EXHIBIT 1.1
2,000,000 SHARES
MIDCOAST ENERGY RESOURCES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
December 8, 1999
CIBC World Markets Corp.
Prudential Securities Incorporated
c/o CIBC World Markets Corp.
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
Midcoast Energy Resources, Inc., a Texas corporation (the "Company"),
proposes, subject to the terms and conditions contained herein, to sell to you
and the other underwriters named on Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as Representatives (the
"Representatives"), an aggregate of 2,000,000 shares (the "Firm Shares") of the
Company's Common Shares, $0.01 par value (the "Common Stock"). All of the
Shares are to be issued and sold by the Company. The respective amounts of the
Firm Shares to be purchased by each of the several Underwriters are set forth
opposite their names on Schedule I hereto. In addition, the Company proposes to
grant to the Underwriters an option to purchase up to an additional 300,000
shares (the "Option Shares") of Common Stock from it for the purpose of covering
over-allotments in connection with the sale of the Firm Shares. The Firm Shares
and the Option Shares are together called the "Shares."
1. Sale and Purchase of the Shares.
On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at a price
of $16.0625 per share (the "Initial Price"), the number of Firm Shares
set forth opposite the name of such Underwriter under the column "Number
of Firm Shares to be Purchased" on Schedule I to this Agreement, subject
to adjustment in accordance with Section 10 hereof.
(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares
at the Initial Price. The number of Option Shares to be purchased by
each Underwriter shall be the same percentage (adjusted by the
Representatives to eliminate fractions) of the total number of Option
Shares to be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the Underwriters
and may be exercised in whole or in part at any time on or before 12:00
noon, New York City time, on the business day before the Firm Shares
Closing Date (as defined below), and from time to time thereafter within
30 days after the date of this Agreement, in each case upon written,
facsimile or telegraphic notice, or verbal or telephonic notice confirmed
by written, facsimile or telegraphic notice, by the Representatives to
the Company no later than 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the
time and date (if other than the Firm Shares Closing Date) of such
purchase.
2. Delivery and Payment. Delivery by the Company of the Firm
Shares to the Representatives for the respective accounts of the Underwriters,
and payment of the purchase price in immediately available funds for the shares
purchased from the Company, against delivery of the certificates therefor to the
Representatives, shall take place at the offices of Xxxxxxx & Xxxxx, L.L.P.,
0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxx 00000, at 10:00 a.m., Houston time, on the
third business day following the date of this Agreement, or at such time on such
other date, not later than 10 business days after the date of this Agreement, as
shall be agreed upon by the Company and the Representatives (such time and date
of delivery and payment are called the "Firm Shares Closing Date").
In the event the option with respect to the Option Shares is exercised
in whole or in part on one or more occasions, delivery by the Company of the
Option Shares to the Representatives for the respective accounts of the
Underwriters and payment of the purchase price thereof in immediately available
funds by wire transfer or by certified or official bank check or checks payable
in New York Clearing House (same day) funds to the Company shall take place at
the offices of Xxxxxxx & Xxxxx, L.L.P. specified above at the time and on the
date (which may be the same date as, but in no event shall be earlier than, the
Firm Shares Closing Date) specified in the notice referred to in Section 1(b)
(such time and date of delivery and payment are called the "Option Shares
Closing Date"). The Firm Shares Closing Date and the Option Shares Closing Date
are called, individually, a "Closing Date" and, together, the "Closing Dates."
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Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The
Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission") a Registration Statement (as hereinafter
defined) on Form S-3 (No. 333-70371) for the registration of certain of the
Company's securities including the Shares, and the offering thereof from time to
time in accordance with Rule 415 of the Rules, and the Company has filed such
post-effective amendments thereto as may be required to the date of this
Agreement in order to effect the registration and the offering of the Shares.
Such Registration Statement (as so amended, if applicable) has been declared
effective by the Commission. Copies of such Registration Statement (including
all amendments thereof) have heretofore been delivered by the Company to you.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus supplement in accordance with paragraph (b) of
Rule 424 ("Rule 424(b)") of the Rules. The information included in any such
prospectus that was omitted from the Registration Statement at the time it
became effective but that is deemed to be part of such registration statement at
the time it became effective or included in a prospectus supplement filed in
respect of such registration statement pursuant to Rule 424(b) is referred to as
"Rule 424(b) Information." The term "Preliminary Prospectus" means any
prospectus or prospectus supplement that omitted the Rule 424(b) Information
that was used after the Registration Statement became effective and prior to the
date of this Agreement. The term "Registration Statement" as used in this
Agreement means the initial registration statement (including all exhibits,
financial schedules and information and documents deemed to be a part of the
Registration Statement through incorporation by reference or otherwise), as
amended at the time and on the date it becomes effective (the "Effective Date")
including the information (if any) deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A of the Rules (including the Rule 424(b)
Information). If the Company has filed an abbreviated registration statement to
register additional Shares pursuant to Rule 462(b) under the Rules (the "462(b)
Registration Statement") then any reference herein to the Registration Statement
shall also be deemed to include such 462(b) Registration Statement. The term
"Prospectus" as used in this Agreement means the final prospectus and the final
prospectus supplement relating to the Shares (including the information and
documents deemed to be a part of the prospectus by incorporation by reference
or otherwise) in the form filed with the Commission pursuant to Rule 424(b) of
the Rules. For purposes of this Agreement, all references to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("XXXXX").
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All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any Preliminary Prospectus (including any prospectus
supplement constituting a part thereof) or the Prospectus (including any
prospectus supplement constituting a part thereof), or other references of like
import, shall be deemed to mean and include all such financial statements and
schedules and other information which is incorporated by reference in the
Registration Statement, any Preliminary Prospectus (including any preliminary
prospectus supplement constituting a part thereof) or the Prospectus (including
any prospectus supplement constituting a part thereof), as the case may be; and
all references in this Agreement to amendments or supplements to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the "Act") which is incorporated by reference
in the Registration Statement, such Preliminary Prospectus or the Prospectus, as
the case may be.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the date of this Agreement as the Representatives deem advisable. The
Company hereby confirms that the Underwriters and dealers have been authorized
to distribute or cause to be distributed each Preliminary Prospectus and are
authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).
4. Representations and Warranties. The Company hereby represents
and warrants to each Underwriter as follows:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act. The Registration Statement has become effective under
the Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Registration Statement and any post-
effective amendments thereto (including the filing of the Company's most
recent Annual Report on Form 10-K with the Commission (the "Annual Report
on Form 10-K")) became effective and as of each Closing Date, the
Registration Statement and any amendments thereto complied and will
comply in all material respects with the requirements of the Securities
Act and the Rules and 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. At
the date of the Prospectus and as of each Closing Date, neither the
Prospectus nor any amendments and supplements thereto included or will
include an untrue statement of a material fact or omitted or will omit to
state a material fact necessary in order to make the statements therein,
in the light of the
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circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter
through the Representatives expressly for use in the Registration
Statement or the Prospectus.
Each preliminary prospectus and prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied
when so filed in all material respects with the Rules, and each
preliminary prospectus and the Prospectus delivered to the Underwriters
for use in connection with the offering of Shares will, at the time of
such delivery, be identical to any electronically transmitted copies
thereof filed with the Commission pursuant to XXXXX, except to the extent
permitted by Regulation S-T.
(b) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement and the Prospectus, when they
became effective or at the time they were or hereafter are filed with the
Commission, complied with and will comply in all material respects with
the requirements of the Act and the rules and regulations of the
Commission thereunder (the "Exchange Act Rules") and, when read together
with the other information in the Prospectus, at the date of the
Prospectus and as of each Closing Date, did not and will not contain an
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.
(c) The accountants who certified the financial statements and any
supporting schedules thereto included or incorporated by reference in the
Registration Statement and the Prospectus are independent public
accountants as required by the Securities Act and the Rules.
(d) The historical consolidated financial statements of the Company
incorporated by reference in the Registration Statement and the
Prospectus, together with the related schedules and notes, present fairly
in all material respects the financial position of the Company and its
consolidated Subsidiaries (as defined below) at the dates indicated and
the statements of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified
except, in the case of unaudited consolidated financial statements, for
normal year end audit adjustments that have not been made and footnote
disclosure necessary for GAAP (as defined below) purposes that may not
have been presented. The historical financial statements of each of (i)
Kansas Pipeline Company, MarGasCo Partnership, Mid-Kansas Partnership,
and Riverside Pipeline Company (collectively, the "Kansas Pipeline
Subsidiaries"), (ii) the AlaTenn Subsidiaries and (iii) the El Paso Field
Services Company - Anadarko Gas Gathering System included or incorporated
by reference in the Registration Statement and the Prospectus pursuant
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to Rule 3-05 of Regulation S-X promulgated by the Commission ("Regulation
S-X"), together with the related notes, present fairly in all material
respects the financial position of the Kansas Pipeline Subsidiaries (on a
combined basis), the AlaTenn Subsidiaries (on a combined basis) and the
El Paso Field Services Company -Anadarko Gas Gathering System at the
respective dates indicated and for the periods specified except, in the
case of unaudited consolidated financial statements, for normal year end
audit adjustments that have not been made and footnote disclosure
necessary for GAAP (as defined below) purposes that may not have been
presented. Such financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The schedules
supporting the historical financial statements of the Company and its
consolidated subsidiaries, if any, included or incorporated by reference
in the Registration Statement and the Prospectus present fairly and in
all material respects in accordance with GAAP the information required to
be stated therein. The selected financial data and the summary financial
information relating to the historical financial statements of the
Company and its consolidated subsidiaries included in the Prospectus
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included
in the Registration Statement.
(e) The pro forma financial statements included or incorporated by
reference in the Registration Statement and the Prospectus, together with
the related schedules and notes, are in all material respects fairly
presented and prepared on a basis consistent with the historical
financial statements of the Company and its subsidiaries, give effect to
assumptions used in the preparation thereof which have been made on a
reasonable basis and in good faith, and present fairly the effects of the
Company's acquisition of the Kansas Pipeline Subsidiaries based on the
assumptions set forth therein.
(f) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C) except
for regular quarterly dividends on the Common Stock in amounts per share
that are disclosed in the Prospectus, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(g) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Texas and has
corporate power and authority to own, lease and operate its properties
and to conduct its business
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as described in the Prospectus and to enter into and perform its
obligations under, or as contemplated under, this Agreement. The Company
is duly qualified as a foreign corporation to transact business and is in
good standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify or be in
good standing would not result in a Material Adverse Effect.
(h) Each "significant subsidiary" of the Company (as such term is
defined in Rule 1-02 of Regulation S-X promulgated under the Securities
Act) is listed in Exhibit C of this Agreement (each, a "Subsidiary" and,
collectively, the "Subsidiaries") and has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure to so qualify or be in good standing would not
result in a Material Adverse Effect. Except as otherwise stated in the
Registration Statement and the Prospectus, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
is validly issued, fully paid and non-assessable and, except for
directors' qualifying shares, is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity. None of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
preemptive or other similar rights of any security holder of such
Subsidiary. The only other subsidiaries of the Company are certain other
subsidiaries which, if considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X.
(i) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled
"Historical" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus). The shares of issued and outstanding capital stock
have been duly authorized and validly issued and are fully paid and non-
assessable; none of the outstanding shares of capital stock was issued in
violation of the preemptive or other similar rights of any securityholder
of the Company.
(j) This Agreement has been duly authorized, executed and delivered
by the Company.
(k) The Shares to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against
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payment of the consideration set forth herein, will be validly issued and
fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Shares will be subject to personal liability
by reason of being such a holder; and the issuance of the Shares is not
subject to the preemptive or other similar rights of any securityholder
of the Company.
(l) Neither the Company nor any of its subsidiaries is in violation
of its charter or by-laws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any
subsidiary is subject (collectively, "Agreements and Instruments") except
for such defaults that would not result in a Material Adverse Effect; and
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and in the
Registration Statement (including the issuance and sale of the Shares
and the use of the proceeds from the sale of the Shares as described in
the Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any subsidiary or any of their assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any subsidiary.
(m) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent, and
the Company is not aware of any existing or imminent labor disturbance by
the employees of any of its or any subsidiary's principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(n) There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic
or foreign, now pending,
8
or, to the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected
to result in a Material Adverse Effect.
(o) There are no contracts or documents which are required to be
described in the Registration Statement, or the Prospectus or to be filed
as exhibits thereto which have not been so described and filed as
required.
(p) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, is necessary or
required for the due authorization, execution and delivery by the Company
of this Agreement or for the performance by the Company of the
transactions contemplated under the Prospectus, this Agreement, except
such as have been already made, obtained or rendered, as applicable or as
may be required under the Securities Act, or the Rules and foreign or
state securities or blue sky laws.
(q) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise aware
of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances
which would render any Intellectual Property invalid or inadequate to
protect the interest of the Company or any of its subsidiaries therein,
and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would result in a Material Adverse Effect.
(r) The Company and its subsidiaries possess such permits, licenses,
approvals, consents and other authorizations (collectively, "Governmental
Licenses") issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them except for such Governmental Licenses which the failure
to possess would not, singly or in the aggregate, have a Material Adverse
Effect; the Company and its subsidiaries are in compliance with the terms
and conditions
9
of all such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(s) The Company and its subsidiaries have good and indefeasible
title to all real property owned by the Company and its subsidiaries and
good title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described
in the Prospectus or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries holds
properties described in the Prospectus, are in full force and effect, and
neither the Company nor any subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the rights
of the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(t) Except as described in the Registration Statement and except as
would not, singly or in the aggregate, result in a Material Adverse
Effect, (A) neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
except where the failure to have such permits, authorizations or
approvals or to be in compliance therewith would not, singly or in the
aggregate, have a Material Adverse Effect, (C) there are no pending or to
the Company's knowledge, threatened administrative, regulatory or
judicial actions, suits, demands,
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demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its subsidiaries and (D) to the Company's
knowledge, there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any of its subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(u) The Company is not subject to, or is exempt from, regulation as
a "holding company", a "subsidiary company" of a "holding company", an
"affiliate" of a "holding company" or an "affiliate" of a "subsidiary
company" of a "holding company", in each case as such terms are defined
in the Public Utility Holding Company Act, as amended.
(v) The Shares upon issuance, will be excluded or exempted under, or
beyond the purview of, the Commodity Exchange Act, as amended (the
"Commodity Exchange Act"), and the rules and regulations of the Commodity
Futures Trading Commission under the Commodity Exchange Act the
"Commodity Exchange Act Regulations").
(w) The Company is not, and upon the issuance and sale of the Shares
as herein contemplated and the application of the net proceeds therefrom
as described in the Prospectus will not be, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"1940 Act").
(x) Except as disclosed in the Prospectus, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the Securities Act. Each director and executive
officer of the Company has delivered to the Representatives the
enforceable written lock-up agreement in the form attached as Exhibit B
to this Agreement (the "Lock-Up Agreement").
(y) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(C) access to assets is permitted only in accordance with management's
general or specific authorization and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) The Company and its subsidiaries carry or are entitled to the
benefits of insurance, with financially sound and reputable insurers, in
such amounts and covering
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such risks as is generally maintained by companies of established repute
engaged in the same or similar business, and all such insurance is in
full force and effect.
(aa) Neither the Company nor, to the Company's knowledge, any of its
officers, directors or controlling persons has taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares.
(bb) The internal controls and policies used in connection with the
natural gas derivatives business of the Company and each subsidiary are
reasonable and to the best knowledge of the Company, adequate in light of
the business conducted.
(cc) Neither the Company nor any of its subsidiaries, nor, to the
Company's knowledge, any director, officer, agent, employee or other
person, acting on behalf of the Company or any of its subsidiaries, has
used any corporate funds during the last five years for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977;
or made any illegal bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(dd) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a
Material Adverse Effect on the Company and its subsidiaries) and has paid
all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due
and payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent preliminary prospectus).
(ee) The Company has not distributed and, prior to the later of (i)
the Closing Date and (ii) the completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement or
any amendment thereto, any preliminary prospectus or the Prospectus or
any amendment or supplement thereto, or other materials, if any,
permitted by the Act.
(ff) The Company has reviewed its operations and that of the
Subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem (that is, any significant risk that computer hardware or
software applications used by the Company and its subsidiaries will not,
in the case of dates or time periods occurring after December 31, 1999,
function at
12
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000); as a result of such review, (i) the Company
has no reason to believe, and does not believe, that (A) there are any
issues related to the Company's preparedness to address the Year 2000
Problem that are of a character required to be described or referred to
in the Registration Statement or Prospectus which have not been
accurately described in the Registration Statement or Prospectus and (B)
the Year 2000 Problem will have a Material Adverse Effect, or result in
any material loss or interference with the business or operations of the
Company and its subsidiaries, taken as a whole; and (ii) the Company
reasonably believes, after due inquiry, that the suppliers, vendors,
customers or other material third parties used or served by the Company
and such subsidiaries are addressing or will address the Year 2000
Problem in a timely manner, except to the extent that a failure to
address the Year 2000 by a supplier, vendor, customer or material third
party would not have a Material Adverse Effect.
5. Conditions of the Underwriters' Obligations. The obligations
of the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject to
each of the following terms and conditions:
(a) Notification that the Registration Statement has become
effective shall have been received by the Representatives and the
Prospectus shall have been timely filed with the Commission in accordance
with Section 6(a) of this Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no
order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before or
threatened by the Commission, and any requests for additional information
on the part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with
to the satisfaction of the Commission and the Representatives.
(c) The representations and warranties of the Company contained in
this Agreement and in the certificates delivered pursuant to Section 5(d)
shall be true and correct when made and on and as of each Closing Date as
if made on such date. The Company shall have performed all covenants and
agreements and satisfied all the conditions contained in this Agreement
required to be performed or satisfied by them at or before such Closing
Date.
(d) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives and dated such Closing
Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the
effect that (i) the signers of such certificate have carefully examined
the Registration Statement, the Prospectus and this Agreement and that
the representations and warranties of the Company in this Agreement are
true and correct on and as of such
13
Closing Date with the same effect as if made on such Closing Date and the
Company has performed all covenants and agreements and satisfied all
conditions contained in this Agreement required to be performed or
satisfied by it at or prior to such Closing Date, and (ii) no stop order
suspending the effectiveness of the Registration Statement has been
issued and to the best of their knowledge, no proceedings for that
purpose have been instituted or are pending under the Securities Act.
(e) The Representatives shall have received, at the time this
Agreement is executed and on each Closing Date a signed letter from each
of PricewaterhouseCoopers LLP, independent accountants, Xxxx + Associates
LLP and Ernst & Young LLP, addressed to the Representatives and dated,
respectively, the date of this Agreement and each such Closing Date, in
form and substance reasonably satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the Securities Act and the Rules and that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them, and
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information included or
included by reference in the Registration Statement and the Prospectus.
(f) The Representatives shall have received on each Closing Date
from Xxxxxx and Xxxxxx L.L.P., counsel for the Company, an opinion,
addressed to the Representatives and dated such Closing Date, in form and
substance reasonably satisfactory to counsel for the Underwriters, to the
effect set forth in Exhibit A hereto and to such further effect as
counsel to the Underwriters may reasonably request.
(g) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and their
counsel and the Underwriters shall have received from Xxxxxxx & Xxxxx
L.L.P. a favorable opinion, addressed to the Representatives and dated
such Closing Date, with respect to the Shares, the Registration Statement
and the Prospectus, and such other related matters, as the
Representatives may reasonably request, and the Company shall have
furnished to Xxxxxxx & Xxxxx L.L.P. such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(h) The Representatives shall have received copies of the Lock-up
Agreements executed by each entity or person described in Section 4(x).
(i) The Company shall have furnished or caused to be furnished to
the Representatives such further certificates or documents as the
Representatives shall have reasonably requested.
6. Covenants.
14
(a) The Company covenants and agrees as follows:
(i) The Company shall prepare the Prospectus in a form approved
by the Representatives and file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the Commission's
close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required under the Securities Act.
(ii) The Company shall promptly advise the Representatives in
writing (A) when any post-effective amendment to the Registration
Statement shall have become effective, (B) of any request by the
Commission for any amendment of the Registration Statement or the
Prospectus or for any additional information, (C) of the
prevention or suspension of the use of any preliminary prospectus
or the Prospectus or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement
or the institution or threatening of any proceeding for that
purpose and (D) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Company shall not file any
amendment of the Registration Statement or supplement to the
Prospectus unless the Company has furnished the Representatives a
copy for its review prior to filing and shall not file any such
proposed amendment or supplement to which the Representatives
reasonably object. The Company shall use its best efforts to
prevent the issuance of any such stop order and, if issued, to
obtain as soon as possible the withdrawal thereof.
(iii) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the
Rules, any event occurs as a result of which, in the opinion of
counsel for the Underwriters or for the Company, the Prospectus as
then amended or 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, in the opinion of such counsel, to amend or supplement
the Prospectus to comply with the Securities Act or the Rules, the
Company shall promptly prepare and file with the Commission,
subject to the second sentence of paragraph (ii) of this Section
6(a), an amendment or supplement which shall correct such
statement or omission or an amendment which shall effect such
compliance.
(iv) The Company shall make generally available to its security
holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning
at the end of the fiscal quarter of the Company during which the
Effective Date occurs (or 90 days if such 12-month period
coincides with the Company's fiscal year), an earning statement
(which
15
need not be audited) of the Company, covering such 12-month
period, which shall satisfy the provisions of Section 11(a) of the
Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and
amendments thereof) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and all
amendments thereof and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Securities Act or the
Rules, as many copies of any preliminary prospectus and the
Prospectus and any amendments thereof and supplements thereto as
the Representatives may reasonably request.
(vi) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and
sale in connection with the offering under the laws of such
jurisdictions as the Representatives may designate and shall
maintain such qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the Company
shall not be required in connection therewith, as a condition
thereof, to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or
subject itself to taxation as doing business in any jurisdiction.
(vii) Without the prior written consent of CIBC World Markets
Corp., for a period of 180 days after the date of this Agreement,
the Company shall not issue, sell or register with the Commission
(other than on Form S-8 or on any successor form), or otherwise
dispose of, directly or indirectly, any equity securities of the
Company (or any securities convertible into, exercisable for or
exchangeable for equity securities of the Company), except for (i)
the issuance of the Shares to be sold hereunder, (ii) the issuance
of up to $10.75 million of unregistered shares of Common Stock to
Xxxxxx X. Xxxxxxx and/or Management Resources Group, LLC, (iii)
the issuance of shares of Common Stock pursuant to any existing
stock option plan or bonus plan of the Company referred to in the
Registration Statement and the Prospectus and (iv) the issuance of
unregistered shares of Common Stock in connection with the
Company's acquisition of a business; provided, that, with respect
to issuances under clauses (ii) or (iv), the transferee of such
shares shall be subject to a contractual transfer restriction
similar to this paragraph. In the event that during this period,
(A) any shares are issued pursuant to the Company's existing stock
option plan or bonus plan that are exercisable during such 180 day
period or (B) any registration is effected on Form S-8 or on any
successor form relating to shares that are exercisable during such
180 day period, the Company shall obtain the written agreement of
such grantee or purchaser or holder of such registered securities
that, for a period of 180 days after the date of this Agreement,
such person will not, without the prior written
16
consent of CIBC World Markets Corp., offer for sale, sell,
distribute, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, or exercise any registration rights
with respect to, any shares of Common Stock (or any securities
convertible into, exercisable for, or exchangeable for any shares
of Common Stock) owned by such person.
(viii) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws
and by the American Stock Exchange (including any required
registration under the Exchange Act).
(ix) The Company will apply the net proceeds from the offering
of the Shares in the manner set forth under "Use of Proceeds" in
the Prospectus.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses
incident to the public offering of the Shares and the performance of the
obligations of the Company under this Agreement including those relating
to: (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the
Registration Statement and the Prospectus, and the printing, filing and
distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration
or qualification of the Shares for offer and sale under the state and
foreign securities or Blue Sky laws of the various jurisdictions referred
to in Section 6(a)(vi), including the reasonable fees and disbursements
of counsel for the Underwriters in connection with such registration and
qualification and the preparation, printing, distribution and shipment of
preliminary and supplementary Blue Sky memoranda; (iv) the furnishing
(including costs of shipping and mailing) to the Representatives and to
the Underwriters of copies of each preliminary prospectus, the Prospectus
and all amendments or supplements thereto, and of the several documents
required by this Section to be so furnished, as may be reasonably
requested for use in connection with the offering and sale of the Shares
by the Underwriters or by dealers to whom Shares may be sold; (v) the
filing fees of the NASD in connection with its review of the terms of the
public offering and reasonable fees and disbursements of counsel for the
Underwriters in connection with such review; (vi) inclusion of the Shares
for quotation on the American Stock Exchange; and (vii) all transfer
taxes, if any, with respect to the sale and delivery of the Shares by the
Company to the Underwriters. Subject to the provisions of Section 9, the
Underwriters agree to pay, whether or not the transactions contemplated
hereby are consummated or this Agreement is terminated, all costs and
expenses incident to the performance of the obligations of the
Underwriters under this Agreement not payable by the Company pursuant to
the preceding sentence, including, without limitation, the fees and
disbursements of counsel for the Underwriters.
7. Indemnification.
17
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Securities Act, the Exchange
Act or other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise
out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment thereof or
supplement thereto, (ii) in whole or in part upon any breach of the
representations and warranties set forth in Section 4 hereof, or (iii) in
whole or in part upon any failure of the Company to perform any of its
obligations hereunder or under law; provided, however, that such
indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) on account of any losses, claims,
damages or liabilities arising from the sale of the Shares to any person
by such Underwriter if such untrue statement or omission or alleged
untrue statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or supplement
thereto, or in any Blue Sky Application in reliance upon and in
conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use
therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, each director of the Company, and each officer of
the Company who signs the Registration Statement, to the same extent as
the foregoing indemnity from the Company to each Underwriter, but only
insofar as such losses, claims, damages or liabilities arise out of or
are based upon any untrue statement or omission or alleged untrue
statement or omission which was made in any preliminary prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, contained in the (i) concession and reallowance
figures appearing under the caption "Underwriting" and (ii) the
stabilization information contained under the caption "Underwriting" in
the Prospectus; provided, however, that the obligation of each
Underwriter to indemnify the Company (including any controlling person,
director or officer thereof) shall be limited to the net proceeds
received by the Company from such Underwriter.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which
a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the
18
commencement of such action, suit or proceeding, enclosing a copy of all
papers served. No indemnification provided for in Section 7(a) or 7(b)
shall be available to any party who shall fail to give notice as provided
in this Section 7(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the
defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those
available to the indemnifying party (in which case the indemnifying
parties shall not have the right to direct the defense of such action on
behalf of the indemnified party) or (iii) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of
which cases the fees and expenses of counsel shall be at the expense of
the indemnifying parties. An indemnifying party shall not be liable for
any settlement of any action, suit, proceeding or claim effected without
its written consent, which consent shall not be unreasonably withheld or
delayed.
8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(a) or 7(b) is due in accordance with its terms but for any reason is
held to be unavailable to or insufficient to hold harmless an indemnified party
under Section 7(a) or 7(b), then each indemnifying party shall contribute to
the aggregate losses, claims, damages and liabilities (including any
investigation, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting any contribution received by any person
entitled hereunder to contribution from any person who may be liable for
contribution) to which the indemnified party may be subject in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other from the offering of the Shares
or, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received notice
as provided in Section 7 hereof, in such
19
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Underwriters shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts but
before deducting expenses) received by the Company, as set forth in the table on
the cover page of the Prospectus, bear to (y) the underwriting discounts
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company or the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact related to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter (except as may be provided
in the Agreement Among Underwriters) be liable or responsible for any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter hereunder; and (ii) the Company shall be jointly and severally
liable and responsible for any amount in excess of such underwriting discount;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person, if any, who controls the Company within
the meaning of the Section 15 of the Securities Act or Section 20(a) of 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 clauses (i) and (ii) in the
immediately preceding sentence of this Section 8. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in proportion
to their respective underwriting commitments and not joint. For purposes of this
Section 8, the Company shall be deemed one party jointly and severally liable
for any obligations hereunder.
9. Termination. This Agreement may be terminated with respect to
the Shares to be purchased on a Closing Date by the Representatives by notifying
the Company at any time:
20
(a) in the absolute discretion of the Representatives at or before
any Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Representatives will in the future materially disrupt,
the securities markets; (ii) if there has occurred any new outbreak or
material escalation of hostilities or other calamity or crisis the effect
of which on the financial markets of the United States is such as to make
it, in the judgment of the Representatives, inadvisable to proceed with
the offering; (iii) if there shall be such a material adverse change in
general financial, political or economic conditions or the effect of
international conditions on the financial markets in the United States is
such as to make it, in the judgment of the Representatives, inadvisable
or impracticable to market the Shares; (iv) if trading in the Shares has
been suspended by the Commission or trading generally on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or the Nasdaq
National Market has been suspended or limited, or minimum or maximum
ranges for prices for securities shall have been fixed, or maximum ranges
for prices for securities have been required, by said exchanges or by
order of the Commission, the National Association of Securities Dealers,
Inc., or any other governmental or regulatory authority; (v) if a banking
moratorium has been declared by any state or Federal authority; or (vi)
if, in the judgment of the Representatives, there has occurred a Material
Adverse Effect, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as required
by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representatives may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth
21
in this Agreement. If no such arrangements have been made by the close of
business on the business day following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date, then
each of the nondefaulting Underwriters shall be obligated to purchase
such Shares on the terms herein set forth in proportion to their
respective obligations hereunder; provided, that in no event shall the
maximum number of Shares that any Underwriter has agreed to purchase
pursuant to Section 1 be increased pursuant to this Section 10 by more
than one-ninth of such number of Shares without the written consent of
such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to one additional business day within which it
may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representatives to purchase such Shares
upon the terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 6(b),
7, 8 and 9. The provisions of this Section 10 shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.
11. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(b), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
22
This Agreement has been and is made for the benefit of the
Underwriters and the Company, their respective successors and assigns, and, to
the extent expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph if subsequently confirmed in
writing, (a) if to the Representatives, c/o CIBC World Markets Corp., Xxx Xxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxx Xxxxxxx, with a copy
to Xxxxxxx & Xxxxx L.L.P., 000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
Attention: Xxx Xxxxxx and (b) if to the Company, to Midcoast Energy Resources,
Inc., 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, Attention: Xxx
X. Xxxxxxx, President, with a copy to Xxxxxx & Xxxxxx L.L.P., 000 Xxxxxxxxx,
Xxxxxxx, Xxxxx 00000, Attention: Xxxxxx Xxxxx.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
23
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Xxx X. Xxxxxxx
------------------
Xxx X. Xxxxxxx
President and Chief Executive Officer
Confirmed:
CIBC WORLD MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
---------------------------------------
Acting on behalf of themselves and as
representatives of the several Underwriters
named in Schedule I annexed hereto.
By: CIBC WORLD MARKETS CORP.
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Name: Xxxxxx X. Xxxxxx
-----------------
Title: Managing Director
--------------------
24
SCHEDULE I
Number of Firm Shares
Name To Be Purchased
------------------------------------- ---------------------
CIBC World Markets Corp. 920,000
Prudential Securities Incorporated 920,000
Banc of America Securities LLC 40,000
Xxxxx Xxxxxx & Co., Inc. 20,000
Xxxx Xxxxxxxx Xxxxxxx 20,000
First Union Securities, Inc. 20,000
Xxxxxxxxx & Company, Inc. 20,000
Xxxxxx Xxxxxxx & Co. 20,000
Southcoast Capital L.L.C. 20,000
Total 2,000,000
=========
25
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(f)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Texas.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus in the column entitled "Historical" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Underwriting Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus; the shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(v) The Shares to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant to the
Underwriting Agreement and, when issued and delivered by the Company pursuant to
the Underwriting Agreement against payment of the consideration set forth in the
Underwriting Agreement, will be validly issued and fully paid and non-assessable
and no holder of the Shares is or will be subject to personal liability by
reason of being such a holder.
(vi) The issuance and sale of the Shares by the Company is not subject to
the preemptive or other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated or organized and is
validly existing in good standing under the laws of the jurisdiction of its
formation, has power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly qualified as
a foreign entity to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result
A-1
in a Material Adverse Effect; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock of each Subsidiary
has been duly authorized and validly issued, is fully paid and non-assessable
and, to the best of our knowledge, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding shares of capital stock of
any Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement has been declared effective under the
Securities Act; any required filing of the Prospectus pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule 424(b);
and, to the best of our knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued under the Securities Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
(x) The Registration Statement, the Rule 430A Information, as applicable,
the Prospectus, and each amendment or supplement to the Registration Statement
and Prospectus, as of their respective effective or issue dates (other than the
financial statements and supporting schedules included therein or omitted
therefrom, as to which we need express no opinion) complied as to form in all
material respects with the requirements of the Securities Act and the Rules.
(xi) The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the American Stock Exchange.
(xii) To the best of our knowledge, except as disclosed in the
Prospectus, there is not pending or threatened any action, suit, proceeding,
inquiry or investigation, to which the Company or any subsidiary is a party, or
to which the property of the Company or any subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or foreign, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated in the
Underwriting Agreement or the performance by the Company of its obligations
thereunder.
(xiii) The information incorporated by reference into the Prospectus
from the Company's Amended Current Report on Form 8-K/A, filed on December 2,
1999, from the section entitled "Description of Capital Stock After the Merger"
and in the supplement constituting part of the Prospectus under "Business--
Regulatory Matters" and in the Company's Post-Effective Amendment No. 1 to the
Registration Statement under Item 15, to the extent that it constitutes matters
of law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
A-2
(xiv) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xv) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its charter or by-laws and no default by the Company or any
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement where the consequences of such default might reasonably
be expected to result in a Material Adverse Effect.
(xvi) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the Securities Act
and the Rules, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we express no
opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Underwriting Agreement or for the offering,
issuance, sale or delivery of the Shares.
(xvii) The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated in the
Underwriting Agreement and in the Registration Statement (including the issuance
and sale of the Shares and the use of the proceeds from the sale of the Shares
as described in the Prospectus under the caption "Use Of Proceeds") and
compliance by the Company with its obligations under the Underwriting Agreement
do not and will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section 1(a)(xi) of the Underwriting Agreement) under or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any subsidiary pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, known to us, to which the Company or any
subsidiary is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, or any applicable law, statute, rule, regulation,
judgment, order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
A-3
(xviii) To the best of our knowledge, except as disclosed in the
Prospectus, there are no persons with registration rights or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act.
Although we are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Prospectus or Registration Statement (except as specified in the foregoing
opinion), nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information (if applicable), (except for financial statements and schedules and
other financial data included therein or omitted therefrom, as to which we need
make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included therein or omitted therefrom, as to which we
need make no statement), at the time the Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
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.
In rendering such opinion, such counsel may rely (A) with regard to the
opinions set forth above in Paragraphs (iii), (vii), (xii), (xiii), (xiv) and
(xv), on the opinion of E. Xxxxx Xxxxxxx, General Counsel of the Company, and
(B) as to matters of fact (but not as to legal conclusions), to the extent they
deem proper, on certificates of responsible officers of the Company and public
officials. Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991). In rendering such
opinion, matters expressly stated as within the "knowledge" of counsel shall be
limited to matters within the knowledge of the attorneys of such counsel's firm
who have rendered substantive attention to matters for the Company and its
subsidiaries.
A-4
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
CIBC WORLD MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
as Representative(s) of the several
Underwriters to be named in the
within-mentioned Underwriting Agreement
c/o CIBC World Markets
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Proposed Public Offering by Midcoast Energy Resources, Inc.
Dear Sirs:
The undersigned, a stockholder, officer and/or director of Midcoast Energy
Resources, Inc., Delaware corporation (the "Company"), understands that CIBC
World Markets Corp. ("CIBC") and Prudential Securities Incorporated propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") with the
Company providing for the public offering of shares (the "Shares") of the
Company's common stock, par value $.01 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder, officer and/or director of the Company, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned agrees with each underwriter to be named in
the Underwriting Agreement that, during a period of 180 days from the date of
the Underwriting Agreement, the undersigned will not, without the prior written
consent of CIBC, directly or indirectly, (i) offer, pledge, sell, sell short,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise; provided, (i) any person with shares of
Common Stock or securities convertible into, or exchangeable or exercisable for,
Common Stock that are currently pledged as collateral for a loan made to such
person may pledge such shares of Common Stock or securities convertible into, or
exchangeable or exercisable for, Common Stock as collateral for any loan of an
equal or lesser
B-1
amount in connection with the prepayment and cancellation of such loan, provided
that the pledgee agrees to be bound by a similar lock-up agreement with respect
to such securities; (ii) shares of Common Stock or securities convertible into,
or exchangeable or exercisable for, Common Stock may be transferred by the
undersigned in a private transaction to a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the undersigned (an "Affiliate") if such Affiliate agrees
prior to such transfer in writing to be bound by a similar lock-up agreement;
and (iii) shares of Common Stock or securities convertible into, or exchangeable
or exercisable for, Common Stock may be transferred as bona fide gifts by
stockholders to persons who agree prior to such transfer to be bound by a
similar lock-up agreement.
Very truly yours,
Signature:
---------------------------------
Print Name:
--------------------------------
B-2
EXHIBIT C
SIGNIFICANT SUBSIDIARIES OF MIDCOAST ENERGY RESOURCES, INC.
Midcoast Interstate Transmission, Inc.
Tennessee River Intrastate Gas Co., Inc.
Mid Louisiana Gas Co.
Mid Louisiana Gas Transmission Co.
Midcoast Gas Services, Inc.
Midcoast Marketing, Inc.
Midcoast Kansas Pipeline, Inc.
Midcoast Kansas General Partner, Inc.
C-1
