EXHIBIT 99.1
THE HOUSTON EXPLORATION COMPANY
3,000,000 Shares of Common Stock
Underwriting Agreement
February 20, 2003
X.X. Xxxxxx Securities Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The Houston Exploration Company, a Delaware corporation (the "Company")
and a subsidiary of KeySpan Corporation, a New York corporation ("KeySpan"),
proposes to sell to you (the "Underwriter") an aggregate of 3,000,000 shares
(the "Underwritten Shares") of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"). In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Underwritten Shares, the
Company proposes to issue and sell to the Underwriter, at the option of the
Underwriter, up to an additional 300,000 shares (the "Option Shares") of Common
Stock. The Underwritten Shares and the Option Shares are herein referred to as
the "Shares."
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, File No. 333-78843, including a prospectus, relating to the Shares.
The registration statement as amended to the date of this Agreement is referred
to in this Agreement as the "Registration Statement." The term "Base
Prospectus" means the prospectus included in the Registration Statement. The
Company has filed with, or transmitted for filing to, or shall promptly
hereafter file with or transmit for filing to, the Commission a prospectus
supplement (the "Prospectus Supplement") specifically relating to the Shares
pursuant to Rule 424 under the Securities Act. The term "Prospectus" means the
Prospectus Supplement together with the Base Prospectus in the form first used
to confirm sales of the Shares. If the Company has filed an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement. Any reference in this Agreement to the Registration Statement, any
supplemental prospectus (including the Prospectus Supplement) or the Prospectus
shall be
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deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective
date of the Registration Statement or the date of such supplemental prospectus
or the Prospectus, as the case may be, and any reference to "amend,"
"amendment" or "supplement" with respect to the Registration Statement, any
supplemental prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after such date under the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act") that are deemed to be incorporated by
reference therein.
1. The Company agrees to sell the Underwritten Shares to the Underwriter
as hereinafter provided, and the Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Company at a purchase price of
$26.40 per share (the "Purchase Price") the number of Underwritten Shares to be
purchased by the Underwriter as set forth in Schedule I hereto.
In addition, the Company agrees to sell the Option Shares to the
Underwriter as hereinafter provided, and the Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, shall have the option to purchase from the Company at the
Purchase Price the number of Option Shares as to which such election shall have
been exercised.
The Underwriter may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of the Prospectus Supplement, by written notice from the Underwriter to
the Company. Such notice shall set forth the aggregate number of Option Shares
as to which the option is being exercised and the date and time when the Option
Shares are to be delivered and paid for, which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date nor later than the tenth full Business Day (as hereinafter
defined) after the date of such notice. Any such notice shall be given at least
two Business Days prior to the date and time of delivery specified therein.
2. The Company understands that the Underwriter intends (i) to make a
public offering of the Shares as soon after the parties hereto have executed
and delivered this Agreement as in the judgment of the Underwriter is advisable
and (ii) initially to offer the Shares upon the terms set forth in the
Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Underwriter, in
the case of the Underwritten Shares, on February 26, 2003, or at such other
time on the same or such other date, not later than the fifth Business Day
thereafter, as the Underwriter and the Company may agree upon in writing, or,
in the case of the Option Shares, on the date and time specified by the
Underwriter in the written notice of the Underwriter's election to purchase
such Option Shares. The time and date of such payment for the Underwritten
Shares are herein referred to
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as the "Closing Date," and the time and date for such payment for the Option
Shares, if other than the Closing Date, are herein referred to as the
"Additional Closing Date." As used herein, the term "Business Day" means any
day other than a day on which banks are permitted or required to be closed in
New York City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Underwriter of the Shares to be purchased on such date registered in such
names and in such denominations as the Underwriter shall request in writing not
later than two full Business Days prior to the Closing Date or the Additional
Closing Date, as the case may be, with any transfer taxes payable in connection
with the transfer to the Underwriter of the Shares duly paid by the Company.
The certificates for the Shares will be made available for inspection and
packaging by the Underwriter at the office of X.X. Xxxxxx Securities Inc. set
forth above not later than 1:00 P.M., New York City time, on the Business Day
prior to the Closing Date or the Additional Closing Date, as the case may be.
4. (A) The Company and KeySpan, jointly and severally, represent and
warrant to the Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus supplement has been issued by the Commission, and each
preliminary prospectus supplement filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act, and did not
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, in the light of the circumstances under which they were made, not
misleading; provided that the foregoing representations and warranties
shall not apply to any statements or omissions made in reliance upon and
in conformity with information relating to the Underwriter furnished to
the Company in writing by the Underwriter expressly for use therein;
(b) the Registration Statement has been declared effective by the
Commission under the Securities Act; no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
the Company, threatened by the Commission; the Registration Statement and
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) comply, or will comply, as the case
may be, in all material respects with the requirements of the Securities
Act and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the date of the
Prospectus and any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the
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statements therein not misleading, and the Prospectus, as amended or
supplemented, if applicable, at the Closing Date or Additional Closing
Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, provided that the foregoing representations and
warranties shall not apply to any statements or omissions in the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Underwriter furnished to the
Company in writing by the Underwriter expressly for use therein;
(c) the documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, complied in all material respects with the requirements of the
Exchange Act and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; any further documents so filed and incorporated
by reference in the Prospectus, when such documents are filed with the
Commission, will conform in all material respects to the requirements of
the Exchange Act, and will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(d) the financial statements, and the related notes thereto, included
or incorporated by reference in the Registration Statement and the
Prospectus comply in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and present fairly the
consolidated financial position of the Company and its consolidated
subsidiary as of the dates indicated and the results of their operations
and changes in their consolidated cash flows for the periods specified;
said financial statements have been prepared in all material respects in
conformity with generally accepted accounting principles applied on a
consistent basis, and the supporting schedules included or incorporated by
reference in the Registration Statement present fairly the information
required to be stated therein;
(e) Deloitte & Touche LLP ("Deloitte & Touche"), who has certified
certain financial statements of the Company, are independent public
accountants as required by the Securities Act;
(f) Xxxxxx Xxxxxxxx LLP ("Xxxxxx Xxxxxxxx"), who has certified
certain financial statements of the Company, were, during the periods
covered by, and at the time of, such certification, independent public
accountants as required by the Securities Act;
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(g) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been: (i) any
change in the capital stock (other than any options granted or shares of
Common Stock of the Company issued upon the exercise of options granted or
to be granted under the Company's employee stock option plans existing on
the date of the Prospectus), (ii) any change in long-term debt of the
Company or its subsidiary, (iii) any dividend or distribution of any kind
declared, set aside for payment, paid or made by the Company on any class
of capital stock or (iv) any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiary, taken as a whole (a "Material Adverse Change"), otherwise than
as set forth or contemplated in the Prospectus; and except as set forth or
contemplated in the Prospectus, neither the Company nor its subsidiary has
entered into any transaction or agreement (whether or not in the ordinary
course of business) material to the Company and its subsidiary, taken as a
whole;
(h) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the general affairs,
business, prospects, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiary, taken as a
whole (a "Material Adverse Effect");
(i) Seneca Upshur Petroleum Company is the Company's only subsidiary;
such subsidiary has been duly incorporated and is validly existing as a
corporation under the laws of its jurisdiction of incorporation, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification,
other than where the failure to be so qualified or in good standing would
not have a Material Adverse Effect; and all the outstanding shares of
capital stock of such subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company
free and clear of all liens, encumbrances, security interests and claims;
(j) this Agreement has been duly authorized, executed and delivered
by the Company;
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(k) the Company has an authorized capitalization as set forth in the
Prospectus and such authorized capital stock conforms as to legal matters
to the description thereof set forth in the Prospectus, and all of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and non-assessable and are
not subject to any preemptive or similar rights; and, except as described
in or expressly contemplated by the Prospectus, there are no outstanding
rights (including, without limitation, preemptive rights), warrants or
options, other than outstanding options issued pursuant to any incentive
compensation plan of the Company as described in the Prospectus, to
acquire, or instruments convertible into or exchangeable for, any shares
of capital stock or other equity interest in the Company or its
subsidiary, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of
the Company or such subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options;
(l) the Shares to be issued and sold by the Company to the
Underwriter hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and nonassessable and free of any
preemptive or similar rights and will conform in all material respects to
the description thereof contained in the Prospectus;
(m) neither the Company nor its subsidiary is, or with the giving of
notice or lapse of time or both would be, in violation of or in default
under (i) its certificate of incorporation or by-laws or (ii) any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or its subsidiary is a party or by which
it or any of them or any of their respective properties is bound, except
(in the case of clause (ii)) for violations and defaults which would not,
individually or in the aggregate, have a Material Adverse Effect; the
execution and delivery of this Agreement by the Company, the sale of the
Shares by the Company hereunder, the performance by the Company of its
obligations under this Agreement and the consummation of the transactions
contemplated herein and in the Prospectus (including, without limitation,
the use of proceeds of the sale of the Shares) will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or its subsidiary is a
party or by which the Company or its subsidiary is bound or to which any
of the property or assets of the Company or its subsidiary is subject, nor
will any such action result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company or its
subsidiary or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company, its subsidiary or any of their respective properties;
and no consent, approval, authorization, order, license, registration or
qualification of or with any such court or governmental agency or body is
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required for the consummation by the Company of the transactions
contemplated by this Agreement and the Prospectus, except such consents,
approvals, authorizations, orders, licenses, registrations or
qualifications as have been obtained under the Securities Act and as may
be required under state securities or blue sky laws in connection with the
purchase and distribution of the Shares by the Underwriter;
(n) other than as set forth in the Prospectus, there are no legal or
governmental investigations, actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company
or its subsidiary or any of their respective properties or to which the
Company or its subsidiary is or may be a party or to which any property of
the Company or its subsidiary is or may be the subject which, if
determined adversely to the Company or its subsidiary, could, individually
or in the aggregate, have, or reasonably be expected to have, a Material
Adverse Effect or a material and adverse effect on the ability of the
Company to perform its obligations under this Agreement, and, to the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; and there are no
statutes, regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described or
filed as required;
(o) the Company and its subsidiary have good and defensible title to
the producing oil and gas properties, free and clear of all liens,
encumbrances and defects, except (i) those described in the Prospectus,
(ii) liens securing taxes and other governmental charges, or claims of
materialmen, mechanics and similar persons, not yet due and payable, (iii)
liens and encumbrances under oil and gas leases, options to lease,
operating agreements, unitization and pooling agreements, participation
and drilling concessions agreements and gas sales contracts, securing
payment of amounts not yet due and payable and of a scope and nature
customary in the oil and gas industry and (iv) liens, encumbrances and
defects that do not, individually or in the aggregate, materially affect
the value of such oil and gas properties or materially interfere with the
use made or proposed to be made of such properties by the Company or its
subsidiary; and (b) except to the extent described in the Prospectus, the
leases, options to lease, drilling concessions or other arrangements held
by the Company reflect in all material respects the right of the Company
to explore the unexplored and undeveloped acreage described in the
Prospectus, and the care taken by the Company with respect to acquiring or
otherwise procuring such leases, options to lease, drilling concessions
and other arrangements was generally consistent with standard industry
practices for acquiring or procuring leases to explore acreage for
hydrocarbons; and any buildings held under lease by the Company and its
subsidiary are held by them under valid, existing and enforceable leases
with such exceptions as are not material and do not interfere with the use
made or proposed to be made of such property and buildings by the Company
or its subsidiary;
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(p) no relationship, direct or indirect, exists between or among the
Company or its subsidiary, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or its subsidiary, on
the other hand, which is required by the Securities Act to be described in
the Registration Statement or the Prospectus which is not so described;
(q) no person has the right to require the Company to register any
securities for offering and sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission or, to the best
knowledge of the Company, the sale of the Shares to be sold by the Company
hereunder, except for rights which have been waived;
(r) the Company is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(s) the Company and its subsidiary have filed all federal, state,
local and foreign tax returns which have been required to be filed and
have paid all taxes shown thereon and all assessments received by them or
any of them to the extent that such taxes have become due and are not
being contested in good faith with such exceptions as would not singly or
in the aggregate result in a Material Adverse Effect; and, except as
disclosed in the Registration Statement and the Prospectus, there is no
tax deficiency that has been determined adversely to the Company or its
subsidiary which has had, nor does the Company have any knowledge of any
tax deficiency, which if determined adversely to the Company or its
subsidiary might have, a Material Adverse Effect;
(t) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected
to, cause or result in stabilization or manipulation of the price of the
Common Stock;
(u) the statistical and market-related data included in the
Registration Statement and the Prospectus are based on or derived from
sources which are believed by the Company to be reliable;
(v) the historical information underlying the estimates of the
reserves of the Company supplied by the Company to Netherland, Xxxxxx &
Associates, Inc. and Xxxxxx and Xxxxx, Ltd. (collectively, the
"Engineers"), independent petroleum and natural gas engineers with respect
to the Company (as described in Annex B), for the purposes of preparing
the reserve reports of the Company referenced in the Prospectus (the
"Reserve Reports"), including, without limitation, production volumes,
sales prices for production, contractual pricing provisions under oil or
gas sales or marketing contracts or under hedging arrangements, costs of
operations and development,
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and working interest and net revenue information relating to the Company's
ownership interests in properties was true and correct in all material
respects on the date of each such Reserve Report; the estimates of future
capital expenditures and other future exploration and development costs
supplied to the Engineers were prepared in good faith and with a
reasonable basis; the information provided to the Engineers for purposes
of preparing the Reserve Reports was prepared in all material respects in
accordance with customary industry practices; the Engineers were, as of
the date of each of the Reserve Reports prepared by them, and are, as of
the date hereof, independent petroleum engineers with respect to the
Company; other than normal production of reserves and intervening spot
market product price fluctuations, and except as disclosed in the
Prospectus, the Company is not aware of any facts or circumstances that
would result in a material decline in the reserves in the aggregate, or
the aggregate present value of future net cash flows therefrom, as
described in the Prospectus and as reflected in the Reserve Reports;
estimates of such reserves and the present value of the future net cash
flows therefrom as described in the Prospectus and reflected in the
Reserve Reports comply in all material respects with the Securities Act;
(w) the Company and its subsidiary possess such permits, licenses,
franchises, 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
now operated by them, except when the failure to have such Governmental
Licenses would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect; the Company and its subsidiary
are in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure to so comply would not, individually or
in the aggregate, be reasonably expected to have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; neither the Company nor its subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding would be reasonably expected to have a Material Adverse Effect;
(x) the Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its business and
the value of its properties and as is customary for companies engaged in
similar businesses in similar industries; and
(y) except as otherwise stated or incorporated by reference in the
Registration Statement and the Prospectus, and except as would not, singly
or in the aggregate,
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result in a Material Adverse Effect, (A) neither of the Company nor its
subsidiary 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"), (B) the Company and its subsidiary have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance in all material respects
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating to any Environmental Law against
the Company or its subsidiary and (D) there are no events or circumstances
that may 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 its
subsidiary relating to Hazardous Materials or any Environmental Laws.
5. The Company covenants and agrees with the Underwriter as follows:
(a) if required, to file the final Prospectus with the Commission
within the time periods specified by Rule 424(b) and Rule 430A under the
Securities Act and to file promptly all reports and any definitive proxy
or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Shares; and, at the expense of the Company, to furnish copies
of the Prospectus to the Underwriter in New York City prior to 10:00 a.m.,
New York City time, on the Business Day next succeeding the date of this
Agreement in such quantities as the Underwriter may reasonably request;
(b) to deliver or to make available, at the expense of the Company,
to the Underwriter two signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits and documents incorporated by reference therein, and each
amendment thereto, in each case without exhibits but including the
documents incorporated by reference therein and, during the period
mentioned in paragraph (e) below, to deliver at the expense of the Company
to the Underwriter as many copies of the Prospectus (including all
amendments and supplements
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thereto) and documents incorporated by reference therein as the
Underwriter may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Underwriter a
copy of the proposed amendment or supplement for review and not to file
any such proposed amendment or supplement to which the Underwriter
reasonably objects; provided that the following shall not apply to the
filing by the Company of any document required to be filed in accordance
with the Exchange Act or the rules and regulations promulgated thereunder
and the time period for which lapses within one Business Day of such
filing;
(d) to advise the Underwriter promptly, and to confirm such advice in
writing, (i) when the Registration Statement has become effective, (ii)
when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Underwriter with copies
thereof, (iv) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for any additional information, (v) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus or the initiation or threatening of any
proceeding for that purpose, (vi) of the occurrence of any event, during
the period mentioned in paragraph (e) below, as a result of which the
Prospectus 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
when the Prospectus is delivered to a purchaser, not misleading, and (vii)
of the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best commercial efforts to prevent the issuance of
any such stop order, or of any order preventing or suspending the use of
any preliminary prospectus or the Prospectus, or of any order suspending
any such qualification of the Shares, or notification of any such order
thereof, and, if issued, to obtain as soon as possible the withdrawal
thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriter a
prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriter or any dealer, any event shall
occur as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus to
comply with law, forthwith
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to prepare and furnish, at the expense of the Company, to the Underwriter
and to the dealers (whose names and addresses the Underwriter will furnish
to the Company) to which Shares may have been sold by the Underwriter and
to any other dealers upon request, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so that
the Prospectus will comply with law;
(f) to use its best commercial efforts to maintain the listing of the
Shares on the New York Stock Exchange;
(g) to endeavor to qualify the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Underwriter shall
reasonably request and to continue such qualification in effect so long as
reasonably required for distribution of the Shares; provided that the
Company shall not be required to file a general consent to service of
process in any such jurisdiction;
(h) to make generally available to its security holders and to the
Underwriter as soon as practicable an earning statement covering a period
of at least twelve months beginning with the first fiscal quarter of the
Company occurring after the effective date of the Registration Statement,
which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder;
(i) during the period of two years after the date of this Agreement,
to furnish or make available to the Underwriter copies of all reports or
other communications (financial or other) furnished to holders of the
Shares, and copies of any reports and financial statements furnished to or
filed with the Commission;
(j) for a period of 90 days after the date of the Prospectus
Supplement, not to (i) directly or indirectly, offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of any shares of
Common Stock or any securities of the Company which are substantially
similar to the Common Stock, including but not limited to any securities
convertible into or exercisable or exchangeable for, or that represent the
right to receive, Common Stock or any such substantially similar
securities or (ii) enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock or any such substantially
similar securities, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise without the prior written consent of X.X.
Xxxxxx Securities Inc., other than (a) any options granted or shares of
Common Stock of the Company issued upon the exercise of options granted or
to be granted under the Company's employee stock option
-13-
plans existing on the date of the Prospectus, (b) shares of restricted
Common Stock granted to any officers or employers of the Company or any
subsidiary as compensation under any incentive compensation plan of the
Company, and (c) shares of Common Stock to be issued in any business
combination to be consummated after such 90-day period; and
(k) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the foregoing, all
costs and expenses (i) incident to the preparation, registration,
transfer, execution and delivery of the Shares, (ii) incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus,
including in each case all exhibits, amendments and supplements thereto
prior to or during the period specified in paragraph (e) of this Section
5, (iii) related to any filing with, and clearance of the offering by, the
National Association of Securities Dealers, Inc., (iv) in connection with
the printing (including word processing and duplication costs) and
delivery of this Agreement, any blue sky survey and the furnishing to the
Underwriter and dealers of copies of the Registration Statement and the
Prospectus, including mailing and shipping, as herein provided, (v) any
expenses incurred by the Company in connection with a "road show"
presentation to potential investors, (vi) the cost of preparing stock
certificates, (vii) the cost and charges of the Company's transfer agent
and registrar, (viii) costs and expenses (including all filing fees)
incurred in connection with the registration or qualification of the
Shares under the laws of such jurisdictions as the Underwriter may
designate (including fees of counsel for the Underwriter and its
disbursements with respect thereto) and (ix) all fees of counsel for the
Company.
6. The obligations of the Underwriter hereunder to purchase the Shares on
the Closing Date or the Additional Closing Date, as the case may be, are
subject to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment shall be in effect, and no
proceedings for such purpose shall be pending before or threatened by the
Commission; the Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Securities Act and in
accordance with Section 5(a) hereof; and all requests for additional
information shall have been complied with to the reasonable satisfaction
of the Underwriter;
-14-
(b) the representations and warranties of the Company and KeySpan
contained herein shall be true and correct in all material respects on and
as of the Closing Date or the Additional Closing Date, as the case may be,
as if made on the Closing Date or the Additional Closing Date, as the case
may be, and the Company shall have complied in all material respects with
all agreements and all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date or the Additional Closing Date,
as the case may be;
(c) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date or the Additional Closing Date, as the case may
be, there shall not have occurred any downgrading, nor shall any notice
have been given of (i) any downgrading, (ii) any intended or potential
downgrading or (iii) any review or possible change that does not indicate
an improvement, in the rating accorded any securities of or guaranteed by
the Company or its subsidiary by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is given in
the Prospectus, there shall not have been any change in the capital stock
(other than any options granted or shares of Common Stock of the Company
issued upon the exercise of options granted or to be granted under the
Company's employee stock option plans existing on the date of the
Prospectus) or any increase in the long-term debt of the Company or its
subsidiary, or any Material Adverse Change, otherwise than as set forth or
contemplated in the Prospectus, the effect of which in the judgment of the
Underwriter makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares on the Closing Date or the
Additional Closing Date, as the case may be, on the terms and in the
manner contemplated in the Prospectus; and neither the Company nor its
subsidiary shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus;
(e) the Underwriter shall have received on and as of the Closing Date
or the Additional Closing Date, as the case may be, certificates of the
Chief Executive Officer and Chief Financial Officer of each of the Company
and KeySpan, satisfactory to the Underwriter, to the effect set forth in
subsections (a) through (d) (with respect to the respective
representations, warranties, agreements and conditions of the Company and
KeySpan) of this Section 6 and to the further effect that there has not
occurred any Material Adverse Change from that set forth or contemplated
in the Prospectus;
-15-
(f) Xxxxxxx & Xxxxx LLP, counsel for the Company, shall have
furnished to the Underwriter their written opinion, dated the Closing Date
or the Additional Closing Date, as the case may be, with respect to
matters set forth in Annex A which opinion shall be in form and substance
satisfactory to the Underwriter;
(g) on the date hereof and the effective date of the most recently
filed post-effective amendment filed on or subsequent to the date hereof
to the Registration Statement, if any, and also on the Closing Date or
Additional Closing Date, as the case may be, Deloitte & Touche shall have
furnished to the Underwriter letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to the Underwriter,
containing statements and information of the type customarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or
incorporated by reference in the Registration Statement and the
Prospectus;
(h) the Underwriter shall have received on and as of the Closing Date
or Additional Closing Date, as the case may be, an opinion of Xxxxxx
Xxxxxx & Xxxxxxx, counsel to the Underwriter, with respect to the
Registration Statement, the Prospectus and other related matters as the
Underwriter may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters;
(i) the Engineers shall have delivered to the Underwriter on the
Closing Date a letter (the "Reserve Letter") in form and substance
reasonably satisfactory to the Underwriter and substantially in the form
attached hereto as Annex B, stating, as of the date of such letter (or,
with respect to matters involving changes or developments since the
respective dates as of which specified information with respect to the oil
and gas reserves is given or incorporated in the Prospectus as of the date
not more than five days prior to the date of such letter), the conclusions
and findings of such firm with respect to the oil and gas reserves of the
Company;
(j) on or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company and KeySpan shall have furnished to the
Underwriter such further certificates and documents as the Underwriter
shall reasonably request; and
(k) the "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between each of KeySpan, THEC Holdings Corp., the
directors and executive officers of the Company on the one hand and, in
each case, the Underwriter on the other hand, relating to sales and
certain other dispositions of shares of Common Stock or certain other
securities, delivered to the Underwriter on or before the date hereof,
shall be in full force and effect on the Closing Date or Additional
Closing Date, as the case may be.
-16-
7. (a) The Company and KeySpan agree, jointly and severally, to
indemnify and hold harmless the Underwriter, each affiliate of the
Underwriter which assists the Underwriter in the distribution of the
Shares and each person, if any, who controls the Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, the legal fees and other
expenses incurred in connection with any suit, action or proceeding or any
claim asserted) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with information relating to the
Underwriter furnished to the Company in writing by the Underwriter
expressly for use therein.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement
and each person who controls the Company within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act and KeySpan to
the same extent as the foregoing indemnity from the Company to the
Underwriter, but only with reference to information relating to the
Underwriter furnished to the Company in writing by the Underwriter
expressly for use in the Registration Statement, the Prospectus, any
amendment or supplement thereto.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
the preceding paragraphs of this Section 7, such person (the "Indemnified
Person") shall promptly notify the person or persons against whom such
indemnity may be sought (each an "Indemnifying Person") in writing, and
such Indemnifying Persons, upon request of the Indemnified Person, shall
retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Persons
may designate in such proceeding and shall pay the reasonable fees and
expenses of such counsel related to such proceeding. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person and not the Indemnifying Persons unless (i) the
Indemnifying Persons and the Indemnified Person shall have mutually agreed
to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both an Indemnifying Person and
the Indemnified Person and, based upon advice of counsel, representation
of both parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood that no
Indemnifying Person shall,
-17-
in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they
are incurred. Any such separate firm for the Underwriter, each affiliate
of the Underwriter which assists the Underwriter in the distribution of
the Shares and such control persons of the Underwriter shall be designated
in writing by X.X. Xxxxxx Securities Inc. and any such separate firm for
the Company, its directors, its officers who sign the Registration
Statement and such control persons of the Company shall be designated in
writing by the Company. No Indemnifying Person shall be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final non-appealable judgment
for the plaintiff, each Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of
such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on
claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
KeySpan on the one hand and the Underwriter on the other hand from the
offering of the Shares 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 KeySpan on
the one hand and the UNDERWRITER on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and KeySpan on the one hand and
the Underwriter on the other hand shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before
deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriter, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate
public offering price of the Shares. The relative fault of the Company and
KeySpan on the one hand and the Underwriter on the other hand 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 KeySpan or by the Underwriter and the parties'
-18-
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, KeySpan and the Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall the Underwriter be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company and KeySpan set forth in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Underwriter or any person controlling the Underwriter or by or on behalf
of the Company, its officers or directors or any person controlling the Company
or by and on behalf of KeySpan, its officers or directors or any person
controlling KeySpan and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the Underwriter with respect to the Option Shares) may be
terminated in the absolute discretion of the Underwriter, by notice given to
the Company, if after the execution and delivery of this Agreement and prior to
the Closing Date (or, in the case of the Option Shares, prior to the Additional
Closing Date) (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market, the Chicago Board Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of or guaranteed by the Company or its subsidiary
shall have been suspended on any exchange or in any over-the-counter market,
(iii) a general moratorium on commercial banking activities shall have been
declared by either federal or New York State authorities, or (iv) there
-19-
shall have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis, either within or outside the
United States, that, in the reasonable judgment of the Underwriter, is material
and adverse and which makes it impracticable or inadvisable to market the
Shares being delivered at the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the Prospectus.
9. This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
10. If this Agreement shall be terminated by the Underwriter because of
any failure or refusal on the part of the Company to comply with the terms or
to fulfill any of the conditions of this Agreement, or if for any reason the
Company shall be unable to perform its obligations under this Agreement or any
condition of the Underwriter's obligations cannot be fulfilled, the Company and
KeySpan, jointly and severally, agree to reimburse the Underwriter for all
out-of-pocket expenses (including the fees and expenses of its counsel)
reasonably incurred by the Underwriter in connection with this Agreement or the
offering contemplated hereunder; provided, however, that if this Agreement is
terminated pursuant to any of clause (i), (iii) or (iv) of Section 8 hereof,
then neither the Company nor KeySpan shall have any obligation to reimburse the
Underwriter for any of such out-of-pocket expenses.
11. This Agreement shall inure to the benefit of and be binding upon the
Company, KeySpan and the Underwriter, any controlling persons referred to
herein and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained. No purchaser
of Shares from the Underwriter shall be deemed to be a successor by reason
merely of such purchase.
12. All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriter shall be given
c/o X.X. Xxxxxx Securities Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(telefax: 212-648-5552), Attention: Syndicate Department, with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (telefax:
212-269-5420), Attention: Xxxxxx X. Xxxxxxxxx, Esq. Notices to the Company
shall be given to it at its office located at, 0000 Xxxxxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000 (telefax: 713-830-6810), Attention: Xxxx Xxxxxx, Chief
Financial Officer, with a copy to: Xxxxxxx & Xxxxx LLP, 000 Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000 (telefax: 713-220-4285), Attention: G. Xxxxxxx X'Xxxxx or
Xxxxxx Xxxxxxxxxx, Esqs. Notices to KeySpan shall be given to it c/o KeySpan
Corporation, Xxx XxxxxXxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 (telefax:
718-403-3106), Attention: Law Department, Xxxxxx X. Xxxxxxx, Esq., with a copy
to: Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(telefax: 212-455-2502), Attention: Xxxxxxx Xxxxxxxxx, Esq.
-20-
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding, please sign and
return six counterparts hereof.
Very truly yours,
THE HOUSTON EXPLORATION COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
KEYSPAN CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
Accepted: February 20, 2003
X.X. XXXXXX SECURITIES INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------
Name: Xxxxxxx Xxxxx
Title: Vice President
SCHEDULE I
Number of
Underwritten
Shares To Be
Underwriter Purchased
----------- -------------
X.X. Xxxxxx Securities Inc. ................................ 3,000,000
-------------
Total..................................... 3,000,000
=============
Exhibit A
FORM OF LOCK-UP AGREEMENT
[ ], 2003
X.X. Xxxxxx Securities Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: The Houston Exploration Company - Public Offering
-------------------------------------------------
Ladies and Gentlemen:
The undersigned understands that you, as Underwriter (the "Underwriter"),
propose to enter into an Underwriting Agreement (the "Underwriting Agreement")
with The Houston Exploration Company, a Delaware corporation (the "Company"),
and KeySpan Corporation, a New York corporation ("KeySpan"), providing for the
sale by the Company to the Underwriter of Common Stock, $0.01 par value (the
"Common Stock"), of the Company and the public offering (the "Public Offering")
of the Common Stock by the Underwriter. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Underwriting
Agreement.
In consideration of the Underwriter's agreement to purchase and make the
Public Offering of the Common Stock, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of X.X. Xxxxxx Securities Inc.,
the undersigned will not, during the period ending 90 days after the date of
the Prospectus Supplement relating to the Public Offering (the "Prospectus"),
(1) directly or indirectly offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, any shares of Common Stock or any securities
of the Company which are substantially similar to the Common Stock, including,
but not limited to, any securities convertible into or exercisable or
exchangeable for, or that represent the right to receive, Common Stock or any
such substantially similar securities (including, but not limited to, Common
Stock which may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the Securities and Exchange
Commission) or (2) enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Common Stock or any securities of the Company which are
substantially similar to the Common Stock, including, but not limited to, any
security convertible into or exercisable
-2-
or exchangeable for, or that represent the right to receive, Common Stock or
any such substantially similar securities, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise; provided, however, that
the foregoing provisions in clauses (1) and (2) shall not be construed to
prohibit the receipt and sale of shares of Common Stock received upon the
exercise of options to purchase Common Stock held by the undersigned under any
incentive or compensation plan of the Company as of the date of the Prospectus
Supplement. In addition, the undersigned agrees that, without the prior written
consent of X.X. Xxxxxx Securities Inc., it will not, during the period ending
90 days after the Closing Date, make any demand for or exercise any right with
respect to the registration of any shares of Common Stock or any substantially
similar securities of the Company, including, but not limited to, any security
convertible into or exercisable or exchangeable for Common Stock.
In furtherance of the foregoing, the Company and any duly appointed
transfer agent for the registration or transfer of the securities described
herein are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does not
become effective, or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Stock to be sold thereunder, the
undersigned shall be released from all obligations under this Lock-Up
Agreement.
The undersigned understands that the Underwriter is entering into the
Underwriting Agreement and proceeding with the Public Offering in reliance upon
this Lock-Up Agreement.
THIS LOCK-UP AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
Name: ___________________________
-3-
Accepted as of the date first set forth above:
X.X. XXXXXX SECURITIES INC.
By: __________________________________
Name:
Title:
ANNEX A
(i) the Company is validly existing as a corporation in good standing
under the laws of the State of Delaware with the requisite corporate power
and authority to own its properties and conduct its business as described
in the Prospectus;
(ii) the Company's subsidiary is validly existing as a corporation
under the laws of its jurisdiction of incorporation with requisite
corporate power to own its properties and conduct its business as
described in the Prospectus; and all of the outstanding shares of capital
stock of such subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned by the Company, free and
clear of all liens, encumbrances, equities or claims;
(iii) the outstanding shares of capital stock of the Company have
been duly authorized and are validly issued, fully paid and
non-assessable;
(iv) The Registration Statement has become effective under the Act
and the Prospectus Supplement was filed on February 24, 2003 pursuant to
Rule 424(b) of the rules and regulations of the Commission under the Act
and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued or proceeding for that purpose has
been instituted or threatened by the Commission;
(v) other than as set forth or contemplated in the Prospectus, to the
knowledge of such counsel there are no legal or governmental
investigations, actions, suits or proceedings pending or threatened
against or affecting the Company or its subsidiary or any of their
respective properties or to which the Company or its subsidiary is or may
be a party or to which any property of the Company or its subsidiary is or
may be the subject which, if determined adversely to the Company or its
subsidiary, could, individually or in the aggregate, have, or reasonably
be expected to have, a Material Adverse Effect; and, to such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; such counsel does not
know of any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or Prospectus or to
be filed as exhibits to the Registration Statement that are not described
or filed as required;
(vi) the sale of the Shares by the Company, the performance by the
Company of its obligations under this Agreement and the consummation of
the
-2-
transactions contemplated herein and in the Prospectus (including, without
limitation, the use of proceeds of the sale of the Shares) will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
its subsidiary is a party or by which the Company or its subsidiary is
bound or to which any of the property or assets of the Company or its
subsidiary is subject and which is listed on a schedule to such opinion
(Note: to be material contracts included in THX-2002 10-K), nor will any
such action result in any violation of the provisions of the certificate
of incorporation or the by-laws of the Company or any Applicable Law or
any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company, its
subsidiary or any of their respective properties, except in the case of
the indentures, mortgages, deeds of trust, loan agreements and other
agreements or instruments and which is listed on a schedule to such
opinion (to be material contracts included in THX-2002 10-K), for such
conflicts, breaches and defaults as would not, individually or in the
aggregate, have a Material Adverse Effect;
(vii) no Governmental Approval is required for the consummation by
the Company of the transactions contemplated by this Agreement and the
Prospectus, except such Governmental Approval has been obtained under the
Securities Act and as may be required under state securities or blue sky
laws in connection with the purchase and distribution of the Shares by the
Underwriter;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company;
(ix) the Shares to be issued and sold by the Company to the
Underwriter hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and nonassessable and free of any
preemptive or similar rights arising under the certificate of
incorporation or bylaws of the Company or under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument which is
listed on a schedule to such opinion (to be the material contracts listed
in 2002 10-K); and such shares will conform in all material respects to
the description thereof contained in the Prospectus;
(x) the authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof contained
in the Prospectus under the caption "Description of Capital Stock";
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(xi) the statements in the Prospectus under the captions "Description
of Capital Stock" and "Underwriting" (excluding the final three paragraphs
of such section) and in the Registration Statement in Item 15, insofar as
such statements constitute a summary of the legal matters or documents
referred to therein, fairly summarize in all material respects such
matters or documents; and
(xii) the Company is not an "investment company" as such term is
defined in the Investment Company Act.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of New York and Texas and the General Corporation Law of the State
of Delaware, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to the Underwriter's counsel) of other
counsel reasonably acceptable to the Underwriter's counsel, familiar with the
applicable laws; and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of the Company and its
subsidiary, as applicable, and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiary. The opinion of
such counsel for the Company shall state that the opinion of any such other
counsel upon which they relied is in form satisfactory to such counsel and, in
such counsel's opinion, the Underwriter and they are justified in relying
thereon. With respect to the matters to be covered in subparagraph (xii) above,
counsel may state their opinion and belief is based upon their participation in
the preparation of the Registration Statement and the Prospectus and any
amendment or supplement thereto (other than the documents incorporated by
reference therein) and review and discussion of the contents thereof (including
the documents incorporated by reference therein) but is without independent
check or verification except as specified.
In addition such counsel shall state that such counsel has participated in
the preparation of the Registration Statement and the Prospectus and in
conference with certain officers and other representatives of the Company and
of the Underwriter and its counsel, representatives of the independent
accountants of the Company at which the contents of such instruments 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 therein, on the
basis of such participation (relying with respect to factual matters to the
extent such counsel deems appropriate on statements by officers or
representatives of the Company) no facts have come to their attention to cause
them to believe that (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (other than any financial statements and
related schedules and other financial or statistical information included or
incorporated by reference therein, and the
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information and data with respect to estimates of the Company's crude oil,
natural gas and natural gas liquids reserves included or incorporated by
reference therein, as to which no belief is expressed) do not comply as to form
in all material respects with the Securities Act; (B) the Registration
Statement (other than any financial statements and related schedules and other
financial or statistical information therein, and the information and data with
respect to estimates of the Company's crude oil, natural gas and natural gas
liquids reserves included or incorporated by reference therein, as to which no
belief is expressed) at its effective date contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading; (C) the
Prospectus (other than any financial statements and other financial or
statistical information included or incorporated by reference therein, and the
information and data with respect to estimates of the Company's crude oil,
natural gas and natural gas liquids reserves included or incorporated by
reference therein, as to which no belief is expressed), as of its date and as
of the Closing Date or the Additional Closing Date, as the case may be,
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading; (D) the documents incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior to the
Closing Date or the Additional Closing Date, as the case may be (other than any
financial statements and related schedules and other financial or statistical
information therein, and the information and data with respect to estimates of
the Company's crude oil, natural gas and natural gas liquids reserves, as to
which no belief is expressed), when they were filed with the Commission, did
not comply as to form in all material respects with the requirements of the
Exchange Act; and (E) any of such documents referred to in clause (D), when
such documents were so filed (other than any financial statements and related
schedules and other financial or statistical information therein, and the
information and data with respect to estimates of the Company's crude oil,
natural gas and natural gas liquids reserves, as to which no belief is
expressed), contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such documents were
so filed, not misleading.
"Applicable Laws" means those laws, rules and regulations of the United
States of America, the State of New York, the State of Texas or the DGCL that,
in our experience, are normally applicable to transactions of the type
contemplated by the Underwriting Agreement, without our having made any special
investigation as to the applicability of any specific law, rule or regulation,
and which are not the subject of a specific opinion herein referring expressly
to a particular law or laws; provided that the term "Applicable Laws" does not
include:
(a) any municipal or other local law, rule or regulation, and any
other law, rule or regulation relating to (i) pollution or protection of
the environment, (ii) zoning,
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land use, building or construction codes or guidelines, (iii) labor,
employee rights and benefits, or occupational safety and health, or (iv)
utility regulation;
(b) antitrust laws and other laws regulating competition;
(c) antifraud laws;
(d) tax laws, rules or regulations;
(e) United States federal and state securities or blue sky laws;
(f) the rules and regulations of the National Association of
Securities Dealers, Inc.;
(g) the Natural Gas Act, as amended, the Federal Power Act, as
amended, and the Public Utility Holding Company Act of 1935, as amended,
and the rules and regulations promulgated thereunder;
(h) any energy or pipeline regulatory law, rule or regulation;
(i) any law, rule or regulation that may have become applicable as a
result of the involvement of the Underwriter with the transactions
contemplated by the Underwriting Agreement or because of any facts
specifically pertaining to the Underwriter or because of the legal or
regulatory status or the nature of the business of the Underwriter; and
(j) any law, rule or regulation that may be applicable to any party
by virtue of the particular nature of the business conducted by it or any
goods or services produced by it or property owned or leased by it.
"Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with, any
governmental authority pursuant to (i) the Applicable Laws of the State of New
York and (ii) the Applicable Laws of the United States of America.
ANNEX B
[Form of Reserve Letter]