Encore Acquisition Company Underwriting Agreement
Exhibit 1.1
Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Encore Acquisition Company, a corporation organized under the laws of Delaware (the
“Company”), proposes to sell to you as the sole underwriter (the “Underwriter”), the number of
shares of Common Stock, $0.01 par value (“Common Stock”), of the Company set forth in Schedule
I hereto (said shares to be issued and sold by the Company being hereinafter called the
“Underwritten Securities” or the “Securities”)). The Company is not granting to the Underwriter
any option to purchase any additional shares of Common Stock in connection with this offering. Any
reference herein to the Registration Statement, the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the
Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the
Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the case may be; and
any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus shall be deemed to refer to and include the filing of any document under the Exchange
Act after the Effective Date of the Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the case may be, deemed to
be incorporated therein by reference. Certain terms used herein are defined in Section 19 hereof.
1. Representations and Warranties. The Company represents and warrants to, and agrees
with, the Underwriter as set forth below in this Section 1.
(a) The Company meets, and as of the effective date of the Registration Statement met,
the requirements for use of Form S-3 under the Act. The Company has prepared and filed with
the Commission a registration statement (the file number of which is set forth in
Schedule I hereto) on Form S-3, including a related basic prospectus, for
registration under the Act of the offering and sale of the Securities. Such Registration
Statement, including any post-effective amendments thereto filed prior to the Execution
Time, have become effective. The Company may have filed with the Commission, as part of an
amendment to the Registration Statement or pursuant to Rule 424(b), one or more Preliminary
Final Prospectuses, each of which has previously been furnished to
you. The Company will file with the Commission a final prospectus supplement relating
to the Securities in accordance with Rule 424(b). As filed, such final prospectus
supplement shall contain all information required by the Act and the rules thereunder, and,
except to the extent the Underwriter shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to you prior to the Execution Time or, to the
extent not completed at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the Basic Prospectus and any
Preliminary Final Prospectus) as the Company has advised you, prior to the Execution Time,
will be included or made therein. The Registration Statement, at the Execution Time, meets
the requirements set forth in Rule 415(a)(1)(x).
(b) On the Effective Date, the Registration Statement did, and when the Final
Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing
Date (as defined herein) (a “settlement date”), the Final Prospectus (and any supplement
thereto) will, comply in all material respects with the applicable requirements of the Act
and the Exchange Act and the respective rules thereunder; on the Effective Date and at the
Execution Time, the Registration Statement did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and on the date of the Final
Prospectus and on the Closing Date and any settlement date, the Final Prospectus (together
with any supplement thereto) will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement or the Final Prospectus
(or any supplement thereto) in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Underwriter specifically for inclusion in the
Registration Statement or the Final Prospectus (or any supplement thereto), it being
understood and agreed that the only such information furnished by or on behalf of the
Underwriter consists of the information described as such in Section 8 hereof.
(c) The Disclosure Package, when taken together as a whole at the Execution Time,
together with the price to public, number of Underwritten Securities and the underwriting
discount on the cover page of the Final Prospectus, does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the Disclosure Package
based upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein, it being understood and agreed that the only such
information furnished by or on behalf of the Underwriter consists of the information
described as such in Section 8 hereof.
(d) (i) At the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the meaning of Rule
164(h)(2)) of the Securities and (ii) as of the Execution Time (with such date being used as
the determination date for purposes of this clause (ii)), the Company was not and is not an
Ineligible Issuer (as defined in Rule 405), without taking account of any
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determination by the Commission pursuant to Rule 405 that it is not necessary that the
Company be considered an Ineligible Issuer.
(e) Each Issuer Free Writing Prospectus does not include any information that conflicts
with the information contained in the Registration Statement, including any document
incorporated therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified. The foregoing sentence does not apply to statements in or
omissions from the Disclosure Package based upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf of the
Underwriter consists of the information described as such in Section 8 hereof.
(f) The documents incorporated by reference in the Registration Statement, Disclosure
Package and the Final Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed or will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents, when read together with the other
information in the Final Prospectus, (a) at the time the Registration Statement became
effective, (b) at the earlier of the time the prospectus was first used and the date and
time of the first contract of sale of the Securities in this offering, and (c) on the
Closing Date, did not and will 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, not misleading. The preceding sentence does not apply to statements in or
omissions from the Disclosure Package based upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf of the
Underwriter consists of the information described as such in Section 8 hereof.
(g) Neither the Company nor any of its subsidiaries has sustained since the date of the
latest audited financial statements included or incorporated by reference in the Final
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
Final Prospectus; and, since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its subsidiaries (other than shares
of the Company’s common stock issued upon exercise of options granted under the Company’s
employee stock option plans existing on the date of the Final Prospectus) or any material
adverse change, or any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, stockholders’ equity or
results of operations of the Company and its subsidiaries, except as set forth in or
contemplated in the Disclosure Package and the Final Prospectus (exclusive of any supplement
thereto).
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(h) The Company has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as described in the Final Prospectus;
and the Company is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so qualified would,
individually or in the aggregate, not have a material adverse effect on the condition
(financial or other), business, properties, earnings, assets, stockholders’ equity,
prospects or results of operations of the Company and its subsidiaries taken as a whole (a
“Material Adverse Effect”).
(i) As of March 15, 2006, the Company has 49,766,021 shares of Common Stock issued and
outstanding; all the outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable and are not subject to
any pre-emptive or similar rights; except as described in or expressly contemplated by the
Disclosure Package and the Final Prospectus, there are no outstanding rights (including,
without limitation, pre-emptive rights), warrants or options (other than restricted stock
and any options granted or shares of Common Stock of the Company issued upon exercise of
options granted or to be granted under the Company’s employee stock option plans existing on
the date of the Final Prospectus) to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the Company or any
of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of
any kind relating to the issuance of any capital stock of the Company or any such
subsidiary, any such convertible or exchangeable securities or any such rights, warrants or
options (other than restricted stock and any options granted or shares of Common Stock of
the Company issued upon exercise of options granted or to be granted under the Company’s
employee stock option plans existing on the date of the Final Prospectus); the capital stock
of the Company conforms in all material respects to the description thereof contained in the
Registration Statement, the Disclosure Package and the Final Prospectus.
(j) Each subsidiary of the Company has been duly incorporated or organized and is an
existing corporation, limited partnership or limited liability company in good standing
under the laws of the jurisdiction of its incorporation or organization, with power and
authority (corporate and other) to own its properties and conduct its business as described
in the Final Prospectus; and each subsidiary of the Company is duly qualified to do business
as a foreign corporation, limited partnership or limited liability company in good standing
in all other jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so qualified would not
have a Material Adverse Effect; all outstanding shares of capital stock of each subsidiary
that is a corporation have been duly and validly authorized and issued and are fully paid
and non-assessable, and the limited partnership agreements or limited liability company
agreements governing all outstanding limited partnership interests or limited liability
company interests of each subsidiary that is a limited partnership or limited liability
company, as the case may be, have been validly executed and delivered, and all capital
contributions required under such limited partnership agreements or limited liability
company agreements have been paid in full;
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and the capital stock, limited partnership interests or limited liability company
interests of each subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects, except for liens under or permitted by the
Company’s Amended and Restated Credit Agreement dated August 19, 2004, as amended (the
“Senior Credit Facility”), among the Company, Encore Operating, L.P., Bank of America, N.A.,
as Administrative Agent and L/C Issuer, Fortis Capital Corp. and Wachovia Bank, N.A., as
Co-Syndication Agents, BNP Paribas and Citibank, N.A., as Co-Documentation Agents, and the
financial institutions listed on Schedule 2.01 thereto as Lenders. The subsidiaries listed
on Schedule III of this Agreement are the only subsidiaries of the Company.
(k) This Agreement has been duly authorized, executed and delivered by the Company.
(l) The statements set forth in the Final Prospectus under the captions “Description of
Common Stock”, insofar as they purport to constitute a summary of the terms of the
Securities, and under the caption “Underwriting,” insofar as it purports to describe the
provisions of the laws and documents referred to therein, are accurate, complete and fair.
The preceding sentence does not apply to statements under the caption “Underwriting” based
upon and in conformity with written information furnished to the Company by the Underwriter
specifically for use therein, it being understood and agreed that the only such information
furnished by or on behalf of the Underwriter consists of the information described as such
in Section 8 hereof.
(m) The execution, delivery and performance by the Company of this Agreement, the
issuance and sale of the Securities, and the consummation of the transactions contemplated
herein and in the Final Prospectus (including the use of proceeds from the sale of the
Securities as described in the Final Prospectus), and compliance with the terms and
provisions thereof do not and will not (i) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under, any statute, any rule,
regulation or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any such subsidiary is a
party or by which the Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, except for such breaches,
violations and defaults as would not have a Material Adverse Effect, or (ii) result in any
violation of the charter or by-laws of the Company or any such subsidiary.
(n) No consent, approval, authorization, or order of, or registration or filing with,
any governmental agency or body or any court is required for the consummation of the
transactions contemplated by this Agreement in connection with the issuance and sale of the
Securities, except such as have been, or will have been prior to the Closing Date, obtained
under the Act and such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriter.
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(o) Except as disclosed in the Disclosure Package and the Final Prospectus, there are
no contracts, agreements or understandings between the Company or any subsidiary and any
person that would give rise to a valid claim against the Company, any subsidiary or the
Underwriter for a brokerage commission, finder’s fee or other like payment with respect to
the offer and sale of the Securities.
(p) Neither the Company nor any of its subsidiaries is in violation of its respective
charter or by-laws or in default in the performance of any obligation, agreement, covenant
or condition contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective property is bound except where such
violations or defaults would not have a Material Adverse Effect.
(q) The Company and its subsidiaries have (1) good and indefeasible title to all of
their interests in the oil and gas properties described in the Disclosure Package and the
Final Prospectus, (2) good and indefeasible title in fee simple to all other real property
owned by the Company or any of its subsidiaries and (3) good title to all personal property
owned by the Company or any of its subsidiaries, in each case, free and clear of all liens,
encumbrances and defects, except (i) as described in the Disclosure Package and the Final
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, utilization
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, (iv) liens arising under or permitted by the Senior
Credit Facility or (v) liens, encumbrances and defects that do not, individually or in the
aggregate, materially affect the value of such properties, taken as a whole, or materially
interfere with the use made or proposed to be made of such properties, taken as a whole, by
the Company or its subsidiaries; except as described in the Disclosure Package and the Final
Prospectus, the leases, options to lease, drilling concessions or other arrangements held by
the Company and its subsidiaries reflect in all material respects the right of the Company
and its subsidiaries to explore the unexplored and undeveloped acreage described in the
Disclosure Package and the Final Prospectus, and the care taken by the Company and its
subsidiaries 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
real property and buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made or proposed to be made of such real property and
buildings by the Company or its subsidiaries.
(r) The Company and its subsidiaries carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their business and the
value of their respective properties as is customary for companies engaged in similar
businesses in similar industries; and neither the Company nor any of its subsidiaries has
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(i) received notice from any insurer or agent of such insurer that capital improvements
or other expenditures are required or necessary to be made in order to continue such
insurance or (ii) any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar coverage at
reasonable cost from similar insurers as may be necessary to continue its business.
(s) Except as disclosed in the Disclosure Package and the Final Prospectus, no
relationship, direct or indirect, exists between or among the Company or any of its
subsidiaries on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company or any of its subsidiaries on the other hand, that are required by
the Act to be described in the Final Prospectus.
(t) The Company and its subsidiaries possess all licenses, franchises, certificates,
permits, approvals, consents and other authorizations (collectively, “Governmental
Licenses”) issued by and have made all declarations and filings with, the appropriate
federal, state, local or foreign governmental or regulatory authorities that are necessary
for the ownership or lease of their respective properties or the conduct of their respective
businesses as described in the Disclosure Package and the Final Prospectus except where the
failure to possess such Governmental Licenses or make such declaration and filings would
not, individually or in the aggregate, have a Material Adverse Effect. The Company and its
subsidiaries 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 such 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; and neither the Company nor any of its subsidiaries has received notice of any
revocation or modification of any such license, certificate, permit or authorization or has
any reason to believe that any such Governmental Licenses will not be renewed in the
ordinary course, except for notices, modifications or non-renewals as would not,
individually or in the aggregate, have a Material Adverse Effect.
(u) No labor disturbance or dispute with employees of the Company or any of its
subsidiaries exists or, to the best knowledge of the Company, is contemplated or threatened,
which disturbance or dispute would have a Material Adverse Effect.
(v) The Company and its subsidiaries own, possess or can acquire on reasonable terms
adequate trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property (collectively,
“intellectual property rights”) necessary to conduct the business now operated by them, or
presently employed by them, except where the failure to own, possess or acquire such
intellectual property rights would not, individually or in the aggregate, have a Material
Adverse Effect, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect.
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(w) Except as disclosed in the Disclosure Package and the Final Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “environmental laws”), owns or operates any real property
contaminated with any substance that is subject to any environmental laws, is liable for any
off-site disposal or contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and the Company is
not aware of any pending investigation which might lead to such a claim.
(x) Except as disclosed in the Disclosure Package and the Final Prospectus, there are
no pending actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect, or would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise material in the context
of the sale of the Securities; and no such actions, suits or proceedings are, to the
Company’s knowledge, threatened or contemplated.
(y) The financial statements and the notes related thereto of the Company and its
consolidated subsidiaries included or incorporated by reference in the Disclosure Package
and the Final Prospectus present fairly in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates shown and their
results of operations and changes in their consolidated cash flows for the periods shown,
and such financial statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis; the assumptions
used in preparing any pro forma financial data included or incorporated by reference in the
Disclosure Package and the Final Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those assumptions, and the pro
forma data therein reflect the proper application of those adjustments to the corresponding
historical financial statement amounts; and the other financial information included or
incorporated by reference in the Disclosure Package and the Final Prospectus, including oil
and gas production information, has been derived from the accounting records of the Company
and its subsidiaries and presents fairly in all material respects the information shown
thereby.
(z) Ernst & Young LLP, who has certified certain financial statements of the Company,
is the independent registered public accounting firm with respect to the Company as required
by the Act.
(aa) Xxxxxx and Xxxxx, Ltd. (the “Engineer”), whose reserve evaluations are referenced
or appear, as the case may be, in the Final Prospectus were, as of December 31, 2003, 2004
and 2005, and are, as of the date hereof, independent engineers with
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respect to the Company; and the historical information underlying the estimates of the
reserves of the Company supplied by the Company to the Engineer for the purposes of
preparing the reserve reports of the Company referenced in the Final 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, and working interest and
net revenue information relating to the Company’s ownership interests in properties, was
true and correct on the date that each such Reserve Report was prepared in all material
respects in accordance with customary industry practices.
(bb) The Company is not and after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the Disclosure
Package and the Final Prospectus, will not be an “investment company” as defined in the
Investment Company Act, as amended.
(cc) No “nationally recognized statistical rating organization” as such term is defined
for purposes of Rule 436(g)(2) under the Act has notified the Company that it is considering
(i) the downgrading, suspension or withdrawal of, or any review for a possible change that
does not indicate the direction of the possible change in, any rating assigned to the
Company or any securities of the Company or (ii) any change with negative implications in
the outlook for any rating of the Company or any securities of the Company.
(dd) The Company and its subsidiaries maintain systems of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii) access to assets
is permitted only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any differences.
(ee) Nothing has come to the attention of the Company that has caused the Company to
believe that the statistical and market-related data included or incorporated by reference
in the Disclosure Package and the Final Prospectus is not based on or derived from sources
that are reliable and accurate in all material respects.
(ff) The Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to the Company’s principal
executive officer and its principal financial officer by others within those entities, and
such disclosure controls and procedures are effective at the reasonable assurance level to
perform the functions for which they were established; the Company’s auditors and the Audit
Committee of the Board of Directors have been advised of: (i) any significant deficiencies
and material weaknesses in the design or operation of internal
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control over financial reporting which are reasonably likely to adversely affect the
Company’s ability to record, process, summarize, and report financial information; and (ii)
any fraud, whether or not material, that involves management or other employees who have a
significant role in the Company’s internal control over financial reporting; since the date
of the most recent evaluation of such disclosure controls and procedures, there has not been
any change in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting; the principal executive officer and principal financial officer of the
Company have made all certifications required by the Xxxxxxxx-Xxxxx Act of 2002 (the
“Xxxxxxxx-Xxxxx Act”) and any related rules and regulations promulgated by the Commission,
and the statements contained in any such certification are complete and correct; and the
Company is otherwise in compliance with all applicable provisions of the Xxxxxxxx-Xxxxx Act
that are effective.
(gg) There are no contracts, agreements or understandings between the Company or any
subsidiary and any person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the Company (except
as disclosed in the Disclosure Package and the Final Prospectus) or to require the Company
to include such securities with the Securities registered pursuant to the Registration
Statement.
(hh) The Company and its subsidiaries have paid all federal, state, local and foreign
taxes and filed all tax returns required to be paid or filed through the date hereof 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 otherwise disclosed in the Disclosure Package and the Final Prospectus, there is
no tax deficiency that has been asserted against the Company or any of its subsidiaries or
any of their respective properties or assets which has had, nor does the Company have any
knowledge of any tax deficiency, which if determined adversely to the Company or its
subsidiaries might have, a Material Adverse Effect.
(ii) Except as described in the Disclosure Package and the Final Prospectus, no
subsidiary of the Company is currently prohibited, directly or indirectly, under any
agreement or other instrument to which it is a party or is subject, from paying any
dividends to the Company, from making any other distribution to the Company on such
subsidiary’s capital stock, from repaying to the Company any loans or advances to such
subsidiary from the Company or from transferring any of such subsidiary’s properties or
assets to the Company or any other subsidiary of the Company.
Any certificate signed by any officer of the Company and delivered to the Underwriter or
counsel for the Underwriter in connection with the offering of the Securities shall be deemed a
representation and warranty by the Company, as to matters covered thereby, to the Underwriter.
2. Purchase and Sale. Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees to sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, at the purchase price
set forth in Schedule I hereto, the Underwritten Securities.
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3. Delivery and Payment. Delivery of and payment for the Underwritten Securities
shall be made on the date and at the time specified in Schedule I hereto or at such time on
such later date not more than three Business Days after the foregoing date as the Underwriter shall
designate, which date and time may be postponed by agreement between the Underwriter and the
Company or as provided in Section 9 hereof (such date and time of delivery and payment for the
Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to
the Underwriter against payment by the Underwriter of the purchase price thereof to or upon the
order of the Company by wire transfer payable in same-day funds to an account specified by the
Company. Delivery of the Underwritten Securities shall be made through the facilities of The
Depository Trust Company unless the Underwriter shall otherwise instruct.
4. Offering by the Underwriter. It is understood that the Underwriter proposes to
offer the Securities for sale to the public as set forth in the Final Prospectus.
5. Agreements. The Company agrees with the Underwriter that:
(a) Prior to the termination of the offering of the Securities, the Company will not
file any amendment of the Registration Statement or supplement (including the Final
Prospectus or any Preliminary Final Prospectus) to the Basic Prospectus or any Rule 462(b)
Registration Statement unless the Company has furnished you a copy for your review prior to
filing and will not file any such proposed amendment or supplement to which you reasonably
object. The Company will cause the Final Prospectus, properly completed, and any supplement
thereto to be filed in a form approved by the Underwriter with the Commission pursuant to
the applicable paragraph of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to the Underwriter of such timely filing. The Company will promptly
advise the Underwriter (1) when the Final Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b) or when any Rule 462(b)
Registration Statement shall have been filed with the Commission, (2) when, prior to
termination of the offering of the Securities, any amendment to the Registration Statement
shall have been filed or become effective, (3) of any request by the Commission or its staff
for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement,
or for any supplement to the Final Prospectus or for any additional information, (4) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any notice that would prevent its use or the institution or
threatening of any proceeding for that purpose and (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the institution or threatening of any proceeding for such purpose.
The Company will use its best efforts to prevent the issuance of any such stop order or the
occurrence of any such suspension or prevention and, upon such issuance, occurrence or
prevention, to obtain as soon as possible the withdrawal of such stop order or relief from
such occurrence or prevention, including, if necessary, by filing an amendment to the
Registration Statement or a new registration statement and using its best efforts to have
such amendment or new registration statement declared effective as soon as practicable.
(b) [Reserved]
11
(c) If there occurs an event or development as a result of which the Disclosure Package
would include an untrue statement of a material fact or would omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances then
prevailing, not misleading, the Company will notify promptly the Underwriter so that any use
of the Disclosure Package may cease until it is amended or supplemented.
(d) If, at any time when a prospectus relating to the Securities is required to be
delivered under the Act (including in circumstances where such requirement may be satisfied
pursuant to Rule 172), any event occurs as a result of which the Final Prospectus as then
supplemented would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to amend the
Registration Statement or supplement the Final Prospectus to comply with the Act or the
Exchange Act or the respective rules thereunder, including in connection with use or
delivery of the Final Prospectus, the Company promptly will (1) notify the Underwriter of
such event, (2) prepare and file with the Commission, subject to the second sentence of
paragraph (a) of this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance, (3) use its best efforts to have any
amendment to the Registration Statement declared effective as soon as practicable in order
to avoid any disruption in use of the Final Prospectus and (4) supply any supplemented Final
Prospectus to you in such quantities as you may reasonably request.
(e) As soon as practicable, the Company will make generally available to its security
holders and to the Underwriter an earnings statement or statements of the Company and its
subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158.
(f) The Company will furnish to the Underwriter and counsel for the Underwriter,
without charge, signed copies of the Registration Statement (including exhibits thereto)
and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the
Act (including in circumstances where such requirement may be satisfied pursuant to Rule
172), as many copies of each Preliminary Final Prospectus, the Final Prospectus and each
Issuer Free Writing Prospectus and any supplement thereto as the Underwriter may reasonably
request. The Company will pay the expenses of printing or other production of all documents
relating to the offering.
(g) The Company will arrange, if necessary, for the qualification of the Securities for
sale under the laws of such jurisdictions as the Underwriter may designate, will maintain
such qualifications in effect so long as required for the distribution of the Securities and
will pay any fee of the National Association of Securities Dealers, Inc., in connection with
its review of the offering; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to the imposition of any tax or service of process in suits,
other than those arising out of the offering or sale of the Securities, in any jurisdiction
where it is not now so subject.
12
(h) The Company agrees that, unless it obtains the prior written consent of the
Underwriter, and the Underwriter agrees with the Company that, unless it obtains the prior
written consent of the Company, it will not make any offer relating to the Securities that
would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a
“free writing prospectus” (as defined in Rule 405) required to be filed by the Company with
the Commission or retained by the Company under Rule 433; provided that the prior written
consent of the parties hereto shall be deemed to have been given in respect of the Free
Writing Prospectuses included in Schedule II hereto. Any such free writing
prospectus consented to by the Underwriter or the Company is hereinafter referred to as a
“Permitted Free Writing Prospectus.” The Company agrees that (x) it has treated and will
treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus and (y) it has complied and will comply, as the case may be, with the
requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus,
including in respect of timely filing with the Commission, legending and record keeping.
(i) The Company will not, without the prior written consent of Citigroup Global Markets
Inc., offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any
transaction which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or indirectly, including
the filing (or participation in the filing) of a registration statement with the Commission
in respect of, or establish or increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16 of the Exchange Act, any other
shares of Common Stock or any securities convertible into, or exercisable, or exchangeable
for, shares of Common Stock; or publicly announce an intention to effect any such
transaction, until the Business Day set forth on Schedule I hereto (the date 45 days
after the date of this Agreement), provided, however, that (a) the Company
may issue and sell Common Stock pursuant to any employee stock option plan, stock ownership
plan or dividend reinvestment plan of the Company in effect at the Execution Time, (b) the
Company may issue Common Stock issuable upon the conversion of securities or the exercise of
options or warrants outstanding at the Execution Time and (c) the Company may contract to
issue Common Stock in any business combination to be consummated after such 45-day period.
(j) The Company will not take, directly or indirectly, any action designed to or that
would constitute or that might reasonably be expected to cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(k) The Company will apply the net proceeds from the sale of the Securities as
described in the Final Prospectus under the heading “Use of Proceeds.”
(l) The Company will use its reasonable best efforts to list, subject to notice of
issuance, the Securities on the New York Stock Exchange.
13
6. Conditions to the Obligations of the Underwriter. The obligations of the
Underwriter to purchase the Underwritten Securities shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of the Execution
Time, the Closing Date and any settlement date pursuant to Section 3 hereof (except to the extent
such representations and warranties expressly relate to a specific earlier date (in which case such
representations and warranties shall be true and correct as of such specified earlier date)), to
the accuracy of the statements of the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Final Prospectus, and any supplement thereto, have been filed in the manner and
within the time period required by Rule 424(b); any material required to be filed by the
Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission
within the applicable time periods prescribed for such filings by Rule 433; and no stop
order suspending the effectiveness of the Registration Statement or any notice that would
prevent its use shall have been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have requested and caused Xxxxx Xxxxx L.L.P. , counsel for the
Company, to have furnished to the Underwriter their opinion, dated the Closing Date and
addressed to the Underwriter, to the effect that:
(i) The Company and each of its subsidiaries listed on Schedule III of
the Agreement (individually a “Subsidiary” and collectively the “Subsidiaries”) are
validly existing and in good standing under the laws of their respective
jurisdictions of organization. The Company and its Subsidiaries have all corporate,
partnership or limited liability company power and authority necessary to own or
hold their respective properties and to conduct their respective businesses as
described in the Disclosure Package and the Final Prospectus;
(ii) All the outstanding shares of capital stock or other equity interests of
each subsidiary of the Company have been duly and validly authorized and issued, are
fully paid (in the case of limited partnership or limited liability company
interests, to the extent required under the respective partnership or limited
liability company agreements) and non-assessable (in the case of limited partnership
or limited liability company interests, except as such non-assessability may be
limited by the limited partnership or limited liability company statute of the
jurisdiction of organization of such entity), and, except as otherwise set forth in
the Disclosure Package and the Final Prospectus or as set forth in or permitted by
the Senior Credit Facility, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any perfected security interest;
(iii) The Company’s authorized equity capitalization is contained in the
Disclosure Package and set forth in the Final Prospectus; the capital stock of the
Company conforms in all material respects to the description thereof contained in
the Final Prospectus; the outstanding shares of Common Stock have been duly
14
and validly authorized and issued and are fully paid and nonassessable; the
Securities have been duly and validly authorized, and, when issued and delivered to
and paid for by the Underwriter pursuant to this Agreement, will be fully paid and
nonassessable; the holders of outstanding shares of capital stock of the Company are
not entitled to preemptive or other rights to subscribe for the Securities under the
Company’s Second Amended and Restated Certificate of Incorporation or the Delaware
General Corporation Law;
(iv) To the knowledge of such counsel, except as described in the Disclosure
Package and the Final Prospectus, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the Company or any of
its subsidiaries is or may be a party or to which any property of the Company or any
of its subsidiaries is or may be the subject which, individually or in the
aggregate, if determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect; and to the knowledge of
such counsel, no such investigations, actions, suits or proceedings are threatened
or contemplated by any governmental or regulatory authority or threatened by others;
(v) The statements included or incorporated by reference in the Final
Prospectus under the heading “Description of Capital Stock” and in the Registration
Statement in Item 15, insofar as such statements purport to summarize the provisions
of law and documents referred to therein fairly summarize in all material respects
the laws and documents described therein;
(vi) The Registration Statement has become effective under the Act; any
required filing of the Basic Prospectus, any Preliminary Final Prospectus and the
Final Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); to the knowledge
of such counsel, no stop order suspending the effectiveness of the Registration
Statement or any notice that would prevent its use has been issued, and, to the
knowledge of such counsel, no proceedings for that purpose have been instituted or
threatened;
(vii) The Company has the corporate power and authority to execute and deliver
this Agreement and to perform all of its obligations thereunder (including the use
of proceeds from the sale of the Securities as described in the Disclosure Package
and the Final Prospectus); and all action required to be taken by the Company for
the due and proper authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby (including the use of proceeds
from the sale of the Securities as described in the Disclosure Package and the Final
Prospectus) have been duly and validly taken;
(viii) This Agreement has been duly authorized, executed and delivered by the
Company;
15
(ix) The Company is not and, after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described in the Final
Prospectus, will not be an “investment company” as defined in the Investment Company
Act of 1940, as amended;
(x) No consent, approval, authorization, filing with or order of any court or
governmental or regulatory authority of the United States of America, the State of
Delaware (solely with respect to the Delaware General Corporation Law) or the State
of Texas is required in connection with the transactions contemplated herein, except
such as have been obtained under the Act and such as may be required under the blue
sky laws of any jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriter in the manner contemplated in this Agreement and in
the Final Prospectus and such other approvals (specified in such opinion) as have
been obtained;
(xi) The execution, delivery and performance by the Company of this Agreement,
the issuance and sale of the Securities being delivered on the Closing Date, and the
consummation of the transactions contemplated by this Agreement (including the use
of proceeds from the sale of the Securities as described in the Final Prospectus)
will not (i) conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, any agreement set forth on Exhibit A
to such counsel’s opinion (to be limited to material contracts included in the
Company’s Form 10-K for the fiscal year ended December 31, 2005 and any filings
since such Form 10-K made by the Company with the Commission, (ii) result in any
violation of the provisions of the charter or by-laws or similar organizational
documents of the Company or any of its subsidiaries or (iii) result in the violation
of any U.S. federal or Texas law or statute, the Delaware General Corporation Law or
any judgment, order or regulation of any U.S. or Texas court or governmental or
regulatory authority except, in the case of clauses (i) and (iii) above, for such
conflicts, breaches or violations, liens, charges or encumbrances that would not,
individually or in the aggregate, have a Material Adverse Effect; and
(xii) To such counsel’s knowledge, except as have been waived, there are no
persons with registration or similar rights to have any securities of the Company
registered pursuant to the Registration Statement
(xiii) The documents incorporated by reference in the Registration Statement
and the Final Prospectus or any further amendment or supplement thereto made by the
Company prior to the Closing Date, (other than the financial statements and related
schedules, other financial data and oil and gas reserve and production data therein,
as to which such counsel need express no opinion), when they became effective or
were filed with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder;
16
(xiv) The Registration Statement and the Final Prospectus (other than (a) the
financial statements (including the notes thereto and the auditors’ reports
thereon), (b) the other financial and statistical information contained therein, (c)
the estimated oil and natural gas reserve evaluations and related calculations of
Xxxxxx and Xxxxx, Ltd., independent petroleum engineers, and (d) the exhibits
thereto, as to which such counsel need express no opinion) appear on their face to
comply as to form in all material respects with the applicable requirements of the
Act and the Exchange Act.
Such counsel shall also state that they have participated in conferences with officers and
other representatives of the Company, with representatives of the Company’s independent
registered public accounting firm and independent petroleum engineer and with you and your
counsel, at which the contents of the Registration Statement, the Disclosure Package, the
Final Prospectus and related matters were discussed, and although they did not independently
verify the information in the Registration Statement, the Disclosure Package or the Final
Prospectus, and are not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration Statement, the
Disclosure Package and the Final Prospectus (except in opinion (v) above) such counsel shall
advise you that, on the basis of the foregoing (relying to a limited extent with respect to
materiality upon statements by officers and other representatives of the Company), no facts
have come to the attention of such counsel to lead such counsel to believe (1) that on the
Effective Date the Registration Statement (other than (a) the financial statements,
including the notes thereto and the auditors’ reports thereon, contained or incorporated by
reference therein or omitted therefrom, (b) the other financial and statistical information
contained or incorporated by reference therein or omitted therefrom, (c) the estimated oil
and natural gas reserve evaluations and related calculations of Xxxxxx and Xxxxx, Ltd.,
independent petroleum engineers contained or incorporated by reference therein or omitted
therefrom, and (d) any statement or representation in any exhibits included or incorporated
by reference therein, as to which such counsel need express no opinion) contained any untrue
statement of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (2) that the Final
Prospectus (other than (a) the financial statements, including the notes thereto and the
auditors’ reports thereon, contained or incorporated by reference therein or omitted
therefrom, (b) the other financial and statistical information contained or incorporated by
reference therein or omitted therefrom, and (c) the estimated oil and natural gas reserve
evaluations and related calculations of Xxxxxx and Xxxxx, Ltd., independent petroleum
engineers, contained or incorporated by reference therein or omitted therefrom, as to which
such counsel need express no opinion) as of its date and on the Closing Date included or
includes any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading or (3) that the Disclosure Package, together with the price
to the public, the number of Underwritten Securities and the underwriting discount on the
cover page of the Final Prospectus (other than (a) the financial statements, including the
notes thereto and the auditors’ reports thereon, contained or incorporated by reference
therein or omitted therefrom, (b) the other financial and statistical information contained
or incorporated by reference therein or omitted
17
therefrom therein, and (c) the estimated oil and natural gas reserve evaluations and related
calculations of Xxxxxx and Xxxxx, Ltd., independent petroleum engineers, contained or
incorporated by reference therein or omitted therefrom, as to which such counsel need
express no opinion) when taken together as a whole, as of the Execution Time contained any
untrue statement of a material fact or omitted to state any material fact necessary in order
to make the statements therein, in the light of circumstances under which they were made,
not misleading.
In rendering such opinions, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Texas or the Federal laws of
the United States, to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriter and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of the Company and public
officials. References to the Final Prospectus in this paragraph (b) shall also include any
supplements thereto at the Closing Date.
(c) The Underwriter shall have received from Xxxxxxx Xxxxx LLP, counsel for the
Underwriter, such opinion or opinions, dated the Closing Date and addressed to the
Underwriter, with respect to the issuance and sale of the Securities, the Registration
Statement, the Disclosure Package, the Final Prospectus (together with any supplement
thereto) and other related matters as the Underwriter may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for the purpose
of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Underwriter a certificate of the Company,
signed by the Chairman of the Board or the President and the principal financial or
accounting officer of the Company, dated the Closing Date, to the effect that the signers of
such certificate have carefully examined the Registration Statement, the Final Prospectus,
the Disclosure Package and any supplements or amendments thereto and this Agreement and
that:
(i) the representations and warranties of the Company in this Agreement are
true and correct on and as of the Closing Date with the same effect as if made on
the Closing Date (except to the extent such representations and warranties expressly
relate to a specific earlier date (in which case such representations and warranties
shall be true and correct as of such specified earlier date)), and the Company has
complied with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration Statement
or any notice that would prevent its use has been issued and no proceedings for that
purpose have been instituted or, to the Company’s knowledge, threatened; and
(iii) since the date of the most recent financial statements included or
incorporated by reference in the Final Prospectus (exclusive of any supplement
18
thereto), there has been no material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in the
Disclosure Package and the Final Prospectus (exclusive of any supplement thereto).
(e) The Company shall have requested and caused Ernst & Young LLP to have furnished to
the Underwriter, at the Execution Time and at the Closing Date, letters (which may refer to
letters previously delivered to the Underwriter), dated respectively as of the Execution
Time and as of the Closing Date, in form and substance reasonably satisfactory to the
Underwriter, confirming that, with respect to the Company and its Subsidiaries, they are an
independent registered public accounting firm within the meaning of the Act and the Exchange
Act and the respective applicable rules and regulations adopted by the Commission
thereunder, and stating in effect that:
(i) in their opinion, the audited financial statements and financial statement
schedules and, if applicable, any pro forma financial statements included or
incorporated by reference in the Registration Statement and the Final Prospectus and
reported on by them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related rules and
regulations adopted by the Commission;
(ii) on the basis of carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing standards) which would
not necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the stockholders,
directors and audit committee of the Company and the Subsidiaries; and inquiries of
certain officials of the Company who have responsibility for financial and
accounting matters of the Company and its subsidiaries as to transactions and events
subsequent to December 31, 2005, nothing came to their attention which caused them
to believe that:
(1) with respect to the period subsequent to December 31, 2005, there
were, as of a specified date not more than five days prior to the date of
the letter, (a) any increases in the consolidated long-term debt of the
Company and its subsidiaries, (b) any changes in the capital stock of the
Company (other than issuances of capital stock upon the exercise of options
and stock appreciation rights, upon earn-outs of performance shares and upon
conversion of convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated by reference
into the Registration Statement and Final Prospectus), (c) any decreases in
the stockholders’ equity of the Company, (d) any decreases in the
consolidated net current assets of the Company as compared with the amounts
shown on the December 31, 2005 consolidated balance sheet included or
incorporated by reference in the Registration Statement and the Final
Prospectus, or for the period from
19
December 31, 2005 to such specified date there were any decreases, as
compared with the period from January 1, 2005 to February 28, 2005, in (x)
net revenues, (y) income before income taxes, or (z) in total or per share
amounts of net income of the Company and its subsidiaries, except in all
instances for changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary by the
Underwriter;
(2) the information included or incorporated by reference in the
Registration Statement and Final Prospectus in response to Regulation S-K,
Item 301 (Selected Financial Data), Item 302 (Supplementary Financial
Information), Item 402 (Executive Compensation) and Item 503(d) (Ratio of
Earnings to Fixed Charges) is not in conformity with the applicable
disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified procedures as a result of
which they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company and its
subsidiaries) set forth in the Registration Statement and the Final Prospectus and
in Exhibit 12 to the Registration Statement, including the information set forth
under the captions “Ratio of Earnings to Fixed Charges” and “Summary Consolidated
Financial and Operating Data” in the Final Prospectus, the information included or
incorporated by reference in Items 1, 2, 6, 7 and 11 of the Company’s Annual Report
on Form 10-K, incorporated by reference in the Registration Statement and the Final
Prospectus, agrees with the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation.
References to the Final Prospectus in this paragraph (e) include any supplement thereto
at the date of the letter.
(f) The Engineer shall have delivered to you at the Closing Date, a letter in form and
substance reasonably satisfactory to you, stating, as of the date hereof and as of the
Closing Date (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 Disclosure Package and the Final 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.
(g) Subsequent to the Execution Time or, if earlier, the dates as of which information
is given in the Registration Statement (exclusive of any amendment thereof) and the Final
Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change
or decrease specified in the letter or letters referred to in paragraph (e) of this Section
6 or (ii) any change, or any development involving a prospective change, in or affecting the
condition (financial or otherwise), earnings, business or properties of the
20
Company and its subsidiaries taken as a whole, whether or not arising from transactions
in the ordinary course of business, except as set forth in or contemplated in the Disclosure
Package and the Final Prospectus (exclusive of any supplement thereto) the effect of which,
in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the
Underwriter, so material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the Registration
Statement (exclusive of any amendment thereof), the Disclosure Package and the Final
Prospectus (exclusive of any supplement thereto).
(h) Subsequent to the Execution Time, there shall not have been any decrease in the
rating of any of the Company’s debt securities by any “nationally recognized statistical
rating organization” (as defined for purposes of Rule 436(g) under the Act) or any notice
given of any intended or potential decrease in any such rating or of a possible change in
any such rating that does not indicate the direction of the possible change.
(i) Prior to the Closing Date, the Company shall have furnished to the Underwriter such
further information, certificates and documents as the Underwriter may reasonably request.
(j) The Securities to be delivered on the Closing Date shall have been admitted and
authorized for trading on the New York Stock Exchange, subject to official notice of
issuance, and satisfactory evidence of such actions shall have been provided to the
Underwriter.
(k) At the Execution Time, the Company shall have furnished to the Underwriter a letter
substantially in the form of Exhibit A hereto from each officer and director of the
Company addressed to the Underwriter, and such letters shall be in full force and effect on
the date hereof and on the Closing Date
(l) There shall not have occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock Exchange; (ii) a
suspension or material limitation in trading in the Company’s securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities or a material disruption in commercial banking
or securities settlement or clearance services in the United States; (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the United
States of a national emergency or war or (v) the occurrence of any other calamity or crisis
or any change in financial, political or economic conditions in the United States or
elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment
of Citigroup Global Markets Inc. makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus as first amended or supplemented relating to the Securities.
(m) The Underwriter shall have received on and as of the Closing Date satisfactory
evidence of the good standing of the Company and its subsidiaries in their respective
jurisdictions of organization and their good standing as foreign entities in such
21
other jurisdictions as the Underwriter may reasonably request, in each case (i) in
writing or in any standard form of telecommunication from the appropriate Governmental
Authorities of such jurisdictions and (ii) with respect to the good standing of the
subsidiaries and the good standing as foreign entities, as of a time not more than three (3)
business days prior to the Closing Date.
If any of the conditions specified in this Section 6 shall not have been fulfilled when and as
provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere
in this Agreement shall not be reasonably satisfactory in form and substance to the Underwriter and
counsel for the Underwriter, this Agreement and all obligations of the Underwriter hereunder may be
canceled at, or at any time prior to, the Closing Date by the Underwriter . Notice of such
cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in
writing.
The documents required to be delivered by this Section 6 shall be delivered at the office of
Xxxxxxx Xxxxx LLP, counsel for the Underwriter, at 000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, on
the Closing Date.
7. Reimbursement of Underwriter’s Expenses. If the sale of the Securities provided
for herein is not consummated because any condition to the obligations of the Underwriter set forth
in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or
because of any refusal, inability or failure on the part of the Company to perform any agreement
herein or comply with any provision hereof other than by reason of a default by any of the
Underwriter, the Company will reimburse Citigroup Global Markets Inc. as the Underwriter on demand
for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to indemnify and
hold harmless the Underwriter, the directors, officers, employees and agents of the
Underwriter and each person who controls the Underwriter within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or 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 or (ii) any untrue statement or alleged untrue statement of a material fact
included in the Basic Prospectus, any Preliminary Final Prospectus, the Final Prospectus,
any Issuer Free Writing Prospectus or in any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein 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, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any
22
such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of the
Underwriter specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration Statement, and each person who
controls the Company within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Underwriter, but only with
reference to written information relating to such Underwriter furnished to the Company by or
on behalf of the Underwriter specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any liability which
the Underwriter may otherwise have. The Company acknowledges that the statements set forth
in the last paragraph of the cover page regarding delivery of the Securities and, under the
heading “Underwriting”, (i) the name of the Underwriter and its participation in the sale of
the Securities, (ii) the second and third sentences of the fifth paragraph and the sixth
paragraph regarding sales by the underwriter, commissions and discounts and (iii) the tenth,
eleventh and twelfth paragraphs related to stabilization, syndicate covering transactions
and penalty bids in the Final Prospectus constitute the only information furnished in
writing by the Underwriter for inclusion in the Final Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 8 of notice of
the commencement of any action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under this Section 8, notify the indemnifying
party in writing of the commencement thereof; but the failure so to notify the indemnifying
party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not,
in any event, relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice
at the indemnifying party’s expense to represent the indemnified party in any action for
which indemnification is sought (in which case the indemnifying party shall not thereafter
be responsible for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party’s election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the
23
indemnified party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this
Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any
reason, the Company and the Underwriter agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively “Losses”) to which the Company and the
Underwriter may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and by the Underwriter on the other from
the offering of the Securities; provided, however, that in no case shall the
Underwriter be responsible for any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by the Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any reason, the
Company and the Underwriter shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company on the one hand
and of the Underwriter on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses) received by it, and benefits received by the
Underwriter shall be deemed to be equal to the total underwriting discounts and commissions,
in each case as set forth on the cover page of the Final Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact
relates to information provided by the Company on the one hand or the Underwriter on the
other, the intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of an Underwriter shall have the same rights to
24
contribution as such Underwriter, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. [RESERVED].
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Underwriter, by notice given to the Company prior to delivery of and payment for
the Securities, if at any time prior to such time (i) trading in the Company’s Common Stock shall
have been suspended by the Commission or the New York Stock Exchange or trading in securities
generally on the New York Stock Exchange shall have been suspended or limited or minimum prices
shall have been established on such Exchange, (ii) a banking moratorium shall have been declared
either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national emergency or war, or
other calamity or crisis the effect of which on financial markets is such as to make it, in the
sole judgment of the Underwriter, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Prospectus (exclusive of any supplement
thereto).
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or its officers and of
the Underwriter set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Underwriter or the Company or
any of the officers, directors, employees, agents or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7
and 8 hereof shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Underwriter, will be mailed, delivered or telefaxed to the Citigroup
Global Markets Inc. General Counsel (fax no.: (000) 000-0000) and confirmed to the General
Counsel, Citigroup Global Markets Inc., at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
Attention: General Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
(000) 000-0000 and confirmed to it at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, Xxxxx 00000,
attention of Chief Financial Officer, with a copy to Xxxxx Xxxxx L.L.P., 000 Xxxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxx 00000, Attn: Xxxx X. Xxxxxxx.
13. Successors. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the officers, directors, employees, agents and
controlling persons referred to in Section 8 hereof, and no other person will have any right or
obligation hereunder.
14. No fiduciary duty. The Company hereby acknowledges that (a) the purchase and sale
of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the
Company, on the one hand, and the Underwriter and any affiliate through which it may be acting, on
the other, (b) the Underwriter is acting as principal and not as
25
an agent or fiduciary of the Company and (c) the Company’s engagement of the Underwriter in
connection with the offering and the process leading up to the offering is as independent
contractor and not in any other capacity. Furthermore, the Company agrees that it is solely
responsible for making its own judgments in connection with the offering (irrespective of whether
any of the Underwriter has advised or is currently advising the Company on related or other
matters). The Company agrees that it will not claim that the Underwriter has rendered advisory
services of any nature or respect, or owes an agency, fiduciary or similar duty to the Company, in
connection with such transaction or the process leading thereto.
15. Integration. This Agreement supersedes all prior agreements and understandings
(whether written or oral) between the Company and the Underwriter, or any of them, with respect to
the subject matter hereof.
16. Applicable Law. This Agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be performed within the
State of New York.
17. Counterparts. This Agreement may be signed in one or more counterparts, each of
which shall constitute an original and all of which together shall constitute one and the same
agreement.
18. Headings. The section headings used herein are for convenience only and shall not
affect the construction hereof.
19. Definitions. The terms which follow, when used in this Agreement, shall have the
meanings indicated.
“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations
of the Commission promulgated thereunder.
“Basic Prospectus” shall mean the prospectus referred to in paragraph 1(a) above
contained in the Registration Statement at the Effective Date.
“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or
a day on which banking institutions or trust companies are authorized or obligated by law to
close in New York City, New York or Ft. Worth, Texas.
“Commission” shall mean the Securities and Exchange Commission.
“Disclosure Package” shall mean (i) the Basic Prospectus, as amended and supplemented
to the Execution Time, (ii) the Issuer Free Writing Prospectuses, if any, identified in
Schedule II hereto, and (iii) any other Free Writing Prospectus that the parties
hereto shall hereafter expressly agree in writing to treat as part of the Disclosure
Package.
“Effective Date” shall mean each date and time that the Registration Statement, and any
post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement
became or become effective.
26
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
“Execution Time” shall mean the date and time that this Agreement is executed and
delivered by the parties hereto.
“Final Prospectus” shall mean the prospectus supplement relating to the Securities that
was first filed pursuant to Rule 424(b) after the Execution Time, together with the Basic
Prospectus.
“Free Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405.
“Issuer Free Writing Prospectus” shall mean an issuer free writing prospectus, as
defined in Rule 433.
“Preliminary Final Prospectus” shall mean any preliminary prospectus supplement to the
Basic Prospectus which describes the Securities and the offering thereof and is used prior
to filing of the Final Prospectus, together with the Basic Prospectus.
“Registration Statement” shall mean the registration statement referred to in paragraph
1(a) above, including (i) all documents filed as part thereof or incorporated or deemed to
be incorporated by reference therein, (ii) any information contained or incorporated by
reference in any prospectus supplement relating to the Securities that is filed with the
Commission pursuant to Rule 424(b) and deemed part of such registration statement pursuant
to Rule 430B, as amended at the Execution Time and, in the event any post-effective
amendment thereto or any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date, shall also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be.
“Rule 158”, “Rule 163”, “Rule 164”, “Rule 172”, “Rule 405”, “Rule 415”, “Rule 424”,
“Rule 430B”, “Rule 433” and “Rule 462” refer to such rules under the Act.
“Rule 462(b) Registration Statement” shall mean a registration statement and any
amendments thereto filed pursuant to Rule 462(b) relating to the offering covered by the
registration statement referred to in Section 1(a) hereof.
27
If the foregoing is in accordance with your understanding of our agreement, please sign and
return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement among the Company and the Underwriter.
| Very truly yours, | ||||||
| Encore Acquisition Company | ||||||
| By: | /s/ L. Xxx Xxxxxx | |||||
| L. Xxx Xxxxxx | ||||||
| Senior Vice President, Chief Financial | ||||||
| Officer, Treasurer and Corporate | ||||||
| Secretary | ||||||
| The foregoing Agreement is | ||||
| hereby confirmed and accepted | ||||
| as of the date specified in | ||||
| Schedule I hereto. | ||||
| Citigroup Global Markets Inc. | ||||
By: |
/s/ Xxxx X. Xxxxxx | |||
| Title: Vice President | ||||
28
SCHEDULE I
Underwriting Agreement dated March 29, 2006
Registration Statement No. 333-117036
Underwriter: Citigroup Global Markets Inc.
Title, Purchase Price and Description of Securities:
Title: Common Stock, par value $0.01 per share
Number of Underwritten Securities to be sold by the Company: 4,000,000
Price per Share to Public (include accrued dividends, if any): $32.00*
Price per Share to the Underwriter – total: $31.81
* Other provisions: In addition to the underwriting discount, the underwriter may receive a
commission equivalent from the investors up to $0.05 for each share of Common Stock sold to
the investors in the offering.
Closing Date, Time and Location: April 4, 2006 at 9:00 a.m. CST at Xxxxx Xxxxx L.L.P., 000
Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000
Type of Offering: Non-Delayed
Date referred to in Section 5(i) after which the Company may offer or sell securities issued by the
Company without the consent of the Representative: May 13, 2006
SCHEDULE II
Schedule of Free Writing Prospectuses included in the Disclosure Package
None
SCHEDULE III
Subsidiaries
| Subsidiary | Jurisdiction of Formation | |
Encore Operating, L.P.
|
Texas | |
EAP Operating, Inc.
|
Delaware | |
EAP Properties, Inc.
|
Delaware | |
EAP Energy, Inc.
|
Delaware | |
EAP Energy Services, L.P.
|
Texas | |
Encore Operating Louisiana, LLC
|
Delaware |
| [Form of Lock-Up Agreement] | EXHIBIT A |
ENCORE ACQUISITION COMPANY
Public Offering of Common Stock
Public Offering of Common Stock
March 29, 2006
Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed Underwriting Agreement
(the “Underwriting Agreement”), between Encore Acquisition Company, a Delaware corporation (the
“Company”), and you as the sole Underwriter named therein, relating to an underwritten public
offering of Common Stock, $0.01 par value (the “Common Stock”), of the Company.
In order to induce you as the Underwriter to enter into the Underwriting Agreement, the
undersigned will not, without the prior written consent of Citigroup Global Markets Inc., offer,
sell, contract to sell, pledge or otherwise dispose of, (or enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or otherwise) by the
undersigned or any affiliate of the undersigned or any person in privity with the undersigned or
any affiliate of the undersigned), directly or indirectly, including the filing (or participation
in the filing) of a registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Securities and Exchange Commission promulgated thereunder with
respect to, any shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for such capital stock, or publicly announce an intention to effect any
such transaction, for a period of 45 days after the date of the Underwriting Agreement, other than
shares of Common Stock disposed of as a bona fide gift or gift, provided that the donee or donees
thereof agree in writing to be bound by the terms of this letter and the transaction is not
reportable on Form 4.
If for any reason the Underwriting Agreement shall be terminated prior to the Closing Date (as
defined in the Underwriting Agreement), the agreement set forth above shall likewise be terminated.
| Yours very truly, | ||
| [Signature of officer or director] | ||
| [Name and address of officer or director] |
