EXHIBIT 10.1
$125,000,000
CROSS TIMBERS OIL COMPANY
(a Delaware corporation)
9 1/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
------------------
March 26, 1997
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Bear, Xxxxxxx & Co. Inc.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation
as Representatives of the several Initial Purchasers
x/x Xxxxxxx Xxxxx & Xx.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxx Xxxxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
Cross Timbers Oil Company, a Delaware corporation (the "Company"), confirms
its agreement with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated ("Xxxxxxx Xxxxx") and each of the other Initial Purchasers named in
Schedule A hereto (collectively, the "Initial Purchasers", which term shall also
include any initial purchaser substituted as hereinafter provided in Section 11
hereof), for whom Xxxxxxx Xxxxx, Bear, Xxxxxxx & Co. Inc. and Xxxxxxxxx, Xxxxxx
& Xxxxxxxx Securities Corporation are acting as representatives (in such
capacity, the "Representatives"), with respect to the issue and sale by the
Company and the purchase by the Initial Purchasers, acting severally and not
jointly, of the respective principal amounts set forth in said Schedule A of
$125,000,000 aggregate principal amount of the Company's 9 1/4% Senior
Subordinated Notes due 2007 (the "Securities"). The Securities are to be issued
pursuant to an indenture dated as of April 1, 1997 (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Trustee"). Securities issued
in book-entry form will be issued to Cede & Co. as nominee of The Depository
Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the
Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the
Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are
to be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the 1933 Act
is available (including the exemption afforded by Rule 144A ("Rule 144A") or
Regulation S ("Regulation S") of the rules and regulations promulgated under the
1933 Act by the Securities and Exchange Commission (the "Commission")).
The Company has prepared and delivered to each Initial Purchaser copies of
a preliminary offering memorandum dated March 14, 1997 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to each Initial
Purchaser, on the date hereof or the next succeeding business day, copies of a
final offering memorandum dated March 26, 1997 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Securities. "Offering
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement to
either such document), including exhibits thereto and any documents incorporated
therein by reference, which has been prepared and delivered by the Company to
the Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Securities.
At the Closing Time, and as a condition to the obligations of the Initial
Purchasers hereunder, the Company and each of the Initial Purchasers will enter
into a Registration Rights Agreement (the "Registration Rights Agreement"),
substantially in the form attached hereto as Exhibit A. Pursuant to the
Registration Rights Agreement, the Company will agree, among other things, to
use its reasonable best efforts to file with, and cause to be declared effective
by, the Commission a registration statement with respect to a registered
exchange offer under the 1933 Act, relating to the offer to exchange the
Securities for like respective principal amount of debt securities of the
Company identical in all material respects to the Securities.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Memorandum; and all references in
this Agreement to amendments or supplements to the Offering Memorandum shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the
Offering Memorandum.
2
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or
-----------------
indirectly, solicited any offer to buy or offered to sell, and will not,
directly or indirectly, solicit any offer to buy or offer to sell, in the
United States or to any United States citizen or resident, any security
which is or would be integrated with the sale of the Securities in a manner
that would require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does
-------------------
not, and at the Closing Time will not, include 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; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through the
Representatives expressly for use in the Offering Memorandum.
(iii) Incorporated Documents. The Offering Memorandum as
----------------------
delivered from time to time shall incorporate by reference the most recent
Annual Report of the Company on Form 10-K filed with the Commission and
each Quarterly Report of the Company on Form 10-Q and each Current Report
of the Company on Form 8-K filed with the Commission since the end of the
fiscal year to which such Annual Report relates. The documents incorporated
or deemed to be incorporated by reference in the Offering Memorandum at the
time they were or hereafter are filed with the Commission complied and will
comply in all material respects with the requirements of the 1934 Act and
the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), and, when read together with the other information in the
Offering Memorandum, at the date of the Offering Memorandum and at the
Closing Time, do not and will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(iv) Independent Accountants. The accountants who
-----------------------
certified the financial statements and supporting schedules included in the
Offering Memorandum are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
(v) Financial Statements. The financial statements,
--------------------
together with the related schedules and notes, included in the Offering
Memorandum present fairly in all material respects the financial position
of the Company and its consolidated subsidiaries at the
3
dates indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The financial statement schedules,
if any, included in the Offering Memorandum present fairly in all material
respects in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Offering Memorandum present fairly in all material respects
the information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the Offering
Memorandum. The column entitled "Pro Forma, As Adjusted," in the section of
the Offering Memorandum entitled "Capitalization" presents fairly in all
material respects the information shown therein, has been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and has been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(vi) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Offering
Memorandum, 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 (a "Material Adverse Effect"),
whether or not arising in the ordinary course of business, (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, par value $0.01 per share, of the Company (the "Common
Stock") and on the Series A Convertible Preferred Stock, par value $0.01
per share, of the Company (the "Series A Preferred Stock") in amounts per
share that are consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(vii) Good Standing of the Company. The Company has been
----------------------------
duly organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under this Agreement, the Indenture, the Securities
and the Registration Rights Agreement; and 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 so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(viii) Good Standing of Subsidiaries. The only direct or
-----------------------------
indirect subsidiaries of the Company are the corporations listed on
Schedule B hereto. Each subsidiary of the Company has been duly organized
and is validly existing as a corporation in good
4
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 Offering Memorandum 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 so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Offering Memorandum, 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 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 the subsidiaries was issued in
violation of any preemptive or similar rights arising by operation of law,
or under the charter or by-laws of any subsidiary or under any agreement to
which the Company or any subsidiary is a party.
(ix) Capitalization. The issued and outstanding capital
--------------
stock of the Company is as set forth in the Offering Memorandum in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
employee benefit plans referred to in the Offering Memorandum or pursuant
to the exercise of convertible securities or options referred to in the
Offering Memorandum).
(x) Authorization of Agreement. This Agreement has been
--------------------------
duly authorized, executed and delivered by the Company.
(xi) Authorization of the Indenture and the Registration
----------------------------------------------------
Rights Agreement. The Indenture and the Registration Rights Agreement have
----------------
been duly authorized by the Company and, at the Closing Time, will have
been duly executed and delivered by the Company and will constitute valid
and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xii) Authorization of the Securities. The Securities
-------------------------------
have been duly authorized and, at the Closing Time, will have been duly
executed by the Company and, when authenticated in the manner provided for
in the Indenture and delivered against payment of the purchase price
therefor will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law), and will be in the form contemplated by, and entitled to
the benefits of, the Indenture.
5
(xiii) Description of the Securities and the Indenture.
-----------------------------------------------
The Securities and the Indenture will conform in all material respects to
the respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms previously
delivered to the Initial Purchasers.
(xiv) Absence of Defaults and Conflicts. 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 any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries 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, the Registration Rights Agreement, the
Indenture and the Securities and any other agreement or instrument entered
into or issued or to be entered into or issued by the Company in connection
with the transactions contemplated hereby or thereby or in the Offering
Memorandum and the consummation of the transactions contemplated herein and
in the Offering Memorandum (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum 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 a Repayment Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, the Agreements and Instruments except
for such conflicts, breaches or defaults or liens, charges or encumbrances
that, singly or in the aggregate, would not result in a Material Adverse
Effect, nor will such action result in any violation of 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 of its subsidiaries or any of
their assets or properties, which violation would 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 of its
subsidiaries. No event of default exists under any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument
constituting Senior Indebtedness (as defined in the Indenture). 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 of its subsidiaries.
(xv) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or any of its subsidiaries 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 of its subsidiaries' principal suppliers, manufacturers,
6
customers or contractors, which, in either case, may reasonably be expected
to result in a Material Adverse Effect.
(xvi) Absence of Proceedings. Except as disclosed in the
----------------------
Offering Memorandum, there is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any subsidiary thereof
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 of the Company or any of its subsidiaries or the
consummation of this Agreement, the Indenture, the Securities or the
Registration Rights 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 thereof is a party or of
which any of their respective property or assets is the subject which are
not described in the Offering Memorandum, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xvii) Possession of Intellectual Property. 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.
(xviii) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement or the Registration Rights Agreement, except
such as may be required under state securities laws, and, in the case of
the performance of the Company's obligations under the Registration Rights
Agreement, such as may be required under the federal securities laws.
(xix) Possession of Licenses and Permits. The Company
----------------------------------
and its subsidiaries possess such certificates, 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
7
conducted by them; the Company and its subsidiaries are in compliance with
the terms and conditions 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 where 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.
(xx) Title to Property. The Company and its subsidiaries
-----------------
have good and defensible title to their producing oil and gas properties,
and any gas gathering properties that it owns, free and clear of all liens,
encumbrances and defects, except (a) those described in the Offering
Memorandum, (b) liens securing taxes and other governmental charges, or
claims of materialmen, mechanics and similar persons, not yet due and
payable, (c) liens and encumbrances under operating agreements, unitization
and pooling agreements, and gas sales contracts, securing payment of
amounts not yet due and payable and of a scope and nature customary in the
oil and gas industry and (d) liens, encumbrances and defects that do not in
the aggregate materially affect the value of such oil and gas properties or
gas gathering properties or materially interfere with the use made or
proposed to be made of such properties by the Company and its subsidiaries.
Except to the extent described in the Offering Memorandum, the oil, gas and
mineral leases, coal methane leases, options to lease, drilling concessions
or other property interests therein held by the Company and its
subsidiaries reflect in all material respects the right of the Company and
its subsidiaries, as the case may be, to explore or receive production from
the undeveloped properties described in the Offering Memorandum, 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 property interests was generally consistent with standard industry
practices for acquiring or procuring leases and interests therein to
explore such for hydrocarbons. All other 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 Offering Memorandum are in full force and
effect, and neither the Company nor any of its subsidiaries has actual
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 such
leases or subleases, or affecting or questioning the rights of the Company
or such subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xxi) Tax Returns. All United States federal income tax
-----------
returns of the Company and its subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise assessed,
which are due and payable, have been paid, except assessments against which
appeals have been or will be promptly taken and as to which adequate
reserves have been provided. The Company and its subsidiaries have filed
all other tax returns that are required to have been filed by them pursuant
to applicable foreign, state, local or other law except insofar as the
failure to file such returns would not result in a
8
Material Adverse Effect, and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company and its
subsidiaries, except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. The charges,
accruals and reserves on the books of the Company in respect of any income
and corporation tax liability for any years not finally determined are
adequate to meet any assessments or re-assessments for additional income
tax for any years not finally determined, except to the extent of any
inadequacy that would not result in a Material Adverse Effect.
(xxii) Environmental Laws. Except as described in the
------------------
Offering Memorandum and except such matters 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 order, consent, decree or
judgment 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, (C) there are no pending or, to the knowledge of
the Company threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) 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
Environmental Laws.
(xxiii) Internal Accounting Controls. 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.
(xxiv) Insurance. The Company and its subsidiaries carry
---------
or are entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts and
9
covering 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.
(xxv) Solvency. The Company is, and immediately after
--------
the Closing Time will be, Solvent. As used herein, the term "Solvent"
means, with respect to the Company on a particular date, that on such date
(A) the fair market value of the assets of the Company is greater than the
total amount of liabilities (including contingent liabilities) of the
Company, (B) the present fair salable value of the assets of the Company is
greater than the amount that will be required to pay the probable
liabilities of the Company on its debts as they become absolute and
matured, (C) the Company is able to realize upon its assets and pay its
debts and other liabilities, including contingent obligations, as they
mature, and (D) the Company does not have unreasonably small capital.
(xxvi) No Stabilization. Neither Company nor 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 Securities.
(xxvii) Investment Company Act; Public Utility Holding
----------------------------------------------
Company Act. The Company is not, and upon the issuance and sale of the
-----------
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Offering Memorandum will not be (A) an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated
thereunder (the "1940 Act") or (B) a "holding company" or "affiliate" of a
"holding company" or "public utility," as such terms are defined in the
Public Utility Holding Company Act of 1935, and the rules and regulations
of the Commission promulgated thereunder (the "PUHCA").
(xxviii) Rule 144A Eligibility. The Securities are
---------------------
pursuant to Rule 144A and will not be, at the Closing Time, of the same
class as securities listed on a national securities exchange registered
under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer
quotation system.
(xxix) No General Solicitation. None of the Company, its
-----------------------
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on its or any of their behalf (other
than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage, in connection with the offering
of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxx) No Registration Required. Subject to compliance by
------------------------
the Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery
10
of the Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by this Agreement and the Offering
Memorandum to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act").
(xxxi) No Directed Selling Efforts. With respect to
---------------------------
those Securities sold in reliance on Regulation S, (A) none of the Company,
its Affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation) has
engaged or will engage in any directed selling efforts within the meaning
of Regulation S and (B) each of the Company and its Affiliates and any
person acting on its or their behalf (other than the Initial Purchasers, as
to whom the Company makes no representation) has complied and will comply
with the offering restrictions requirement of Regulation S.
(xxxii) Petroleum Engineering Consultants. The
---------------------------------
information supplied by the Company to the independent petroleum
engineering consultants for the Company for purposes of preparing the
reserve reports and estimates of such consultants included in the Offering
Memorandum, including, without limitation, production, costs of operation
and development, current prices for production, agreements relating to
current and future operations and sales of production, was true and correct
in all material respects on the date supplied and was prepared in
accordance with customary industry practices; Xxxxxx and Xxxxx, Ltd.,
independent consulting petroleum engineers, who prepared estimates of the
extent and value of proved oil and natural gas reserves of the Company are
independent with respect to the Company.
(b) Officer's Certificates. Any certificate signed by any
officer of the Company or any of its subsidiaries delivered to the
Representatives or to counsel for the Initial Purchasers shall be deemed a
representation and warranty by the Company to each Initial Purchaser as to
the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Initial Purchaser, severally and not
jointly, and each Initial Purchaser, severally and not jointly, agrees to
purchase from the Company, a purchase price equal to 97.243% of the principal
amount thereof, the aggregate principal amount of Securities set forth in
Schedule A opposite the name of such Initial Purchaser, plus any additional
principal amount of Securities which such Initial Purchaser may become obligated
to purchase pursuant to the provisions of Section 11 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Xxxxx, Xxxx &
Xxxxxxx, P.C., 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, Xxxxx, or at such other
place as shall be agreed upon by the Representatives and the Company, at 8:00
A.M. local time on the fourth business day after the date hereof (unless
postponed in accordance with the provisions of Section 11), or such other time
not later than ten business days
11
after such date as shall be agreed upon by the Representatives and the Company
(such time and date of payment and delivery being herein called the "Closing
Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives, for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Xxxxxxx Xxxxx, individually and not
as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
(c) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company that it is a "qualified institutional buyer" within the meaning of Rule
144A under the 1933 Act (a "Qualified Institutional Buyer") and an "accredited
investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited
Investor").
(d) Denominations; Registration. Certificates for the
Securities shall be in such denominations ($1,000 or integral multiples thereof)
and registered in such names as the Representatives may request in writing at
least one full business day before the Closing Time. The certificates
representing the Securities shall be registered in the name of Cede & Co.
pursuant to the DTC Agreement and shall be made available for examination and
packaging by the Initial Purchasers in The City of New York not later than 10:00
A.M. on the last business day prior to the Closing Time.
SECTION 3. Covenants of the Company.
The Company covenants with each Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible,
will furnish to each Initial Purchaser, without charge, such number of copies of
the Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Company will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (i) any filing made by the Company of information relating to the offering of
the Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (ii) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the earnings, business affairs or business prospects of the Company
and its subsidiaries which (A) make any statement in the Offering Memorandum
false or misleading or (B) are not disclosed in the Offering Memorandum. In such
event or if during such time any event shall occur as a result of which it is
necessary, in the
12
reasonable opinion of the Company, its counsel, the Initial Purchasers or
counsel for the Initial Purchasers, to amend or supplement the Final Offering
Memorandum in order that the Final Offering Memorandum not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
then existing, the Company will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing (in reasonable number) to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include 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 existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The
Company will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect such amendment or
supplement without the consent of the Initial Purchasers, which consent will not
be unreasonably withheld. Neither the consent of the Initial Purchasers, nor the
Initial Purchaser's delivery of any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company
will use its best efforts, in cooperation with the Initial Purchasers, to
qualify the Securities for offering and sale under the applicable securities
laws of such jurisdictions as the Representatives may designate and will
maintain such qualifications in effect as long as required for the sale of the
Securities; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(e) Rating of Securities. The Company shall take all reasonable
action necessary to enable Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc. ("S&P"), and Xxxxx'x Investors Service, Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
(f) DTC. The Company will cooperate with the Representatives
and use its best efforts to permit the Securities to be eligible for clearance
and settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Offering Memorandum under "Use of Proceeds"
(h) Restriction on Sale of Securities. During a period of 90
days from the date of the Offering Memorandum, the Company will not, without the
prior written consent of Xxxxxxx Xxxxx, directly or indirectly, issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise
13
dispose of, securities of the Company that are similar to, convertible into, or
exchangeable for, the Securities, except for the Exchange Notes (as such term is
defined in the Offering Memorandum).
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the printing
and any filing of the Offering Memorandum (including financial statements and
any schedules or exhibits and any document incorporated therein by reference)
and of each amendment or supplement thereto, (ii) the printing and delivery to
the Initial Purchasers of this Agreement, the Indenture and such other documents
as may be required in connection with the offering, purchase, sale and delivery
of the Securities, (iii) the issuance and delivery of the certificates for the
Securities to the Initial Purchasers, including any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors (other than the Representatives), (v) the qualification of
the Securities under securities laws in accordance with the provisions of
Section 3(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection therewith and
in connection with the preparation of the Blue Sky Survey, any supplement
thereto and any Legal Investment Survey, (vi) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, (vii) any fees payable in
connection with the rating of the Securities, and (viii) any fees payable to the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the initial and continued designation of the Securities as PORTAL securities
under the PORTAL Market Rules pursuant to NASD Rule 5322.1.
(b) Termination of Agreement. If this Agreement is terminated
by the Representatives in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations.
The obligations of the several Initial Purchasers hereunder are
subject to the accuracy of the representations and warranties of the Company
contained in Section 1 hereof or in certificates of any officer of the Company
or any of its subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Xxxxx, Xxxx & Xxxxxxx, P.C., counsel for the Company, in form
and substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letter for each of the other Initial
Purchasers to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the Initial Purchasers may reasonably request.
14
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time,
the Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Xxxxxxx & Xxxxx, L.L.P., counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers with respect to the matters set forth in (i) (solely as to
the incorporation status of the Company), (iv) through (vii), inclusive, (x)
(solely as to the information in the Offering Memorandum under "Description of
the Notes") and the penultimate paragraph of Exhibit B hereto. Such opinion
shall be limited to the laws of the State of Texas and the State of New York,
the federal law of the United States and the General Corporation Law of the
State of Delaware. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(c) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any 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, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as though
expressly made at and as of the Closing Time, and (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time.
(d) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from Xxxxxx Xxxxxxxx LLP
a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers containing statements and information of
the type ordinarily included in accountants' "comfort letters" to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from Xxxxxx Xxxxxxxx LLP a letter, dated as
of the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities shall
be rated at least B2 by Moody's and B by S&P, and the Company shall have
delivered to the Representatives a letter dated the Closing Time, from each such
rating agency, or other evidence satisfactory to the Representatives, confirming
that the Securities have such ratings; and since the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned to the
Securities or any of the Company's other securities by any nationally recognized
securities rating agency, and no such
15
securities rating agency shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of the
Securities or any of the Company's other securities.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(h) Petroleum Engineering Consultants. At the time of execution of
this Agreement and also at the Closing Time, the Representatives shall have
received letters from Xxxxxx and Xxxxx, Ltd. dated such date in form and
substance satisfactory to the Representatives.
(i) Registration Rights Agreement. At the Closing Time, the Company
shall have executed and delivered the Registration Rights Agreement.
(j) Additional Documents. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
they may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the Representatives and counsel for the Initial Purchasers.
(k) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 7 and 8 shall survive any such termination and remain in
full force and effect.
Section 6. Subsequent Offers and Resales of the Securities.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and
the Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales only to Institutional Accredited
-------------------------------------------------
Investors, Qualified Institutional Buyers or Certain Non-U.S. Persons.
---------------------------------------------------------------------
Offers and sales of the Securities will be made only by the Initial
Purchasers or Affiliates thereof qualified to do so in the jurisdictions in
which such offers or sales are made. Each such offer or sale shall only be
made (A) to persons whom the offeror or seller reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the
Securities Act), (B) to a limited number of other institutional accredited
investors (as such term is defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D) that the offeror or seller reasonably believes to be and,
with respect to sales and deliveries, that are Accredited Investors
("Institutional Accredited Investors") or (C) non-U.S. persons
16
outside the United States to whom the offeror or seller reasonably believes
offers and sales of the Securities may be made in reliance upon Regulation
S under the 1933 Act.
(ii) No General Solicitation. The Securities will be offered
-----------------------
by the Initial Purchasers only by approaching prospective Subsequent
Purchasers on an individual basis. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 0000 Xxx) will be
used in the United States in connection with the offering of the
Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a
---------------------------------
non-bank Subsequent Purchaser of a Security acting as a fiduciary for one
or more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (a) (i) above, each third party shall, in the
judgment of the applicable Initial Purchaser, be an Institutional
Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person
outside the United States.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser
---------------------------------
will take reasonable steps to inform, and cause each of its U.S. affiliates
to take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or in accordance with another exemption from
registration under the 1933 Act, as the case may be, and (C) may not be
offered, sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Rule 904 of Regulation S, or
(3) inside the United States in accordance with (x) Rule 144A to a person
whom the seller reasonably believes is a Qualified Institutional Buyer that
is purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale
or transfer is being made in reliance on Rule 144A or (y) the exemption
from registration under the 1933 Act provided by Rule 144, if available.
(v) Restrictions on Transfer. The transfer restrictions and
------------------------
the other provisions set forth in Section 2.07 of the Indenture, including
the legend required thereby, shall apply to the Securities except as
otherwise agreed by the Company and the Initial Purchasers. Following the
sale of the Securities by the Initial Purchasers to Subsequent Purchasers
pursuant to the terms hereof, the Initial Purchasers shall not, in their
capacities as Initial Purchasers, be liable or responsible to the Company
for any losses, damages or liabilities suffered or incurred by the Company,
including any losses, damages or liabilities under the 1933 Act, arising
from or relating to any subsequent resale or transfer of any Security.
(vi) Delivery of Offering Memorandum. Each Initial Purchaser
-------------------------------
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the Securities,
a copy of the Offering Memorandum, as amended and supplemented at the date
of such delivery.
17
(b) Covenants of the Company. The Company covenants with each
Initial Purchaser as follows:
(i) Due Diligence. In connection with the original
-------------
distribution of the Securities, the Company agrees that, prior to any offer
or resale of the Securities by the Initial Purchasers, the Initial
Purchasers and counsel for the Initial Purchasers shall have the right to
make reasonable inquiries into the business of the Company and its
subsidiaries. The Company also agrees to provide answers to each
prospective Subsequent Purchaser of Securities who so requests concerning
the Company and its subsidiaries (to the extent that such information is
available or can be acquired and made available to prospective Subsequent
Purchasers without unreasonable effort or expense and to the extent that
officers of the Company determine, in their reasonable judgment, such
information need not be kept confidential and the provision thereof is not
prohibited by applicable law) and the terms and conditions of the offering
of the Securities, as provided in the Offering Memorandum.
(ii) Integration. The Company agrees that it will not and will
-----------
cause its affiliates not to make any offer or sale of any class of
securities of the Company if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale would render
invalid (for the purpose of (A) the sale of the Securities by the Company
to the Initial Purchasers, (B) the resale of the Securities by the Initial
Purchasers to Subsequent Purchasers or (C) the resale of the Securities by
such Subsequent Purchasers to others) the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or Regulation
thereunder or by Rule 144A or otherwise.
(iii) Rule 144A Information. The Company agrees that, in order
---------------------
to render the Securities eligible for resale pursuant to Rule 144A under
the 1933 Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to
Section 13 or 15(d) of the 1934 Act (such information, whether made
available to holders or prospective purchasers or furnished to the
Commission, is herein referred to as "Additional Information").
(iv) Restriction on Repurchases. Until the expiration of two
--------------------------
years after the original issuance of the Securities, the Company will not,
and will cause its affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions) unless, immediately upon
any such purchase, the Company or any Affiliate shall submit such
Securities to the Trustee for cancellation.
(c) Selling Restrictions for Offers and Sales Outside the United
States. Each Initial Purchaser understands that the Securities have not been and
will not be registered under the 1933 Act and may not be offered or sold within
the United States or to, or for the account or benefit
18
of, U.S. persons except in accordance with Regulation S under the 1933 Act or
pursuant to an exemption from the registration requirements of the 1933 Act.
Each Initial Purchaser represents and agrees, that except as permitted by
Section 6(a) above, it has offered and sold Securities and will offer and sell
Securities (i) as part of their distribution at any time and (ii) otherwise
until forty days after the later of the date upon which the offering of the
Securities commences and the Closing Time, only in accordance with Rule 903 of
Regulation S or Rule 144A under the 1933 Act. Accordingly, neither the Initial
Purchasers, their affiliates nor any persons acting on their behalf have engaged
or will engage in any directed selling efforts with respect to Securities, and
the Initial Purchasers, their affiliates and any person acting on their behalf
have complied and will comply with the offering restriction requirements of
Regulation S. Each Initial Purchaser agrees that at or prior to confirmation of
a sale of Securities (other than a sale of Securities pursuant to Rule 144A), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities from it or
through it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered
under the United States Securities Act of 1933 (the
"Securities Act") and may not be offered or sold within the
United States or to or for the account or benefit of U.S.
persons (i) as part of their distribution at any time and
(ii) otherwise until forty days after the later of the date
upon which the offering of the Securities commenced and the
date of closing, except in either case in accordance with
Regulation S or Rule 144A under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
Each Initial Purchaser severally represents and agrees that it has not
entered and will not enter into any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.
Section 7. Indemnification.
(a) Indemnification of Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
19
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
7(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Xxxxxxx Xxxxx),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Xxxxxxx Xxxxx expressly for use in the Offering
Memorandum (or any amendment thereto) and provided, further, that this indemnity
agreement with respect to any Preliminary Offering Memorandum shall not inure to
the benefit of any Initial Purchaser from whom the person asserting any such
losses, liabilities, claims, damages or expenses purchased Securities, or any
person controlling such Initial Purchaser, if a copy of the Offering Memorandum,
as then amended or supplemented, was not sent or given by or on behalf of the
Initial Purchaser to such person at or prior to the written confirmation of the
sale of such Securities to such person and if the Offering Memorandum, as so
amended or supplemented, would have corrected any untrue statement or omission,
or alleged untrue statement or omission, giving rise to such loss, liability,
claim, damage or expense (provided the Company has delivered the Offering
Memorandum, as then amended or supplemented, to the several Initial Purchasers
in requisite quantity on a timely basis to permit such delivery or sending).
(b) Indemnification of Company and Directors. Each Initial Purchaser
severally agrees to indemnify and hold harmless the Company, its directors, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Offering Memorandum in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser through Xxxxxxx Xxxxx
expressly for use in the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not
20
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Xxxxxxx Xxxxx, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. Notwithstanding the
foregoing, in case any action or proceeding shall be instituted and the
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein, and,
after written notice from the indemnifying party to such indemnified party, to
assume the defense thereof with counsel of its choice reasonably acceptable to
the indemnified parties in such action. Notwithstanding the election of the
indemnifying party to assume defense of such action or proceeding, the
indemnified party shall have the right, at its own expense, to employ one
additional firm as separate counsel and to participate in the defense of the
action or proceeding; provided that the indemnifying party shall pay the
reasonable fees and expenses of such separate counsel reasonably satisfactory to
the indemnifying party if (i) the indemnifying party shall have failed to employ
counsel to represent the indemnified party in a reasonably timely manner or (ii)
the defendants in any such action or proceeding include both the indemnified
party and the indemnifying party and counsel to the indemnified party shall have
concluded and notified the indemnifying party that in its reasonable judgment
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 7 or Section 8 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
21
Section 8. Contribution.
If the indemnification provided for in Section 7 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Initial Purchasers on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total initial purchasers' discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers 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 Initial Purchasers 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 in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased by it exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
22
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 0000 Xxx) 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
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The Initial Purchasers' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the principal amount of Securities set
forth opposite their respective names in Schedule A hereto and not joint.
Section 9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any Initial Purchaser or controlling person, or by or on
behalf of the Company, and shall survive delivery of the Securities to the
Initial Purchasers.
Section 10. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any 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, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or
elsewhere, any outbreak of hostilities or escalation thereof or other calamity
or crisis or any change or development involving a prospective change in
national or international political, financial or economic conditions, in each
case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market System has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal, New York or Texas authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4
23
hereof, and provided further that Sections 1, 7 and 8 shall survive such
termination and remain in full force and effect.
Section 11. Default by One or More of the Initial Purchasers.
If one or more of the Initial Purchasers shall fail at the Closing Time to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth: if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder, each of
the non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-defaulting
Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section 11.
Section 12. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers shall be directed
to the Representatives at Xxxxx Xxxxx, Xxxxx Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000-0000, attention of Wood Xxxxxxxxx, Vice President; notices to the
Company shall be directed to them at 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx,
Xxxxx 00000, attention of Xxxxx X. Xxxxxxx.
24
Section 13. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers, the Company and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Initial Purchasers, the
Company and their respective successors and the controlling persons and officers
and directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers, the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
Section 14. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 15. Effect of Headings.
The Section headings herein are for convenience only and shall not affect
the construction hereof.
25
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
CROSS TIMBERS OIL COMPANY
By: __________________________________
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
BEAR, XXXXXXX & CO. INC.
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
By: XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
By:_______________________________
Authorized Signatory
For themselves and as Representatives of the other Initial Purchasers named in
Schedule A hereto.
26
SCHEDULE A
Principal Amount
Name of Initial Purchaser of Securities
------------------------- ----------------
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated............. $ 75,000,000
Bear, Xxxxxxx & Co. Inc. ...................................... 25,000,000
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation............ 25,000,000
----------------
Total.......................................................... $ 125,000,000
================
27
SCHEDULE B
SUBSIDIARIES OF CROSS TIMBERS OIL COMPANY
JURISDICTION OF INCORPORATION
-----------------------------
Cross Timbers Operating Company Texas
Cross Timbers Energy Services, Inc. Texas
Cross Timbers Trading Company Texas
Ringwood Gathering Company Delaware
Timberland Gathering & Processing Company, Inc. Texas
WTW Properties, Inc. Texas
28
