manner therein
contemplated (A) constituted, constitutes or will constitute a violation of the
organizational documents of the Company, KCS Resources, Inc., Medallion California
Properties Company or KCS Energy Services, Inc., (B) constituted, constitutes or will
constitute a breach or violation of, or a default (or an event which, with notice or
lapse of time or both, would constitute such a default), under any Applicable Contract
(as defined in such counsel’s opinion), (C) resulted, results or will result in the
creation of any security interest in, or lien upon, any of the property or assets of the
Company, KCS Resources, Inc., Medallion California Properties Company or KCS Energy
Services, Inc. pursuant to any Applicable Contract, or (D) resulted, results or will
result in any violation of (i) the Applicable Laws of the State of Texas, (ii) the
Applicable Laws of the State of New York, (iii) the Applicable Laws of the United States
of America, (iv) Regulations T, U and X of the Federal Reserve Board, or (v) the General
Corporation Law of the State of Delaware. Such counsel need not express any opinion,
however, as to whether the execution, delivery or performance by the Company or the
Guarantors of the Transaction Agreements will constitute a breach or violation of, or a
default under or as a result of, any covenant, restriction or provision with respect to
any financial ratio or test or any aspect of the financial condition or results of
operations of the Company or the Guarantors. Such counsel calls to your attention that
certain of the Applicable Contracts are governed by laws other than those as to which
such counsel expresses an opinion; such counsel expresses no opinion as to the effect of
such other laws on the opinions herein stated.

     (xiii) The statements in the Offering Circular under the captions “Description of
the Notes” and “Material U.S. Federal Income Tax Considerations,” insofar as they
constitute descriptions of contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, fairly summarize the matters referred to therein
in all material respects, subject to the qualifications and assumptions stated therein.

     (xiv) No Governmental Approval (as defined in such counsel’s opinion), which has
not been obtained or taken and is not in full force and effect, is required to
authorize, or is required for, the execution and delivery by the Company, KCS Resources,
Inc., Medallion California Properties Company and KCS Energy Services, Inc. of each of
the Transaction Agreements, or the incurrence or performance of their respective
obligations thereunder, or the enforceability of any of such Transaction Agreements
against the Company or the Guarantors on the date hereof, except such as may be required

14

 

under state securities laws and except for the order of the Commission declaring the
Exchange Offer Registration Statement or the Shelf Registration Statement (as each such
term is defined in the Registration Rights Agreement) effective as to which and to the
extent we express our opinion in clause (xv) below.

     (xv) Assuming (i) the accuracy of the representations and warranties of the Company
set forth in paragraphs (z), (cc), (dd) and (ff) of Section 2 of this Agreement, (ii)
the due performance by the Company and the Purchasers of the covenants and agreements
set forth in this Agreement, (iii) the compliance by the Purchasers with the offering
and transfer procedures and the restrictions described in the Offering Circular, (iv)
the accuracy of the representations and warranties of the Purchasers set forth in
Section 4 of this Agreement, and (v) the accuracy of the representations and warranties
made or deemed to be made in accordance with the section in the Offering Circular
captioned “’Transfer Restrictions”, the offer, issue, sale and delivery of the Offered
Securities, as guaranteed by the Guarantors, to the Purchasers and the initial resale of
the Offered Securities, as guaranteed by the Guarantors, by the Purchasers, each in the
manner contemplated by this Agreement and the Offering Circular, do not require
registration under the Securities Act; provided, however, that we express no opinion as
to any subsequent resale of any Offered Security or any Exchange Note.

     (xvi) The Company is not and, after giving effect to the offering and sale of the
Offered Securities and the application of the proceeds thereof as described in the
Offering Document, will not be an “investment company” as such terms are defined in the
Investment Company Act.

     (xvii) The Original Indenture has been duly qualified under the Trust Indenture Act
of 1939, as amended, and the rules and regulations thereunder.

     In addition, such counsel shall state they have participated in conferences with
officers and other representatives of the Company and the Guarantors and the independent
public accountants for the Company and the Guarantors, our representatives and our counsel
at which the contents of the Offering Circular and related matters were discussed and,
although such counsel has not independently verified and are not passing upon, and do not
assume any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Circular (except and to the extent set forth in clause (xiii)
above), on the basis of the foregoing (relying with respect to factual matters to the extent
such counsel deem appropriate upon statements by officers and other representatives of the
Company and the Guarantors), no facts have come to such counsel’s attention that have led
such counsel to believe that the Offering Circular, as of its date and as of the date
hereof, contained or contains an untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, it being
understood that such counsel shall express no statement or belief with respect to (a) the
financial statements and related schedules included therein, including the notes and the
auditor’s report thereon, or excluded therefrom, and (b) other financial, accounting or oil
and gas reserve data, in each case, included in the Offering Circular or excluded therefrom.

     In rendering its opinion pursuant to this Section 6(c), such counsel may rely, as to
all matters governed by the laws of jurisdictions other than the law of the State of New
York, the federal law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Purchasers. Such counsel may
also state that, insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its Subsidiaries
and certificates of public officials.

     (d) The Purchasers shall have received from Vinson & Elkins L.L.P., counsel for the
Purchasers, such opinion or opinions, dated the Closing Date, with respect to the
incorporation of the Company, the validity of the Offered Securities, the Offering Circular,
the exemption from registration for the offer and sale of the Offered Securities by the
Company to the several Purchasers and the resales by the several Purchasers as contemplated
hereby and other related matters as CSFB may require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling them to pass upon
such matters.

     (e) The Purchasers shall have received a certificate, dated the Closing Date, of the
principal executive officer and a principal financial or accounting officer of the Company
in which such officers, to the best of

15

 

their knowledge after reasonable investigation, state
that the representations and warranties of the Company and each of the Guarantors in this
Agreement are true and correct, that the Company and each of the Guarantors have complied
with all agreements and satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date, and that, subsequent to the date of the most
recent financial statements in the Offering Document there has been no material adverse
change, nor any development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations of the Company
and the Subsidiaries taken as a whole except as set forth in the Offering Document or as
described in such certificate.

     (f) The Purchasers shall have received a letter, dated the Closing Date, of Ernst &
Young LLP that meets the requirements of subsection (a) of this Section 6, except that the
specified date referred to in such subsection will be a date not more than three days prior
to the Closing Date for the purposes of this subsection.

     (g) The Purchasers shall have received a letter, dated the Closing Date, of NSAI, in
form and substance satisfactory to the Purchasers, with respect to the reserve information
included in the Offering Circular.

     (h) The Company and the Guarantors shall have executed and delivered to the Purchasers
the Registration Rights Agreement.

        The Company will furnish the Purchasers with such conformed copies of such opinions,
certificates, letters and documents as the Purchasers reasonably request. CSFB may in its sole
discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of
the Purchasers hereunder.

        7. Indemnification and Contribution.

     (a) The Company and each of the Guarantors, jointly and severally, will indemnify and
hold harmless each Purchaser, its partners, directors and officers and each person, if any,
who controls such Purchaser within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such Purchaser may
become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact contained
in the Offering Document, or any amendment or supplement thereto, or any related preliminary
offering circular or the Exchange Act Reports, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Company’s or such Guarantor’s failure to perform its
obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any
legal or other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company and each Guarantor will not be
liable in any such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through CSFB specifically for use
therein, it being understood and agreed that the only such information consists of the
information described as such in subsection (b) below; provided, further, however, that the
foregoing indemnity agreement with respect to losses, claims, damages or liabilities shall
not inure to the benefit of any Purchaser (or any person controlling any Purchaser) with
respect to any losses, claims, damages arising out of or based upon (i) any untrue statement
or alleged untrue statement of any material fact in the preliminary offering circular or
(ii) the omission or alleged omission to state in the preliminary offering circular a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, if: (A) the Company furnished
sufficient copies of the Offering Circular on a timely basis to permit delivery of the
Offering Circular to all persons purchasing notes from the Purchasers in the initial resale
of such notes (such persons “Initial Resale Purchasers”) at or prior to the written
confirmation of the sale of the Offered Securities to such person; (B) the Initial Resale
Purchaser asserting such losses, claims, damages or liabilities purchased Offered Securities
in the initial resale from the Purchasers and a copy of the Offering Circular (but excluding
the documents incorporated therein by reference) was not sent or given by or on behalf of
such Purchaser to such Initial Resale Purchaser; and (C) the Offering Circular would have
cured the defect giving rise to such losses, claims, damages or liabilities.

16

 

     (b) Each Purchaser will severally and not jointly indemnify and hold harmless the
Company and each Guarantor, their directors and officers and each person, if any, who
controls the Company or such Guarantor within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities to which the Company or such
Guarantor may become subject, under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement thereto, or any
related preliminary offering circular, or arise out of or are based upon the omission or the
alleged omission to
state therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such Purchaser
through CSFB specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchaser consists of the sixth
paragraph and the tenth paragraph under the caption “Plan of Distribution”; provided,
however, that the Purchasers shall not be liable for any losses, claims, damages or
liabilities arising out of or based upon the Company’s or such Guarantor’s failure to
perform its obligations under Section 5(a) of this Agreement.

     (c) Promptly after receipt by an indemnified party under this Section 7 of notice of
the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof, but the failure to notify the indemnifying
party shall not relieve it from any liability that it may have under subsection (a) or (b)
above except to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the failure to
notify the indemnifying party shall not relieve it from any liability that it may have to an
indemnified party otherwise than under subsection (a) or (b) above. In case any such action
is brought against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes (i) an
unconditional release of such indemnified party from all liability on any claims that are
the subject matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or failure to act by or on behalf of any indemnified party.

     (d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then
each indemnifying party shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in subsection
(a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Guarantors on the one hand and the Purchasers on the other
from the offering of the Offered Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Guarantors on the one hand and the Purchasers on the other in
connection with the statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors on the one hand and the Purchasers on
the other shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the Guarantors bear to the
total discounts and commissions received by the Purchasers from the Company and the
Guarantors under this Agreement. The relative fault 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

17

 

relates to information supplied by the
Company and the Guarantors or the Purchasers and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to
include any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall
be required to contribute any amount in excess of the amount by which the total discounts,
fees and commissions received by such Purchaser exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Purchasers’ obligations in this subsection
(d) to contribute are several in proportion to their respective purchase obligations and not
joint.

     (e) The obligations of the Company and the Guarantors under this Section 7 shall be in
addition to any liability which the Company and the Guarantors may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls any
Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations
of the Purchasers under this Section 7 shall be in addition to any liability which the
several Purchasers may otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls the Company or any Guarantor within the meaning of the
Securities Act or the Exchange Act.

        8. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to
purchase the Offered Securities hereunder on the Closing Date and the aggregate principal amount of
the Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase
does not exceed 10% of the total principal amount of the Offered Securities, CSFB may make
arrangements satisfactory to the Company for the purchase of such Offered Securities by other
persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date,
the non-defaulting Purchasers shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed
but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal
amount of the Offered Securities with respect to which such default or defaults occur exceeds 10%
of the total principal amount of the Offered Securities and arrangements satisfactory to CSFB and
the Company for the purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the part of any
non-defaulting Purchaser or the Company or any of the Guarantors, except as provided in Section 9.
As used in this Agreement, the term “Purchaser” includes any person substituted for a Purchaser
under this Section 8. Nothing herein will relieve a defaulting Purchaser from liability for its
default.

        9. Survival of Certain Representations and Obligations. The respective indemnities,
agreements, representations, warranties and other statements of the Company and the Guarantors or
their respective officers and of the several Purchasers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation, or statement as to
the results thereof, made by or on behalf of any Purchaser, the Company, the Guarantors or any of
their respective representatives, officers or directors or any controlling person, and will survive
delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to
Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Company and each of the Guarantors shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and
the Purchasers pursuant to Section 7 shall remain in effect. If the purchase of the Offered
Securities by the Purchasers is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in
clause (iii), (iv), (v), (vi) or (vii) of Section 6(b), the Company will reimburse the Purchasers
for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities.

        10. Notices. All communications hereunder will be in writing and, if sent to the Purchasers
will be mailed, delivered or faxed and confirmed to the Purchasers c/o Credit Suisse First Boston
LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory Group (Fax:
212-325-8016), or, if sent to the Company, will be mailed, delivered or faxed and confirmed to it
at 5555 San Felipe, Suite 1200, Houston, TX 77056, Attention: Secretary (Fax: 713-877-1372);
provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered
or faxed and confirmed to such Purchaser.

18

 

          11. Successors. This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors and the controlling persons referred to in Section 7, and no
other person will have any
right or obligation hereunder, except that holders of the Offered Securities shall be entitled
to enforce the agreements for their benefit contained in the second and third sentences of Section
5(b) hereof against the Company as if such holders were parties hereto.

          12. Representation of Purchasers. You will act for the several Purchasers in connection with
this purchase, and any action under this Agreement taken by you jointly or by CSFB will be binding
upon all the Purchasers.

          13. Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts shall together constitute one and the
same Agreement.

          14. Applicable Law. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to principles of conflicts of laws.

          The Company and each Guarantor hereby submit to the non-exclusive jurisdiction of the Federal
and 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.

19

 

          If the foregoing is in accordance with the Purchasers’ understanding of our agreement, kindly
sign and return to the Company one of the counterparts hereof, whereupon it will become a binding
agreement among the Company, the Guarantors and the several Purchasers in accordance with its
terms.

	 	 	 	 	 
	 	Very truly yours,

KCS Energy, Inc.

 	 
	 	By:  	     /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	KCS Resources, Inc.

 	 
	 	By:  	     /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	Medallion California Properties Company

 	 
	 	By:  	/s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	KCS Energy Services, Inc.

 	 
	 	By:  	/s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	Proliq, Inc.

 	 
	 	By:  	/s/ Frederick Dwyer
 	 
	 	 	Name:  	Frederick Dwyer 	 
	 	 	Title:  	Vice President 	 

Signature Page to the Purchase Agreement

 

 

The foregoing Purchase Agreement

is hereby confirmed and accepted

as of the date first above written.

Credit Suisse First Boston LLC

J.P. Morgan Securities Inc.

Harris Nesbitt Corp.

BNP Paribas Securities Corp.

Greenwich Capital Markets, Inc.

Acting on behalf of themselves

and as the Representatives of

the several Purchasers

By: Credit Suisse First Boston LLC

	 	 	 	 	 	 	 
	

	 	By:
	 	     /s/ Damon Barber	 	 
	

	 	 	 	

	 	 
	

	 	 	 	Name: Damon Barber	 	 
	

	 	 	 	Title: Director	 	 

Signature Page to the Purchase Agreement

 

 

SCHEDULE A

	 	 	 	 	 
	 	 	Principal Amount of	 
	Purchasers	 	Offered Securities	 
	Credit Suisse First Boston LLC
	 	$	50,000,000	 
	 
	 	 	 	 
	J.P. Morgan Securities Inc
	 	 	15,000,000	 
	 
	 	 	 	 
	Harris Nesbitt Corp
	 	 	15,000,000	 
	 
	 	 	 	 
	BNP Paribas Securities Corp
	 	 	10,000,000	 
	 
	 	 	 	 
	Greenwich Capital Markets, Inc
	 	 	10,000,000	 
	 
	 	 	 
	 
	 	 	 	 
	Total
	 	$	100,000,000	 
	 
	 	 	 

Schedule A

 

 

SCHEDULE B

KCS Resources Inc., a Delaware corporation

Medallion California Properties Company, a Texas corporation

KCS Energy Services, Inc., a Delaware corporation

Proliq, Inc., a New Jersey corporation

Schedule Bexv10w2

 

EXHIBIT 10.2

$100,000,000

KCS ENERGY, INC.

7 1/8% SENIOR NOTES DUE 2012

REGISTRATION RIGHTS AGREEMENT

April 8, 2005

	 	 	 
	Credit Suisse First Boston LLC
	J.P. Morgan Securities Inc.
	Harris Nesbitt Corp.
	BNP Paribas Securities Corp.
	Greenwich Capital Markets, Inc.
	c/o:

	 	Credit Suisse First Boston LLC
	

	 	Eleven Madison Avenue
	

	 	New York, New York 10010-3629

Dear Sirs:

     KCS Energy, Inc., a Delaware corporation (the “Issuer”), proposes to issue and sell to Credit
Suisse First Boston LLC, J.P. Morgan Securities Inc., Harris Nesbitt Corp., BNP Paribas Securities
Corp. and Greenwich Capital Markets, Inc. (collectively, the “Initial Purchasers”), upon the terms
set forth in a purchase agreement dated April 5, 2005 (the “Purchase Agreement”), $100,000,000
aggregate principal amount of its 7 1/8% Senior Notes due 2012 (the “Initial Securities”) to be
unconditionally guaranteed (the “Guarantees”) by certain of the Issuer’s subsidiaries who are
signatories hereto as guarantors (collectively, the “Guarantors” and together with the Issuer, the
“Company”). The Initial Securities will be issued as additional securities pursuant to an
Indenture, dated as of April 1, 2004, as amended by the First Supplemental Indenture thereto dated
as of April 8, 2005 (as so amended, the “Indenture”), among the Issuer, the Guarantors named
therein and U.S. Bank National Association (the “Trustee”). The Initial Securities are Additional
Securities (as defined in the Indenture) to the $175,000,000
aggregate principal amount of 7 1/8%
Senior Notes due 2012 previously issued and outstanding, and shall constitute a single class
therewith under the Indenture. As an inducement to the Initial Purchasers, the Company agrees with
the Initial Purchasers, for the benefit of the Initial Purchasers and the holders of the Initial
Securities (including, without limitation, the Initial Purchasers), the Exchange Securities (as
defined below) and the Private Exchange Securities (as defined below) (collectively, the “Holder”
or “Holders”), as follows:

     1. Registered Exchange Offer. The Company shall, at its own cost, prepare and, not later than
90 days after (or if the 90th day is not a business day, the first business day thereafter) the
date of original issue of the Initial Securities (the “Issue Date”), file with the Securities and
Exchange Commission (the “Commission”) a registration statement (the “Exchange Offer Registration
Statement”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities
Act”), with respect to a proposed offer (the “Registered Exchange Offer”) to the Holders of
Transfer Restricted Securities (as defined in Section 6(d) hereof), who are not prohibited by any
law or policy of the Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount
of debt securities (the “Exchange Securities”) of the Company issued under the Indenture and
identical in all material respects to the Initial Securities (except for the transfer restrictions
relating to the Initial Securities and the provisions relating to the matters described in Section
6(d) hereof) that would be registered under the Securities Act. The Company shall use its
reasonable best efforts to cause such Exchange Offer Registration Statement to become effective
under the Securities Act within 180 days (or if the 180th day is not a business day, the first
business day thereafter) after the Issue Date and shall keep the Registered Exchange Offer open for
not less than 20 business days (or longer, if required by applicable law) after the date notice of
the Registered Exchange Offer is mailed to the Holders (such period being called the “Exchange
Offer Registration Period”).

     If the Company commences the Registered Exchange Offer, the Company will be entitled to close
the Registered Exchange Offer 30 days after the commencement thereof provided that the Company has
accepted all the

 

 

Initial Securities theretofore validly tendered, and not withdrawn, in accordance
with the terms of the Registered Exchange Offer.

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

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

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

     If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial
Securities acquired by it as part of its initial distribution, the Company, simultaneously with the
delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and
deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange
(the “Private Exchange”) for the Initial Securities held by such Initial Purchaser, a like
principal amount of debt securities of the Company issued under the Indenture and identical in all
material respects (including the existence of restrictions on transfer under the Securities Act and
the securities laws of the several states of the United States, but excluding provisions relating
to the matters described in Section 6 hereof) to the Initial Securities (the “Private Exchange
Securities”). The Initial Securities, the Exchange Securities and the Private Exchange Securities
are herein collectively called the “Securities.”

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

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

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

2

 

     (c) utilize the services of a depositary for the Registered Exchange Offer with an
address in the Borough of Manhattan, The City of New York, which may be the Trustee or an
affiliate of the Trustee;

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

     (e) otherwise comply with all applicable laws.

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

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

     (y) deliver to the Trustee for cancellation all the Initial Securities so accepted for
exchange; and

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

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

     Interest on each Exchange Security and Private Exchange Security issued pursuant to the
Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment
date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if
no interest has been paid on the Initial Securities, from April 1, 2005.

     Each Holder participating in the Registered Exchange Offer shall be required to represent to
the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange
Securities received by such Holder will be acquired in the ordinary course of its business, (ii)
such Holder has no arrangements or understanding with any person to participate in the distribution
of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such
Holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Company or if it
is an affiliate, such Holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it
is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities
and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own
account in exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.

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

     2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations
thereof by the staff of the Commission, the Company is not permitted to effect a Registered
Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated within 220 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following consummation of

3

 

the
Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to
participate in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive
freely tradeable Exchange Securities on the date of the exchange, the Company shall take the
following actions:

     (a) The Company shall, at its cost, as promptly as practicable (but in no event more
than 30 days after so required or requested pursuant to this Section 2) file with the
Commission and thereafter shall use its reasonable best efforts to cause to be declared
effective a registration statement (the “Shelf Registration Statement” and, together with
the Exchange Offer Registration Statement, a “Registration Statement”) on an appropriate
form under the Securities Act relating to the offer and sale of the Transfer Restricted
Securities by the Holders thereof from time to time in accordance with the methods of
distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities
Act (hereinafter, the “Shelf Registration”) on or prior to the 180th day following the Issue
Date in the case of clause (i) above and on or prior to the 90th day after the date on which
the Shelf Registration Statement is required to be filed in the case of clauses (ii), (iii)
and (iv) above; provided, however, that no Holder (other than an Initial Purchaser) shall be
entitled to have the Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions of this Agreement
applicable to such Holder.

     (b) The Company shall use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective, in order to permit the prospectus included therein to be
lawfully delivered by the Holders of the relevant Securities, for a period of two years (or
for such longer period if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the Securities covered by
the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer
restricted securities (as defined in Rule 144 under the Securities Act, or any successor
rule thereof) (the “Shelf Registration Period”). The Company shall be deemed not to have
used its reasonable best efforts to keep the Shelf Registration Statement effective during
the Shelf Registration Period if it voluntarily takes any action that would result in
Holders of Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action is required by applicable law.

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

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

     (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each amendment thereof
and each supplement, if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf Registration
Statement, the Company shall use its reasonable best efforts to reflect in
each such document, when so filed with the Commission, such comments as such Initial
Purchaser reasonably may propose; (ii) include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section
and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan
of Distribution” section of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an
Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K
under the Securities Act, as applicable, in the

4

 

prospectus forming a part of the Exchange
Offer Registration Statement; (iv) include within the prospectus contained in the Exchange
Offer Registration Statement a section entitled “Plan of Distribution,” reasonably
acceptable to the Initial Purchasers, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with respect to the
potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of
Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a
“Participating Broker-Dealer”), whether such positions or policies have been publicly
disseminated by the staff of the Commission or such positions or policies, in the reasonable
judgment of the Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the Commission; and (v) in the case
of a Shelf Registration Statement, include the names of the Holders, who propose to sell
Securities pursuant to the Shelf Registration Statement, as selling securityholders;
provided, however, that each such Holder shall have furnished to the Company on a timely
basis such information regarding the Holder as the Company may require pursuant to Section
3(n) hereof.

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

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

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

     (iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings for
that purpose;

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

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

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

     (d) The Company shall furnish to each Holder of Securities included within the coverage
of the Shelf Registration, without charge, at least one copy of the Shelf Registration
Statement and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).

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

     (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of
Securities included within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus

5

 

(including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement, to the use of
the prospectus or any amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities covered by the
prospectus, or any amendment or supplement thereto, included in the Shelf Registration
Statement.

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

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

     (i) The Company shall cooperate with the Holders of the Securities to facilitate the
timely preparation and delivery of certificates representing the Securities to be sold
pursuant to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request a reasonable period of
time prior to sales of the Securities pursuant to such Registration Statement.

     (j) Upon the occurrence of any event contemplated by clauses (ii) through (v) of
Section 3(b) above during the period for which the Company is required to maintain an
effective Registration Statement, the Company shall promptly prepare and file a
post-effective amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter delivered to Holders of
the Securities or purchasers of Securities, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Company notifies the Initial Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer in accordance with
clauses (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until
the requisite changes to the prospectus have been made, then the Initial Purchasers, the
Holders of the Securities and any such Participating Broker-Dealers shall suspend use of
such prospectus, and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration Statement provided
for in Section 1 above shall each be extended by the number of days from and including the
date of the giving of such notice to and including the date when
the Initial Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this
Section 3(j) or the Company shall have notified such Holders that disposition of such
Transfer Restricted Securities may resume under the existing prospectus.

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

6

 

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

     (m) The Company shall maintain the Indenture’s qualification under the Trust Indenture
Act of 1939, as amended. In the event the maintenance of such qualification would require
the appointment of a new trustee under the Indenture, the Company shall appoint a new
trustee thereunder pursuant to the applicable provisions of the Indenture.

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

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

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

     (q) In the case of any Shelf Registration, the Company, if requested by any Holder of
the Securities covered thereby, shall cause (i) its counsel to deliver an opinion and
updates thereof relating to the Securities in customary form addressed to such Holders and
the managing underwriters, if any, thereof and dated, in the case of the initial opinion,
the effective date of such Shelf Registration Statement (it being agreed that the matters to
be covered by such opinion shall include, without limitation, the due incorporation and good
standing of the Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due authorization, execution
and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the
due authorization, execution, authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence of material legal or governmental
proceedings involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration Statement, the
offering and sale of the applicable Securities, or any agreement of the type referred to in
Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with the requirements of
the Securities Act and the Trust Indenture

7

 

Act, respectively; and, as of the date of the
opinion and as of the effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading (in the case of any such
documents, in the light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act)); (ii) its officers to execute and deliver
all customary documents and certificates and updates thereof requested by any underwriters
of the applicable Securities and (iii) its independent public accountants to provide to the
selling Holders of the applicable Securities and any underwriter therefor a comfort letter
in customary form and covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing Standards No.
72.

     (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser
or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver
to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form
set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in
connection with the preparation of a Registration Statement and (ii) its independent public
accountants to deliver to such Initial Purchaser or such Participating Broker-Dealer a
comfort letter, in customary form, meeting the requirements as to the substance thereof as
set forth in Section 6(a) and (f) of the Purchase Agreement, with appropriate date changes.

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

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

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

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

8

 

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

     5. Indemnification.

     (a) The Company and each of the Guarantors, jointly and severally, agree to indemnify
and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer within the
meaning of the Securities Act or the Exchange Act (each Holder, any Participating
Broker-Dealer and such controlling persons are referred to collectively as the “Indemnified
Parties”) from and against any losses, claims, damages or liabilities, joint or several, or
any actions in respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material fact contained
in a Registration Statement or prospectus or in any amendment or supplement thereto or in
any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and shall
reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Company and each
Guarantor will not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a Shelf
Registration in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or alleged
untrue statement or omission of a material fact made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the
person asserting any such losses, claims, damages or liabilities purchased the Securities
concerned, to the extent that a prospectus relating to such Securities was required to be
delivered by such Holder or Participating Broker-Dealer under the Securities Act in
connection with such purchase and any such loss, claim, damage or liability of such Holder
or Participating Broker-Dealer results from the fact
that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the final prospectus
if the Company had previously furnished sufficient copies thereof to such Holder or
Participating Broker-Dealer to permit delivery of the final prospectus on a timely basis by
such Holder or Participating Broker-Dealer; provided further, however, that this indemnity
agreement will be in addition to any liability which the Company and each of the Guarantors
may otherwise have to such Indemnified Party. The Company and each of the Guarantors,
jointly and severally, shall also indemnify underwriters, their officers and directors and
each person who controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the indemnification of the
Holders of the Securities if requested by such Holders.

     (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold
harmless the Company and each Guarantor, their directors and officers and each person, if
any, who controls the Company or such Guarantor within the meaning of the Securities Act or
the Exchange Act from and against any losses, claims, damages or liabilities or any actions
in respect thereof, to which the Company or any such Guarantor, their directors and officers
or any such controlling person may become subject under the

9

 

Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of
or are based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or omission or alleged untrue
statement or omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company or any such Guarantor,
their directors and officers or any such controlling person for any legal or other expenses
reasonably incurred by the Company or any such Guarantor, their directors and officers or
any such controlling person in connection with investigating or defending any loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be in
addition to any liability that such Holder may otherwise have to the Company, any Guarantor,
their directors and officers or any such controlling person.

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

     (d) If the indemnification provided for in this Section 5 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then
each indemnifying party shall contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate
to reflect the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the offering of the Initial Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities (or actions in respect thereof) as well as
any other relevant equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantors on the one hand or such
Holder or such other indemnified party, as the case may be, on the other, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of

10

 

this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this Section
5(d), the Holders of the Securities shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by such Holders from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages which such
Holders have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this subsection (d), each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as such indemnified party and each person, if any, who controls the Company or
any Guarantor within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as the Company and the Guarantors.

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

     6. Additional Interest Under Certain Circumstances.

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

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

     (ii) If an Exchange Offer Registration Statement or, if required pursuant to
Section 2 above, a Shelf Registration Statement has not been declared effective by the
Commission on or prior to the 180th day after the Issue Date;

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

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

     (v) If obligated to file a Shelf Registration Statement pursuant to Section 2
above, the Shelf Registration Statement is not declared effective on or prior to the
90th day after the Shelf Filing Date; or

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

     Additional Interest shall accrue on the Initial Securities over and above the interest
set forth in the title of the Securities at a rate of 0.50% per year for the first 90-day
period immediately following the

11

 

occurrence of a Registration Default, and such rate will
increase by an additional 0.50% per year with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum Additional Interest rate of 1.50%
per year. Such Additional Interest will be in addition to any other interest payable from
time to time with respect to the Notes and the Exchange Securities. The Company will not be
required to pay Additional Interest for more than one Registration Default at any given
time. Following the cure of all Registration Defaults, the accrual of Additional Interest
will cease and the interest rate will revert to the original rate.

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

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

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

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

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

12

 

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

     9. Miscellaneous.

     (a) Amendments and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures from the provisions hereof
may not be given, except by the Company and the written consent of the Holders of a majority
in principal amount of the Securities affected by such amendment, modification, supplement,
waiver or consents.

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

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

	 	(ii)  	if to the Initial Purchasers:
	 
	 	   	Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, New York 10010-3629

Fax No.: (212) 325-8278

Attention: Transactions Advisory Group

	 
	 	   	with a copy to:
	 
	 	   	Vinson & Elkins L.L.P.

2300 First City Tower

1001 Fannin Street

Houston, Texas 77002

Fax No.: (713) 615-5531

Attention: T. Mark Kelly

	 
	 	(iii)  	if to the Company:
	 
	 	   	KCS Energy, Inc.

5555 San Felipe, Suite 1200

Houston, Texas 77056

Fax No.: (713) 877-1372

Attention: Secretary
	 
	 	   	with a copy to:
	 
	 	   	Andrews Kurth LLP

600 Travis Street, Suite 4200

Houston, Texas 77002

Fax No.: (713) 220-4285

Attention: Diana M. Hudson

     All such notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; three business days after being deposited
in the mail, postage prepaid, if

13

 

mailed; when receipt is acknowledged by recipient’s
facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day delivery.

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

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

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

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

     (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

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

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

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

14

 

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

	 	 	 	 	 
	 	Very truly yours,

KCS Energy, Inc.

 	 
	 	By:  	     /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	KCS Resources, Inc.

 	 
	 	By:  	     /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	Medallion California Properties Company

 	 
	 	By:  	     /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	KCS Energy Services, Inc.

 	 
	 	By:  	      /s/ J. T. Leary
 	 
	 	 	Name:  	J. T. Leary 	 
	 	 	Title:  	Vice President 	 

	 	 	 	 	 
	 	Proliq, Inc.

 	 
	 	By:  	      /s/ Frederick Dwyer
 	 
	 	 	Name:  	Frederick Dwyer 	 
	 	 	Title:  	Vice President 	 

Signature Page to the Registration Rights Agreement

 

 

The foregoing Registration

Rights Agreement is hereby confirmed

and accepted as of the date first

above written.

Credit Suisse First Boston LLC

J.P. Morgan Securities Inc.

Harris Nesbitt Corp.

BNP Paribas Securities Corp.

Greenwich Capital Markets, Inc.

By: Credit Suisse First Boston LLC

	 	 	 	 	 
	By:

	 	/s/ Damon Barber

	 	 
	

	 	Name: Damon Barber	 	 
	

	 	Title: Director	 	 

Signature Page to the Registration Rights Agreement

 

 

ANNEX A

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

A-1

 

 

ANNEX B

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

B-1

 

 

ANNEX C

PLAN OF DISTRIBUTION

     Each broker-dealer that receives Exchange Securities for its own account pursuant to the
Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Initial Securities where such Initial Securities were acquired as a result
of market-making activities or other trading activities. The Company has agreed that, for a period
of 180 days after the consummation of the Registered Exchange Offer, it will make this prospectus,
as amended or supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until
                                 ,
200     (90 days after the consummation of the
Registered Exchange Offer), all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.

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

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

C-1

 

 

ANNEX D

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

	 	 	 
	Name:
	 	 
	

	 	 
	Address:
	 	 
	

	 	 
	 
	 	 
	

	 	 

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

D-1

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