EXHIBIT (1) (a)
Dealer-Manager Agreement
PDC 1996-1997 Drilling Program
DEALER/MANAGER AGREEMENT
, 1996
PDC Securities Incorporated
000 X. Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Dear Sirs:
The undersigned, Petroleum Development Corporation, a Nevada
corporation ("PDC"), the Managing General Partner of PDC 1996-1997
Drilling Program, a series of limited partnerships to be organized under
the laws of West Virginia (the "Partnership"), hereby confirms and agrees
as follows:
1. General. This Agreement sets forth the understandings and
agreements between PDC and you whereby, subject to the terms and
conditions contained herein, you will offer to sell, on a best efforts
basis, preformation partnership interests in the Partnership (the "Units")
which are described more fully in a Prospectus (the "Prospectus"). The
date as of which you are notified by PDC that Units may be offered and
sold shall constitute the "Effective Date" of the offering of Units under
this Agreement. The "Termination Date" of such offering shall be (a)
December 31, 1996 with respect to the 1996 partnerships and December 31,
1997 with respect to the 1997 partnerships or (b) such earlier date on
which Subscriptions (as hereinafter defined) for all of the Units have
been sold in accordance with the procedures and the minimums set forth in
the Prospectus. The period from the Effective Date through the
Termination Date shall constitute the "Offering Period" for the offering
and sale of Units by you pursuant to this Agreement. During the Offering
Period, you, the Soliciting Dealers (hereinafter designated) and PDC shall
designate a date, which date shall not be more than ten business days
after the Termination Date, which shall constitute the "Closing Date"
under this Agreement.
2. Representations and Warranties of PDC. PDC represents and warrants
to you that:
(a) PDC has prepared and reviewed the Prospectus, and the
Prospectus does not include and will not include during the Offering
Period any 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; provided, however, that no representations or
warranties are made with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to PDC
with respect to you, by you or on your behalf expressly for use in the
Prospectus or any amendment or supplement thereof;
(b) The Partnership, upon the due execution of the Partnership
Agreement in the Prospectus (the "Partnership Agreement") and the filing
of a certificate of limited partnership as required under the laws of the
State of West Virginia, will be a limited partnership duly formed and
validly existing pursuant to the Uniform Limited Partnership Act of the
State of West Virginia (the "West Virginia Act"), with all authority
necessary to acquire, own and manage the investments which are
1
described as proposed investments of the Partnership in the Prospectus and
to conduct the business which it proposes to conduct, all as described in
the Prospectus; the Partnership Agreement pursuant to which the
Partnership will be organized provides for the issuance and sale of the
Units; all action required to be taken by PDC or the Partnership as a
condition to the offering or sale of the Units to qualified subscribers
has been or, prior to the Effective Date, will have been taken; upon
payment of the consideration therefor specified in the Subscription
Agreement contained in the Prospectus and the due execution and delivery
to PDC of the Subscription Documents (as hereinafter described) by each
subscriber for the Units (the "Subscription"), acceptance of such
Subscription by PDC, the execution of the Partnership Agreement by PDC as
managing general partner and on behalf of such subscribers pursuant to the
terms of the Partnership Agreement and execution and filing for record of
a certificate of limited partnership of the Partnership (the
"Certificate") as shall be required or appropriate to organize the
Partnership with the accepted subscribers for the Units as additional
general or limited partners in accordance with the requirements of the
West Virginia Act, such subscribers will become additional general or
limited partners of the Partnership (the " Partners") entitled to all the
benefits of Partners under the Partnership Agreement and the West Virginia
Act;
(c) The Units, when issued, will constitute valid partnership
interests in accordance with the terms of, and shall be entitled to the
rights provided in, the Partnership Agreement and the West Virginia Act,
will be fully paid upon payment in cash of the consideration therefor
specified in the Subscription Agreement contained in the Prospectus, and
the liability of a Partner to make payments to the Partnership or on
behalf of the Partnership may or may not be limited to the amount which
such Partner has agreed to pay in accordance with the terms of his
Subscription and the Partnership Agreement depending on whether he chooses
to be an additional general or limited partner;
(d) PDC has been, and on the Closing Date will be, duly and
validly organized and validly existing as a corporation in good standing
under the laws of the State of Nevada; has all requisite power and
authority to act as a Managing General Partner of the Partnership; is or
will be qualified to do business and in good standing as a foreign
corporation in each other jurisdiction in which its acting in such
capacity requires or may require such qualification if the failure to so
qualify might result in material adverse consequences to the Partnership;
has the requisite power and authority and all necessary authorization,
approvals and orders required as of the date hereof to enter into this
Agreement and the Limited Partnership Agreement and to be bound by the
provisions and conditions hereof and thereof; and its audited balance
sheet included in the Prospectus presents fairly its financial position as
at the date indicated; said balance sheet has been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis; and the certified public accountants whose report thereon is
included in the Prospectus are independent accountants as required by the
Securities Act of 1933, as amended (the "Act");
(e) Except to the extent disclosed in the Prospectus there is no
litigation or governmental proceeding pending or, to PDC's knowledge,
threatened against, or involving the business or proposed business of,
the Partnership or PDC, which might materially and adversely affect the
proposed operations and business of the Partnership;
2
(f) The condition, financial or otherwise, of PDC, and the
proposed business of the Partnership, conform in all material respects to
the descriptions thereof contained in the Prospectus;
(g) Neither the execution and delivery of this Agreement and the
Partnership Agreement, the incurrence of the obligations herein and
therein set forth, the consummation of the transactions herein and therein
contemplated, nor compliance with the terms and provisions hereof or
thereof, will conflict with or result in a breach or violation of any of
the terms, provisions or conditions of any agreement or instrument to
which PDC is a party or by which it is bound, or any order, rule or
regulation applicable to PDC of any court or any governmental body or
administrative agency having jurisdiction over PDC;
(h) The Units, when issued, will conform to the descriptions
thereof contained in the Prospectus; and the Prospects (as defined in the
Prospectus) as proposed to be owned by the Partnership conform in all
material respects to the description thereof in the Prospectus;
(i) This Agreement has been duly and validly authorized, executed
and delivered by or on behalf of PDC and constitutes the valid and binding
agreement of PDC;
(j) The Partnership Agreement, upon its execution by PDC will have
been duly and validly authorized, executed and delivered by or on behalf
of PDC as the Managing General Partner and will constitute the valid and
binding agreement of the Managing General Partner; and
(k) Neither PDC nor any of its affiliates has offered for sale or
sold any Units or interests in the Partnership or other securities
(collectively referred to herein as "Prior Offerings") which, under
present applicable law, would result in the integration of Prior Offerings
with the offering and sale of the Units by you as contemplated in this
Agreement.
3. Offering and Sale of Units.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, PDC hereby appoints you as the Dealer Manager during the Offering
Period to offer all of the Units to potential investors in the Partnership
in accordance with the terms of the Prospectus, and you agree to use your
best efforts as Dealer Manager, promptly following the Effective Date, to
offer the Units to suitable investors at the price and in accordance with
the terms stated in the Prospectus.
(b) The offering of Units by you and the Soliciting Dealers will
only be made to potential investors residing in the states listed on
Exhibit A to this Agreement without the prior consent of PDC.
(c) All sales of Units will be conditioned upon receipt of
Subscriptions from suitable investors acceptable to PDC for a minimum of
50 Units ($1,000,000) (the "Minimum Offering") on or before the
Termination Date. All checks received with Subscription Documents shall
be made payable to "PNC Bank N.A. as Escrow Agent for PDC 199 - Limited
Partnership" and shall be transferred to the Escrow Agent by noon of the
next business day after receipt for deposit in the Escrow Account
established pursuant to the Prospectus.
(d) All sales of Units will be conditioned upon acceptance by PDC
of the Subscription Documents of each subscriber (consisting of the
3
Subscription Agreement, all in the form as may be approved by you, the
Soliciting Dealers and PDC, or as may be required by the Prospectus and
the Partnership Agreement), which shall be duly executed by each
subscriber and be accompanied by payment in cash of the purchase price of
Units subscribed to by each such subscriber. PDC shall have the right, in
its sole discretion, to reject the Subscription of any potential purchaser
of Units.
(e) The Units will be sold only to persons who warrant or
represent that they or their beneficiaries meet the financial suitability
requirements as set forth in the Prospectus and such other requirements
may be required by the states in which the Units are sold.
(f) In consideration of your execution of this Agreement, and the
performance of your obligations hereunder, and in further consideration of
your supervising the offering of Units, PDC agrees to cause the
Partnership to pay to you, within ten (10) business days after the filing
of the Certificate, 10-1/2% of the Partnership Subscriptions (as defined in
the Partnership Agreement) received and accepted by PDC as of the Closing
Date, out of which you may pay commissions totaling not more than 8% to
the Soliciting Dealer and reimbursement of due diligence expenses,
marketing support fees, and other compensation, totaling no more than 2%
to the Soliciting Dealer as provided in the Soliciting Dealers Agreement,
and from which you may retain 0.5% of the Partnership Subscriptions as a
wholesaling fee, provided, however, that in the event the Minimum Offering
($1,000,000 representing a sale of 50 units) is not achieved on or before
the Termination Date and this Agreement is terminated, neither you nor the
Soliciting Dealers shall receive any sales commissions or fees. Prior to
the time any partnership had reached the Minimum Offering, the Managing
General Partner shall advance from its own funds sales commissions and due
diligence expenses which would otherwise be payable in connection with
subscription funds received and cleared from subscribers that the Managing
General Partner deems suitable to be Investor Partners.
4. Suitability.
(a) As Dealer-Manager, you are aware of the suitability standards,
as set forth in the Prospectus, that an offeree must meet and represent.
As such, you will make reasonable inquiry and cause the Soliciting Dealers
to make reasonable inquiry to assure that there is compliance with such
standards.
(b) In recommending the purchase of Units in the Partnership, you
shall (and you shall cause the Soliciting Dealers to):
(l) Have reasonable grounds to believe, on the basis of
information obtained from the offeree concerning his investment
objectives, other investments, financial situation and needs, and any
other information known by you or any associated person, that:
(i) the offeree is or will be in a financial position
appropriate to enable him to realize to a significant extent the benefits
described in the Prospectus;
(ii) the offeree has a fair market net worth sufficient to
sustain the risks inherent in the program, including loss of investment
and lack of liquidity;
(iii) the program is otherwise suitable for the offeree; and
(2) Maintain in your file documents disclosing the basis upon
which the determination of suitability was reached as to each offeree.
4
(c) Notwithstanding the provisions of subsection (b) above, you
shall not execute any transaction of Units of the Partnership in any
discretionary account without prior written approval of the transaction by
the offeree.
(d) Prior to executing a purchase transaction of Units of the
Partnership, you shall inform the offeree of all the pertinent facts
relating to the liquidity and marketability of the Units during the term
of the Partnership.
5. Disclosure.
(a) Prior to participating in the offering, you shall have
reasonable grounds to believe, based on information made available to you
by PDC through a prospectus or other materials, that all material facts
are adequately and accurately disclosed and provide a basis for evaluating
the program.
(b) In determining the adequacy of disclosed facts pursuant to
subsection (a) hereof, you shall obtain information on material facts
relating at a minimum to the following, if relevant in view of the nature
of the program:
(1) items of compensation;
(2) physical properties;
(3) tax aspects;
(4) financial stability and experience of PDC;
(5) the program's conflicts and risk factors; and
(6) appraisals and other pertinent reports.
(c) For the purposes of subsections (a) or (b) hereof, you may rely
upon the results of an inquiry conducted by another NASD member or
members, provided that:
(1) the member or persons associated with a member has
reasonable grounds to believe that such inquiry was conducted with due
care;
(2) the results of the inquiry were provided to you with the
consent of the member or members conducting or directing the inquiry; and
(3) no member that participated in the inquiry is a sponsor of
the program or an affiliate of such sponsor.
6. Covenants of PDC. PDC covenants that it will:
(a) During the Offering Period and prior to the Closing Date,
notify you and the Soliciting Dealers immediately, and confirm the notice
in writing, of any event relating to or affecting the Partnership or PDC
which might reasonably result in the Prospectus containing an untrue
statement of a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
existing at the time they were made, not misleading; and if in the opinion
of counsel to PDC, the content of such disclosure to you requires an
amendment or supplement to the Prospectus, PDC will forthwith prepare and
furnish to you and the Soliciting Dealers, at PDC's expense, a reasonable
number of copies of such amendment or amendments, or supplement or
supplements, to the Prospectus so as to render it not misleading prior to
the consummation of any sale of Units to an Investor or any prospective
investor;
5
(b) Qualify or register the Units for offering and sale or make
filings under the securities laws of the states listed in Exhibit A to
this Agreement and such additional states as you or the Soliciting Dealers
may reasonably designate; provided, however, neither the Partnership nor
PDC shall be obligated to file any general consent to service of process
under the laws of any such jurisdiction or subject themselves to taxation
as doing business in such jurisdiction;
(c) File registration statements with the Securities and Exchange
Commission and applicable regulatory authorities of the States, as and
when such filings are required under the securities laws of those States,
and promptly furnish to you two signed or conformed copies thereof;
(d) Deliver promptly to you and the Soliciting Dealers, upon
request, true and complete copies of such contracts, notes, mortgages,
commitments, loan agreements and other documents relating to the formation
of the Partnership, the acquisition, ownership, operation and management
of any oil and gas properties or interests acquired or to be acquired by
the Partnership, the business experience and financial condition of PDC,
and such other information, financial or otherwise, relating to the
business, assets and liabilities of the Partnership or PDC, as you or the
Soliciting Dealers may reasonably request prior to the Closing Date;
(e) Deliver to you and the Soliciting Dealers one copy of each
report, letter, statement or other written information furnished by the
Partnership to the Partners during the term of the Partnership;
(f) Apply the proceeds of the sale of the Units substantially as
set forth in the Prospectus;
(g) From and after the Closing Date, not offer or sell interests in
the Partnership or other securities which offers or sales, in the opinion
of counsel to PDC, would be integrated with offers and sales of interest
in the Partnership pursuant to this Agreement.
7. Covenants of PDC Securities. PDC Securities Incorporated
agrees:
(a) To offer the Units for sale and to sell the Units solely on the
basis of the information furnished to prospective investors in the
Prospectus. If you prepare any materials or presentations supplementary
to the Prospectus, you assume complete responsibility for such materials
and presentations and agree to deliver no written information other than
the Prospectus to any potential subscriber unless authorized to do so in
writing by the Partnership;
(b) To obtain written evidence sufficient to permit you and PDC to
reasonably determine that a subscriber purporting to qualify is, in fact,
so qualified;
(c) Prior to obtaining a Subscription from any potential subscriber
to obtain evidence satisfactory to you and PDC that each subscriber meets
the financial suitability requirements established in the Prospectus;
(d) Not to commence the offer or sale of Units in any State until
you have received advice from PDC or its counsel that the Units may be
offered and sold in such state; and
6
(e) To furnish to PDC or its designee at PDC's request during the
Offering Period, and in any event within five (5) days after the
Termination Date, the Subscription Documents (or true copies thereof) of
subscribers solicited by you to permit PDC or its designee to review such
Subscription Documents and to evaluate the qualifications of such
subscribers as potential Partners.
8. Payment of Expenses. PDC will pay all expenses incident to the
performance of its obligations under this Agreement, including (a) the
preparation of the Prospectus, (b) the preparation of this Agreement, (c)
the fees and disbursements of PDC's counsel, accountants and consultants
related to the preparation of the Prospectus, (d) the qualification of the
Units for the offer and sale thereof under the securities laws of the
States and you or the Soliciting Dealers may reasonably designate,
including filing fees and the fees and disbursements of counsel in
connection therewith, and (e) the printing and delivery to you of such
quantities of the Prospectus as you may reasonably request and all
amendments or supplements thereto.
9. Closing Conditions. Your obligation to deliver the Subscriptions
Documents to PDC for acceptance by it and funds received for Subscriptions
is subject to the satisfaction on or before the Closing Date (as above
defined) of the following conditions:
(a) You and the Soliciting Dealers shall have received the
favorable opinion of one or more of the special counsel or general counsel
for the Partnership or PDC, dated as of the Closing Date, to the effect
that
(i) the Partnership Agreement provides for the issuance and sale
of the Units; all action required to be taken by PDC or the Partnership as
a condition to the offering or sale of Units to subscribers has been
taken; subscribers purchasing Units will become Additional General
Partners or Limited Partners in the Partnership entitled to all the
benefits of Additional General
Partners or Limited Partners under the Partnership Agreement upon the
occurrence of the following events: the acceptance by the Managing
General Partner of such Partners, the payment of the consideration
therefor provided in the Subscription Documents, the execution of the
Partnership Agreement by PDC as Managing General Partner and on behalf of
the Partners as provided in the Limited Partnership Agreement, and the
execution and recordation by the Partnership of the Certificate as shall
be required or appropriate to organize the Partnership with Investors as
Additional General Partners or Limited Partners in accordance with the
requirements of the West Virginia Act;
(ii) the Partnership Agreement has been duly and validly
authorized and executed by PDC and constitutes the valid and binding
obligation of PDC;
(iii) this Agreement has been duly and validly authorized,
executed and delivered by PDC and constitutes the valid and binding
agreement of PDC;
(iv) to the best of their knowledge, there are no legal or
governmental proceedings pending or threatened against the Partnership or
PDC (or its Affiliates) of a character required to be disclosed in the
Prospectus which have not been so disclosed and no consent, approval,
authorization or order of any governmental agency or body is required in
connection with the consummation of the transactions contemplated by this
Agreement, the Prospectus, or the Partnership Agreement, except such as
7
have been heretofore obtained and such as may be necessary under state
"Blue Sky" or securities laws;
(v) the Partnership will be classified as a partnership and not
as an association taxable as a corporation for Federal income tax
purposes.
(b) On the Effective Date and during the Offering no order
suspending the offering or sale of the Units shall have been issued, and
on the Effective Date and during the Offering Period no proceedings for
that purpose shall have been instituted, or to your knowledge or that of
PDC, shall be contemplated.
(c) You and the Soliciting Dealers shall have received a sworn
certificate, dated the Closing Date, signed by the President of PDC, to
the effect that he has carefully read the Prospectus and that:
(i) as of its date, the Prospectus did not contain an untrue
statement of a material fact and, to the best of his knowledge after
reasonable inquiry, did not omit to state a material fact necessary to
make the statements made therein, in light of the circumstances under
which they were made, not misleading;
(ii) since the date of the Prospectus, no event has occurred
which should have been set forth in an amendment or supplement to the
Prospectus which has not been so set forth;
(iii) since the date of the Prospectus, there has not been any
adverse change in the business or proposed business, interests, oil and
gas properties or proposed oil and gas properties or condition, financial
or otherwise, of the Partnership or PDC, whether or not arising from
transactions in the ordinary course of business, which might materially
and adversely affect the properties or operations or proposed properties
and operations of the Partnership or PDC or the ability of PDC to perform
the services proposed to be performed by it as described in the
Prospectus; and
(iv) to the best of his knowledge, based upon reasonable
investigation, the representations and warranties of PDC in Section 2 of
this Agreement are true and correct as if made at and as of the Closing
Date.
If any condition to your obligations hereunder shall not have been
fulfilled when and as required by this Agreement to be fulfilled, you may
waive any such condition which has not been fulfilled, extend the time for
its fulfillment or terminate this Agreement. In the event that you elect
to terminate this Agreement, all Subscription Documents, checks and other
documents and instruments delivered to you for the purchase of the Units
shall be returned to the subscribers solicited by you, accompanied by a
notice from you of the cancellation and termination of the offering of the
Units.
10. Representations and Agreements to Survive. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall remain operative and in full force and
effect and shall survive the Closing Date.
11. Effective Date, Term and Termination of this Agreement.
(a) This Agreement shall become effective on the Effective Date.
You or PDC may elect to prevent this Agreement from
8
becoming effective without liability of any party to any other party by
giving notice of such election to the other parties hereto before the time
this Agreement otherwise would become effective.
(b) You shall have the right to terminate this Agreement at any
time during the Offering Period if any representation or warranty
hereunder shall be found to have been incorrect or misleading or PDC shall
fail, refuse or be unable to perform any of its agreements hereunder or to
fulfill any condition of your obligations hereunder or if the Prospectus
shall have been amended or supplemented despite your objection to such
amendment or supplement or (i) if all trading on the New York Stock
Exchange or the American Stock Exchange (in this Section collectively
called "Exchange') shall have been suspended, or minimum or maximum prices
for trading generally shall have been fixed, or maximum ranges for prices
for all securities shall have been required on the Exchange by the
Exchange or by order of the Securities and Exchange Commission or any
other governmental authority having jurisdiction or (ii) if the United
States shall have become involved in a war or major hostilities or (iii)
if a banking moratorium has been declared by a state or Federal authority
or (iv) if PDC or its properties shall have sustained a material or
substantial loss by fire, flood, accident, earthquake or other calamity or
malicious act which, whether or not said loss shall have been insured,
will in your opinion make it inadvisable to proceed with the offering and
sale of the Units; or if there shall have been such change in the
condition or prospects of the Partnership or PDC or in the levels of the
prime interest rate or long-term mortgage rate or in the condition
of securities markets generally as in your judgement would make it
inadvisable to proceed with the offering and sale of the Units.
12. Notices.
(a) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, or telegraphed and confirmed to you at PDC Securities
Incorporated, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx Xxxxxxxx 00000,
Attention: Xxxx X. Xxxxxxxxx; if sent to PDC and/or the Partnership shall
be mailed, delivered or telegraphed and confirmed to PDC at 000 Xxxx Xxxx
Xxxxxx, P. O. Xxx 00, Xxxxxxxxxx, Xxxx Xxxxxxxx 00000.
(b) Notice shall be deemed to be given by you to PDC or the
Partnership or by PDC or the Partnership to you as of the third business
day after it is mailed or telegraphed as provided and confirmed to you at
PDC Securities Incorporated, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx
Xxxxxxxx 00000.
13. Parties. This Agreement shall inure solely to the benefit of
you and shall be binding upon you and PDC and your respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any person or corporation, other than the
parties hereto and their respective successors and assigns any legal or
equitable right, remedy or claim under or in respect of this Agreement or
any provision herein contained. No purchaser of any of the Units from you
or PDC shall be construed a successor or assign by reason merely of such
purchase.
14. Construction. This Agreement shall be construed in accordance
with the laws of the State of West Virginia.
If the foregoing correctly sets forth the understanding between us, please
so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
9
Very truly yours,
PETROLEUM DEVELOPMENT CORPORATION
By
Title
President
Accepted as of the date first above written.
PDC SECURITIES INCORPORATED
By
Title
President
10
