1
EXHIBIT 1.2
DEALER MANAGER AGREEMENT
Xxxxxxxxx Energy 97 Drilling Program
, 1997
Xxxxxxxxx Securities, Inc.
0000 X. Xxxxxxxx
Xxxxx, Xxxxx 00000
Gentlemen:
Xxxxxxxxx Development Corporation, a Delaware corporation ("MD"), is
or proposes to be the sole managing general partner (in such capacity the
"Managing Partner') of a limited partnership (the "Partnership") formed
pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act"). MD intends to name the Partnership as follows: Xxxxxxxxx Energy
Partners 97-A, L.P. The Partnership will participate in a program, governed by
a Drilling Program Agreement (the "Program Agreement") among Xxxxxxxxx Oil
Company, a Delaware corporation ("MOC"), MD and the Partnership, the primary
purpose of which will be to drill Developmental Xxxxx (as such term is defined
in the Prospectus referred to below).
On behalf of the Partnership and MD, a Registration Statement on Form
S-1 (Registration No. ) dated March , 1997, relating to the offer
and sale of the Interests (hereinafter defined) was filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). On , 1997, MD filed with the Commission on behalf of the
Partnership Amendment No. 1 to the Registration Statement. The Registration
Statement was declared effective by the Commission on , 1997.
MD, the Partnership and the Interests are described in the Prospectus dated
, 1995 (the "Prospectus") that forms a part of the Registration Statement. As
used in this Soliciting Dealer Agreement (this "Agreement"), the terms
"Prospectus" and "Registration Statement" refer solely to the Prospectus and
Registration Statement, as amended, described above, except that (i) from and
after the date on which any post-effective amendment to the Registration
Statement is declared effective by the Commission, the term "Registration
Statement" shall refer to the Registration Statement as amended by that
post-effective amendment, and the term "Prospectus" shall refer to the
Prospectus then forming a part of the Registration Statement, and (ii) if the
Prospectus filed by MD pursuant to Rule 424(b) or (c) promulgated by the
Commission under the Act differs from the Prospectus on file with the
Commission at the time the Registration Statement or any post-effective
amendment thereto shall have become effective, the term "Prospectus" shall
refer to the Prospectus filed pursuant thereto from and after the date on which
it was filed. Terms defined in the Prospectus and not otherwise defined herein
will have the meanings set forth in the Prospectus.
MD desires to raise a minimum of $1,000,000 and a maximum of
$10,000,000 in capital for the Partnership by the sale of up to 1,000
($1,000,000) limited partner interests (the "Limited Partner Interests") and up
to 9,000 ($9,000,000) general partner interests (the "General Partner
Interests") in the Partnership (the Limited Partner Interests and the General
Partner Interests are collectively referred to as the "Interests"). The
Interests will be offered in $1,000 increments, with a minimum purchase of five
Interests ($5,000).
The following are the terms on which the Managing Partner, on behalf
of the Partnership, appoints you exclusive agent ("Dealer Manager") to form a
group of National Association of Securities Dealers, Inc. member firms to
solicit subscribers for the purchase of interests:
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Section 1. Appointment as Dealer Manager. On the basis of the
representations, warranties and covenants contained in this Agreement, but
subject to the terms and conditions set forth herein:
(a) The Managing Partner hereby appoints you during the Offering
Period (as defined below) as exclusive agent to form and manage a group of
securities brokers or dealers selected by you, each of which shall be
registered under the Securities Exchange Act of 1934 (the "Soliciting Dealers")
and be a member in good standing with the National Association of Securities
Dealers, Inc. to assist you in the distribution and sale of Interests. The
"Offering Period" (as such term is used in this Agreement) will commence on or
about the date on which the Registration Statement is declared effective and
will end no later than December 31, 1997. MD has the right in its sole and
absolute discretion to terminate the offering of Interests and end the Offering
Period at any time.
(b) The Managing Partner hereby gives you, as Dealer Manager, the
right to solicit subscriptions of the Interests directly only in states where
you have registered as a broker-dealer under such states' blue sky laws. Such
subscriptions shall be evidenced by execution by the prospective investor of a
Subscription Agreement. It is understood that no sale shall be regarded as
effective unless and until accepted by the Managing Partner on behalf of the
Partnership. The Managing Partner reserves the right in its sole discretion to
refuse to sell a Interest to any person at any time for any reason, without
liability to it or to you.
(c) You hereby accept appointment as a Dealer Manager and agree on
the terms and conditions set forth in this Agreement to use your reasonable
efforts to solicit subscriptions for the Interests during the Offering Period
and until the earlier of (i) the termination of the Offering Period or (ii) the
Closing (as hereinafter defined). Neither your acceptance of that appointment
nor this Agreement shall constitute you and MD or the Partnership as an
association, partnership, unincorporated business or other separate entity.
(d) The price at which the Interests are to be offered shall be
$1,000 per Interest payable upon the terms set forth in the Prospectus:
provided, however, that the minimum purchase shall be five (5) Interests for a
subscription price of $5,000.
(e) If an offering for Interests in the Partnership is commenced
and subscriptions funds of $1,000,000 or more are not received by the
termination of the Offering Period with respect to Interests in the
Partnership, all subscription funds received by the termination of the Offering
Period with respect to Interests in the Partnership shall be returned in full
to the subscribers, together with any interest earned thereon, if any (as
provided in the Prospectus), and this Agreement will terminate without
obligation on your part or on the part of MD, except that (a) you will
promptly, upon notice, transmit to MD any funds advanced to you by MD of any
sales commissions and due diligence fees paid pursuant to Section 6(b) hereof
and which have not been reallowed to a Soliciting Dealer, and (b) the
indemnification and contribution provisions of Section 9 hereof shall continue
after such termination of this Agreement.
Section 2. Representations and Warranties of MD. MD, in its
individual capacity and in its capacity as Managing Partner, hereby represents
and warrants to you that:
(a) In the name and on behalf of the Partnership, MD has prepared
and filed with the Commission the Registration Statement (including the
Prospectus) for the registration of the offering and sale of the Interests
under the Act. The Registration Statement has become and is effective under
the Act. Copies of the Registration Statement and the Prospectus have been or
will be delivered to you.
(b) On the Closing Date (as hereinafter defined) for the sale of
Interests, the Partnership will be a limited partnership duly formed and
validly existing under the laws of the State of Delaware and will be duly
qualified or registered as a foreign limited partnership or otherwise qualified
as a limited partnership in each jurisdiction in which
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the nature of the activities conducted by it or the nature of the
assets owned by it make such qualification necessary (except where the failure
to so qualify or register would not have a material adverse effect on the
Partnership or the rights or liabilities of its Investor Partners). In
addition, the Partnership shall have full and adequate partnership power and
partnership authority to enter into and perform this Agreement and the Program
Agreement and to own its properties and to conduct its business as proposed in
the Prospectus.
(c) MD is, and at all times through the Closing Date will be, a
corporation, validly existing and in good standing under the laws of the State
of Delaware with full and adequate corporate power and corporate authority to
enter into and perform this Agreement and the Agreement of Partnership and to
own its properties and to conduct its business as presently conducted and as
proposed in the Prospectus to be conducted.
(d) Each subscriber for Limited Partner Interests will become a
Limited Partner of the Partnership entitled to all the rights of a Limited
Partner under the Agreement of Partnership for the Partnership and the Delaware
Act upon (i) payment of the consideration for those Limited Partner Interests
specified in that subscriber's Subscription Agreement and (ii) acceptance by
the Managing Partner of that subscriber as a Limited Partner. Each subscriber
for General Partnership Interests will become a General Partner of the
Partnership entitled to all the rights of a General Partner under the Agreement
of Partnership for the Partnership and the Delaware Act upon (i) payment of the
consideration for those General Partner Interests specified in that
subscriber's Subscription Agreement and (ii) acceptance by the Managing Partner
of that subscriber as a General Partner. The Interests, when sold and paid for
as contemplated by the Prospectus, will represent validly authorized and duly
issued Interests and those Interests will conform in all material respects to
the statements relating thereto contained in the Prospectus, including the Form
of Agreement of Partnership attached as Exhibit A thereto.
(e) This Agreement has been duly and validly authorized by MD. MD
has duly executed and delivered this Agreement, which constitutes a valid and
binding agreement of MD enforceable in accordance with its terms (except to the
extent that the enforceability of the indemnification provisions of Section 9
hereof may be limited under federal securities laws or to the extent the
enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the right of creditors
generally).
(f) The Commission has not issued any order preventing or
suspending the use of the Prospectus.
(g) From the time the Registration Statement initially became
effective through the Closing Date, the Registration Statement and the
Prospectus did and will comply in all material respects with the provisions of
the Act, and neither the Registration Statement and the Prospectus nor any
Sales Literature (as hereinafter defined) contains or will contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the representations and
warranties contained in this subsection (g) shall not apply to statements in,
or omissions from, the Registration Statement, the Prospectus or the Sales
Literature based upon and in conformity with information furnished to MD or the
Partnership by you in writing specifically for use in the Registration
Statement, the Prospectus or Sales Literature.
(h) Based upon the opinion of Xxxxxx & Xxxxxx L.L.P., counsel for
MD, and subject to the assumptions and representations expressed therein, under
existing federal income tax laws and regulations the Partnership, upon its
formation, will be classified as the partnership for federal income tax
purposes. The Partnership, at the Closing, will be classified as the
partnership for federal income tax purposes, and at all times subsequent
hereto, MD will use its best efforts to maintain the status of the Partnership
as a partnership for federal income tax purposes.
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(i) Except as disclosed in the Prospectus, there is no litigation
or governmental proceeding pending or, to the best knowledge of MD, threatened
that involves the offering of the Interests or any of the properties or
businesses of MD that would, if adversely decided, materially and adversely
affect (financially or otherwise) the operation of the business of the
Partnership, MD or the offering.
(j) MD is not in violation of the Agreements of Partnership or in
material default in the performance of any obligation, agreement or condition
contained in any agreement by which the Partnership is bound. The execution
and delivery of this Agreement and the Agreements of Partnership, the
fulfillment of the terms set forth herein and therein and the consummation of
the transactions contemplated herein and therein and in the Prospectus will not
conflict with or constitute a breach of or material default under the
Agreements of Partnership or under the certificate of incorporation or bylaws
of MD or under any other agreement, indenture or instrument by which the
Partnership or MD is bound or, to the best knowledge of MD, any law, rule,
regulation, order or decree of any court or any governmental body or
administrative agency applicable to MD or the Partnership.
(k) The financial information (including without limitation the
balance sheets and any accompanying notes and schedules) presented in the
Prospectus concerning MD presents fairly MD's financial position as of the
dates thereof in accordance with generally accepted accounting principles, and
there has been, and through the Closing Date shall be, no material adverse
change in its financial condition since the date of that information.
(l) There has been no material adverse change in the condition,
business or properties of MD, financial or otherwise, from that on the latest
dates as of which such condition, business or properties are set forth in the
Prospectus, except as referred to therein, and such properties and business
substantially conform and shall at the Closing Date with respect to the
Partnership substantially conform to the descriptions thereof contained in the
Prospectus.
(m) MD will timely apply, on behalf of the Partnership, to the
Internal Revenue Service for a tax shelter registration number and, if such a
number is received, will furnish such number to the Investor Partners of the
Partnership within a reasonable time after their admission to the Partnership
or within a reasonable time after the Partnership has received such number,
whichever occurs later.
Section 3. Covenants and Representations of Dealer Manager. You
covenant with and represent to MD that:
(a) You are, and at all times through the last Closing Date will
be, a corporation, validly existing and in good standing as a corporation under
the laws of the jurisdiction set forth on the signature page hereof, with full
and adequate corporate power and corporate authority to enter into and perform
this Agreement.
(b) This Agreement has been duly and validly authorized by you.
You have duly executed and delivered this Agreement, which constitutes a valid
and binding agreement of you enforceable in accordance with its terms (except
to the extent that the enforceability of the indemnification provisions of
Section 9 hereof may be limited under federal securities law or to the extent
the enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally).
(c) You will not offer to sell Interests to, solicit offers to buy
Interests from, or transmit Subscription Agreements to, any person on behalf of
MD that you have reasonable grounds to believe (based on information obtained
from such person or otherwise known to you) does not meet the age, net worth,
annual income or other standards applicable to that person as set forth in the
Subscription Agreement.
(d) You will deliver a copy of the Prospectus, containing such
legends as directed by MD, to each subscriber to whom you sell the Interests at
or before the completion of any sale of Interests to such subscriber (which
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sale shall be deemed, for the purposes of this Agreement to occur on the date
on which that subscriber delivers subscription funds to the escrow agent), or
earlier if required by the blue sky or securities laws of any state. You have
not and will not give any information or make any representation in connection
with the offer or sale of Interests other than as contained in the Prospectus,
and will not publish, circulate or otherwise distribute without MD's approval
any solicitation material other than the Prospectus and other sales material
("Sales Literature") provided to you by MD specifically for distribution to
subscribers with the Prospectus. Any such Sales Literature, if distributed,
must have been preceded or must be accompanied by the Prospectus. You agree
not to discuss any specific oil and gas prospect or to refer to any such oil
and gas prospect in any analysis or report on the Interests prepared by you or
on your behalf.
(e) You will make offers to sell Interests to, sell to or solicit
offers to subscribe for Interests from persons in only those states or other
jurisdictions where MD represents to you in writing that such Interests may be
offered and sold and you agree to make reasonable efforts to comply with all
applicable laws, rules and regulations of those states and jurisdictions in
which you offer or sell Interests.
(f) You are and on the last Closing Date will be (i) a securities
broker-dealer registered with the Securities and Exchange Commission and any
jurisdiction where broker-dealer registration is required in order to offer and
sell the Interests and (ii) a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD").
(g) You agree to make reasonable efforts to sell Interests or
cause them to be sold by the Soliciting Dealers in a manner consistent with all
the rules of the NASD applicable in connection with the offering of Interests
including, without limitation, the following provisions of Article III to the
Rules of Fair Practice:
2730. SECURITIES TAKEN IN TRADE
(a) A member engaged in a fixed price offering, who
purchases or arranges the purchase of securities taken in trade, shall
purchase the securities at a fair market price at the time of purchase
or shall act as agent in the sale of such securities and charge a
normal commission therefor.
(b) When used in this section--
(1) the term "taken in trade" means the purchase by a
member as principal, or as agent for the account of another, of a
security from a customer pursuant to an agreement or understanding
that the customer purchase securities from the member which are part
of a fixed price offering.
(2) the term "fair market price" means a price not higher
than the price at which the securities would be purchased from the
customer or from a similarly situated customer in the ordinary course
of business by a dealer in such securities in transactions of similar
size and having similar characteristics but not involving a security
taken in trade.
(3) the term "normal commission" means an amount of
commission which the member would normally charge to that customer or
a similarly situated customer in the ordinary course of business in
transactions of similar size and having similar characteristics but
not involving a security taken in trade.
(c) For purposes of this Section a member shall be
(1) deemed, with respect to securities other than common
stocks, to have taken such securities in trade at a fair market
price when the price paid is not higher than the highest independent
bid for the securities at the time of purchase, if such bid quotations
for the securities are readily available.
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(2) presumed, with respect to common stocks, to have
taken such common stocks in trade at a fair market price when
the price paid is not hi(,her than the highest independent bid for the
securities at the time of purchase, if such bid quotations for the
securities are readily available.
(3) presumed to have taken a security in trade at a price
higher than a fair market price when the price paid is higher than the
lowest independent offer for the securities at the time of purchase,
if such offer quotations for the securities are readily available.
(d) A member, in connection with every transaction
subject to this Section, shall with respect to
(1) common stocks, which are traded on a national
securities exchange or for which quotations are entered in an
automated quotation system, obtain the necessary bid and offer
quotations from the national securities exchange or from the automated
quotation system; and
(2) other securities and common stocks not included in
subparagraph (1) of this subsection (d) obtain directly or with the
assistance of an independent agent bid and offer quotations from two
or more independent dealers relating to the securities to be taken in
trade or, if such quotations are not readily available, exercise its
best efforts to obtain such quotations with respect to securities
having similar characteristics and of similar quality as those to be
taken in trade.
(e) A member who purchases a security taken in trade
shall keep or cause to be kept adequate records to demonstrate
compliance with this Section and shall preserve the records for at
least 24 months after the transaction. If an independent agent is
used for the purpose of obtaining quotations, the member must request
the agent to identify the dealers from whom the quotations were
obtained and the time and date they were obtained or request the agent
to keep and maintain for at least 24 months a record containing such
information.
2740. SELLING CONCESSIONS
In connection with the sale of securities which are part of a
fixed price offering:
(a) A member may not grant or receive selling
concessions, discounts, or other allowances except as consideration
for services rendered in distribution and may not grant such
concessions, discounts or other allowances to anyone other than a
broker or dealer actually engaged in the investment banking or
securities business; provided, however, that nothing in this Section
shall prevent any member from (1) selling any such securities to any
person, or account managed by any person, to whom it has provided or
will provide bona fide research, if the stated public offering price
for such securities is paid by the purchaser; or (2) selling any such
securities owned by him to any person at any net price which may be
fixed by him unless prevented therefrom by agreement.
(b) The term "bona fide research," when used in this
Section, means advice, rendered either directly or through
publications or writings, as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and
the availability of securities or purchasers or sellers of securities,
or analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; provided, however, that investment management or investment
discretionary services are not bona fide research.
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(c) A member who grants a selling concession, discount or
other allowance to another person shall obtain a written agreement
from that person that he will comply with the provisions of this
Section, and a member who grants such selling concession, discount or
other allowance to a nonmember broker or dealer in a foreign country
shall also obtain from such broker or dealer a written agreement to
comply, as though such broker or dealer were a member, with the
provisions of Section 8 and 36 of this Article and to comply with
Section 25 of this Article as that Section applies to a nonmember
broker/dealer in a foreign country.
(d) A member who receives an order from any person
designating another broker or dealer to receive credit for the sale
shall, within 30 days after the end of each calendar quarter, file
reports with the Association containing the following information with
respect to each fixed price offering which terminated during that
calendar quarter: the name of the person making the designation; the
identity of the brokers or dealers designated; the identity and amount
of securities for which each broker or dealer was designated; the date
of the commencement and termination of the offering and such other
information as the Association shall deem pertinent.
(e) A member who is designated by its customer for the
sale of securities shall keep, and maintain for a period of 24 months,
records in such form and manner to show the following information:
name of customer making the designation; the identity and amount of
securities for which the member was designated; the identity of the
manager or managers of the offering, if any; the date of the
commencement of the offering and such other information as the
Association shall deem pertinent.
2420. DEALING WITH NON-MEMBERS
(a) No member shall deal with any non-member broker or
dealer except at the same prices, for the same commissions or fees,
and on the same terms and conditions as are by such member accorded to
the general public.
(b) Without limiting the generality of the foregoing, no
member shall:
(1) in any transaction with any non-member broker
or dealer, allow or grant to such non-member broker or dealer
any selling concession, discount or other allowance allowed by
such member to a member of a registered securities association
and not allowed to a member of the general public;
(2) join with any non-member broker or dealer in
any syndicate or group contemplating the distribution to the
public of any issue of securities or any part thereof, or
(3) sell any security to or buy any security from
any non-member broker or dealer except at the same price at
which at the time of such transaction such member would buy or
sell such security, as the case may be, from or to a person
who is a member of the general public not engaged in the
investment banking or securities business.
(c) Transaction with foreign non-members. The provisions
of paragraphs (a) and (b) of this rule shall not apply to any
non-member broker or dealer in a foreign country who is not eligible
for membership in a registered securities association, but in any
transaction with any such foreign non-member broker or dealer, where a
selling concession, discount, or other allowance is allowed, a member
shall as a condition of such transaction secure from such foreign
broker or dealer an agreement that, in making any sales to purchasers
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within the United States of securities acquired as a result of such
transactions, he will conform to the provisions of paragraphs (a) and
(b) of this rule to the same extent as though he were a member of the
Corporation.
(d) "Non-member broker or dealer". For the purpose of
this rule, the term "non-member broker or dealer" shall include any
broker or dealer who makes use of the mails or of any means or
instrumentality of interstate commerce to effect any transaction in,
or to induce the purchase or sale of, any security, otherwise than on
a national securities exchange, who is not a member of any securities
association, registered with the Commission pursuant to Section 15A of
the Act, except a broker or dealer who deals exclusively in commercial
paper, bankers' acceptances or commercial bills.
(e) Nothing in this rule shall be so construed or applied
as to prevent any member of the Corporation from granting to any other
member of any registered securities association any dealer's discount,
allowance, commission, or special terms.
2810. DIRECT PARTICIPATION PROGRAMS, (B) REQUIREMENTS (2) SUITABILITY
(B) In recommending to a participant the purchase, sale or exchange of an
interest in a direct participation program, a member or person associated with
a member shall:
(i) have reasonable grounds to believe, on the
basis of information obtained from the participant concerning
his investment objectives, other investments, financial
situation and needs, and any other information known by the
member or associated person, that:
a. the participant is or will be in a
financial position appropriate to enable him to
realize to a significant extent the benefits
described in the prospectus, including the tax
benefits where they are a significant aspect of the
program:
b. the participant has a fair market
net worth sufficient to sustain the risks inherent in
the program, including loss of investment and lack of
liquidity; and
c. the program is otherwise suitable
for the participant; and
(ii) maintain in the files of the member documents
disclosing the basis upon which the determination of
suitability was reached as to each participant.
(c) Notwithstanding the provisions of subsections (a) and
(b) hereof, no member shall execute any transaction in a direct
participation program in a discretionary account without prior written
approval of the transaction by the customer.
2750. TRANSACTIONS WITH RELATED PERSONS
(a) Except as otherwise provided in Subsection (d) of
this Section, no member engaged in a fixed price offering of
securities shall sell the securities to, or place the securities with,
any person or account which is a related person of the member unless
such related person is itself subject to this Section or is a
non-member foreign broker or dealer who has entered into the
agreements required by Subsection 24(c) of this Article.
(b) For purposes of this Section 36, a "related person"
of a member includes any person or account which directly or
indirectly owns, is owned by or is under common ownership with the
member.
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(c) A person owns another person or account for purposes
of this Section if the person directly or indirectly:
(1) has the right to participate to the extent of
more than 25 percent in the profits of the other person; or
(2) owns beneficially more than 25 percent of the
outstanding voting securities of the person.
(d) The prohibition contained in Subsection (a) does not
apply to the sale of securities to, or the placement of securities in,
a trading or investment account of a member or a related person of a
member after termination of the fixed price offering if the member or
the related person of the member has made a bona fide public offering
of the securities. A member or a related person of a member is
presumed not to have made a bona fide public offering for the purpose
of this subsection if the securities being offered immediately trade
in the secondary market at a price or prices which are at or above the
public offering price.
(h) You shall immediately forward all Subscription Agreements
received by you, together with all checks received in payment of the purchase
price for Interests, in accordance with Section 4(b).
(i) If you have reviewed representative oil and gas properties
which have been designated by or held the inventory of MD or its affiliates,
you will not discuss any of such oil and gas properties in connection with the
sale of Interests or otherwise indicate any facts about such properties except
those, if any, discussed in the Prospectus.
(j) You will comply with the duties imposed by Rules 15c2-4 and
15c2-8 as promulgated by the Securities and Exchange Commission pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended. You will cause
the Soliciting Dealers to transmit for prompt deposit all subscriptions checks,
before noon of the next business day after their receipt by a Soliciting
Dealer, in the designated Partnership escrow account. In the event you receive
a check which is not payable to the escrow agent, you shall promptly return
such check directly to the subscriber not later than the end of the next
business day following its receipt.
(k) Prior to recommending an investment in or offering or selling
the Interest to a prospective purchaser you shall have completely read the
Prospectus and related materials and have reasonable grounds to conclude that:
(1) the prospective purchaser is or will be in a financial position to realize
the benefits described in the Prospectus of an investment in the Interests; (2)
the prospective purchaser has met the suitability requirements described in the
Prospectus and has a fair market net worth sufficient to sustain the risks
inherent in an investment in the Interests specifically, including, the loss of
the entire investment and lack of liquidity; and (3) the investment is
otherwise suitable for the prospective investor.
(l) You will maintain in your files for a period of six (6) years
from the close of any Offering Period documents which disclose the basis upon
which you determined that the prospective investor satisfied the suitability
requirements and was otherwise suitable.
(m) Notwithstanding the provisions of subsection (k) hereof, you
will not execute any transaction with respect to Interests in the Partnership
on behalf of a discretionary account without prior approval of the transactions
by the customer.
(n) In the event that you have been notified by MD that the
Prospectus is materially deficient, you will suspend and cause the Soliciting
Dealers to suspend sales until such time as the Prospectus is appropriately
amended or
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supplemented. You will deliver the amended Prospectus or any supplements
thereto to all prospective purchasers and to purchasers who acquired Interests
prior to the date you suspended sales.
(o) Pursuant to this Agreement, you will:
(i) not permit any Soliciting Dealer to offer for sale or
sell any of the Interests in any state where the Interests have not
been registered;
(ii) use your best efforts to insure that the Soliciting
Dealers conduct the Offering pursuant to the Securities Act of 1933,
as amended, state securities laws, the terms of this Agreement, and in
conformity with the provisions of the Prospectus;
(iii) not have any direct interest in the Partnership. In
no event shall the Dealer Manager be considered or become a partner in
the Partnership, and the Dealer Manager shall have no voice or right
to be involved in the management of the affairs of any of the
Partnership; and
(iv) promptly pay the Soliciting Dealers the negotiated
sales commissions and due diligence fees as provided in the Soliciting
Dealer Agreement executed with the respective Soliciting Dealers.
(p) You have conducted your own independent due diligence inquiry
and have concluded that all material facts are adequately and accurately
disclosed and, prior to executing a purchase order in the Interests, will
inform the prospective purchaser, or cause him to be informed by a Soliciting
Dealer, of all pertinent facts relating to the liquidity of the Interests
during the life of the Partnership.
(q) Each Soliciting Dealer shall be required to execute a
Soliciting Dealer Agreement in the form attached hereto as Annex "A" and made a
part hereof.
(r) You representations, warranties and covenants as contained in
this Section 3 will continue in effect throughout the Offering Period.
Section 4. Subscriptions and Closing.
(a) You acknowledge and agree that MD has reserved the right to
reject or reduce any subscription and that subscriptions for Interests will be
accepted by MD only from investors who in the judgment of MD meet the
appropriate suitability standards set forth in the Prospectus and the
Subscription Agreement.
(b) All Subscription Agreements and all checks received in payment
of the purchase price for Interests shall be subject to, and MD and you hereby
agree that you each shall act in accordance with, the following provisions:
(i) You shall cause all Subscription Agreements and
checks, by noon of the business day following the receipt thereof, to
be delivered to NationsBank, Texas, N.A., Tyler, Texas or other escrow
agent designated by MD (the "Escrow Agent"). All checks will be
deposited in a separate escrow account with the Escrow Agent, to be
held therein in accordance with the terms of the Escrow Agreement
between MD and the Escrow Agent and to be released only in accordance
with the Escrow Agreement; and
(ii) MD shall, by noon of the second business day
following its receipt of a copy of the Subscription Agreement, advise
you and the applicable Soliciting Dealer by telegram, telecopy or
other similar means of telecommunications or by telephone (confirmed
in writing), if MD initially accepts or rejects the
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subscription evidenced by that Subscription Agreement because that
subscriber is considered not suitable for Interests, and if that
subscription has been rejected by MD, MD shall, promptly after
advising you and the applicable Soliciting Dealer of that rejection,
direct the Escrow Agent to return to the Soliciting Dealer and the
subscriber's check, and you shall cause the Soliciting Dealer to
return the originally executed Subscription Agreement and that check
to the subscriber.
(c) MD will notify you and each Soliciting Dealer of the closing
of the offering of Interests in the Partnership and the date as of which the
Partnership is to be funded with subscription proceeds held under the Escrow
Agreement. A closing (the "Closing") will be scheduled to be held at the
offices of MD, 0000 X. Xxxxxxxx, Xxxxx, Xxxxx 00000, as soon as practicable
after the date on which you shall have been notified of the closing of the
offering of Interests in the Partnership, or on such date and at such place as
MD may determine (the "Closing Date").
(d) The right of the Partnership to use funds deposited in the
Partnership account for purposes other than the payment of commissions and fees
shall be subject to the accuracy of and the compliance by MD with its
representations, warranties and covenants set forth herein, to its performance
of its obligations hereunder and to the satisfaction at the Closing with
respect to the Partnership of each of the following further conditions:
(i) You shall have received a copy of the opinion of
Xxxxxx & Xxxxxx L.L.P., counsel to MD and the Partnership, as to
certain federal income tax matters discussed under "Tax Aspects" in
the Prospectus, which opinion shall be reasonably satisfactory to you
and your counsel as of the Closing Date.
(ii) You shall have received a blue sky memorandum
prepared by Xxxxxx & Xxxxxx L.L.P. with respect to the Partnership, to
the effect that the Interests have been duly registered or qualified
for sale under the securities or blue sky laws of the states in which,
in accordance with such memorandum, offers and sales of the Interests
may be made to investors (being those states with respect to which you
and other Soliciting Dealers requested that MD use its reasonable
efforts to register or qualify the Interests for offering and sale
under the securities or blue sky laws of such states pursuant to
Section 5(e) hereof).
(iii) All proceedings and documents in connection with the
transactions contemplated by the Prospectus and this Agreement shall
be reasonably satisfactory in form and substance to you and your
counsel, and MD and the Partnership shall use their reasonable efforts
to ensure that you and your counsel shall have received such other
documents in connection with such transactions as you or they may
reasonably request.
(iv) You and your counsel shall have received a letter or
letters from Xxxxxx & Xxxxxx L.L.P. in form and scope
reasonably satisfactory to you and your counsel as to the due
organization of the Partnership under the law of Delaware, the due
admission of the Limited Partners or General Partners to the
Partnership, the due organization of MD under Delaware law, the
qualification of the Partnership and MD to conduct business in Texas
as a foreign limited partnership and corporation, respectively, the
due execution of this Agreement by the Partnership and MD and the due
execution of the Agreement of Partnership of the Partnership by MD.
Section 5. Covenants of MD. MD covenants with you, in its
individual capacity and in its capacity as Managing Partner, that:
(a) MD will deliver to you, at MD's sole expense, such copies of
the Prospectus and related Subscription Agreements and Sales Literature as you
may reasonably request.
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(b) If any event that occurs before the Closing Date and that
relates to or affects the business or condition (financial or other) of MD or
the Partnership makes it necessary to amend or supplement the Prospectus or the
Registration Statement in order that the Prospectus or the Registration
Statement 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 not
misleading in light of the circumstances existing at the time it is delivered
to a subscriber, MD will (i) notify you of the occurrence of such event, (ii)
prepare, file, transmit and use its reasonable efforts to cause to become
effective (to the extent appropriate) any such required amendments or
supplements to the Prospectus or the Registration Statement, (iii) advise you,
promptly after MD receives notice thereof, of the time when any post-effective
amendment to the Registration Statement has become effective or of the time
when any amendment or supplement to the Prospectus has been filed and (iv)
promptly prepare and furnish to you a reasonable number of copies of the
amendments of, or supplements to, the Prospectus or the Registration Statement.
(c) MD will notify you immediately and confirm the notice in
writing of the issuance by the Commission or by any state securities
administrator of any stop order suspending the effectiveness of any
registration or qualification of the Interests for sale or enjoining the sale
of the interests or of the initiation of any proceedings for that purpose. MD
will make every reasonable effort to prevent the issuance of any such stop
order and, if any such stop order shall at any time be issued, to obtain the
lifting thereof at the earliest possible moment.
(d) As soon as practicable after the receipt of any Subscription
Agreements, MD will approve or reject such subscriptions and notify you of the
same.
(e) In addition to those jurisdictions in which the Blue Sky
Memorandum indicates that you may offer (or solicit offers) for Interests, MD
will use its reasonable efforts to register or qualify the Interests for
offering and sale under the securities or blue sky laws of such additional
jurisdictions as you may request, will furnish all such information and
documents as may be reasonably necessary for such purpose and will notify you
in writing as to the effective date of such registrations or qualifications as
soon as practicable after the receipt or confirmation thereof, provided that
you shall have specified and made such request in writing to MD with respect to
each additional jurisdiction in which you intend to offer any of the Interests
for sale, or solicit any offers to subscribe for or buy any of the Interests,
or otherwise negotiate with any person in respect of any of the Interests, and
MD shall have no duty, responsibility, liability or obligation to you under
this subsection (e) or any other provision hereof with respect to any other
jurisdiction. MD will undertake to file all reports required to be filed
subsequent to completion of the offering of the Interests and otherwise to
continue to comply with the securities or blue sky laws of each such
jurisdiction.
Section 6. Payment of Expenses and Fees.
(a) Except as specifically provided elsewhere in this Agreement,
you, the Soliciting Dealers and MD and the Partnership will pay their own
expenses incident to the transactions contemplated by this Agreement, including
fees of their counsel.
(b) Prior to the time that $1,000,000 or more of subscription
funds for the Partnership are received and accepted, MD may, but is not
obligated to, advance to you from MD's own funds the sales commissions and due
diligence fees which would otherwise be payable in connection with subscription
funds received and accepted prior to such time; provided that such advance may
only be paid with respect to subscriptions that have been accepted by MD. In
the event that either (1) subscription funds of $1,000,000 or more are not
received by the termination of the Offering Period with respect to Interests in
the Partnership or (ii) MD otherwise elects not to close the offering of the
Interests in the Partnership, you will promptly upon notice transmit to MD
funds in the amount of the sales commissions and due diligence fees advanced to
you and which have not been reallowed to a Soliciting Dealer.
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(c) Upon the receipt and acceptance of $1,000,000 in subscriptions
for the Partnership, MD may, but is not obligated to, advance to you from MD's
own funds sales commissions and due diligence fees relating to subscriptions
solicited by you; provided that such advance may only be paid with respect to
subscriptions that have been accepted by MD and for which the subscription
funds have cleared at the office of the Escrow Agent.
(d) In the event that MD makes an advance of sales commissions and
due diligence fees pursuant to Section 6(b) or (c) above, you hereby agree that
(i) prior to the Closing, MD retains the right in its sole discretion to refund
to any subscriber solicited by you the full amount of the subscription funds
transmitted by that subscriber and (ii) in the event that MD refunds
subscription funds to a subscriber solicited by you, you will promptly upon
receipt of notice of that refund transmit to MD funds in the amount of the
sales commissions and due diligence fees advanced to you with respect to your
acceptance of an order for Interests from such subscriber and which have not
been reallowed to a Soliciting Dealer.
(e) If the Closing for the sale of Interests in the Partnership
occurs, as compensation for your services under this Agreement, MD shall pay
you from its own funds: (i) a cash sales commission based on eight percent
(8%) of the sales price of Interests, which you shall reallow to the Soliciting
Dealers for the Interests sold by them, and (ii) you may also be reimbursed up
to one-half percent ( 1/2%) of the sales price of Interests sold by you for
actual expenses incurred in affirmatively discharging your due diligence
responsibilities pursuant to Section 4 of Appendix F to the NASD Rules of Fair
Practice, less any sales concessions and due diligence fees advanced to you
prior to that Closing under Section 6(b) or (c) above, except that neither you
nor any Soliciting Dealer will receive any such sales commissions or due
diligence fees for Interests sold to (i) officers, directors or employees of MD
or affiliates thereof, (ii) affiliates of the Managing Partner or (iii) if you
so elect by notifying MD in writing, any of your officers, directors, employees
or registered representatives. No sales commissions or due diligence fees will
be paid on subscriptions refunded for any reason to subscribers prior to that
Closing.
Section 7. Conditions to Obligations of Soliciting Dealer. Your
obligations under this Agreement are subject to the following:
(a) the accuracy of and compliance with the representations and
warranties of MD made in Section 2 hereof and the performance by MD,
individually and in its capacity as Managing Partner, of all material
obligations under this Agreement; and
(b) the absence, on the Closing Date, of any stop order issued
under the Act suspending the use of the Prospectus or the sale of the Interests
or of the initiation or the threatened initiation of any proceedings therefor.
If any of the conditions specified in this Section 7 shall not have
been fulfilled, or cannot be fulfilled on or prior to the Closing Date with
respect to the Partnership, this Agreement and all of your obligations under
it, other than those contained in Section 9 hereof, may be terminated by you by
notifying MD of such termination in writing or by telegram at or prior to the
Closing with respect to the Partnership, and any such termination shall be
without liability of any party to any other party except as otherwise provided
in Section 9 hereof.
Section 8. Conditions to Obligations of MD. The obligations of MD
under this Agreement are subject to the following:
(a) the accuracy of and compliance with your representations and
warranties made in Section 3 hereof and the performance by you of all material
obligations under this Agreement;
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(b) the absence, on the Closing Date, of any stop order issued
under the Act suspending the use of the Prospectus or the sale of the Interests
or of the initiation or the threatened initiation of any proceedings therefor;
and
(c) if the Partnership elects in its discretion to offer
rescission to any subscriber because (i) any of the conditions described in
this Agreement shall not have been fulfilled or (ii) other circumstances arise
subsequent to the date hereof that in the judgment of MD require that such an
offer be made, in either case because of any action or inaction taken or failed
to be taken by you in connection with your offering or sale of the Interests,
you agree to return any sales commissions and due diligence fees earned by you
and not reallowed to a Soliciting Dealer with respect to any purchaser who in
fact rescinds in response to such offer, promptly upon written notice of that
rescission from the Partnership.
If any of the conditions specified in this Section 8 shall not have
been fulfilled, or cannot be fulfilled on or prior to the Closing Date with
respect to the Partnership, this Agreement and all obligations of the
Partnership and MD under it, other than those contained in Section 9 hereof,
may be terminated by MD by notifying you of that termination in writing or by
telegram at or prior to the Closing and any such termination shall be without
liability of any party to any other party except as otherwise provided in
Section 9 hereof.
Section 9. Indemnification.
(a) MD will indemnity and hold you harmless against any losses,
claims, damages or liabilities, joint or several, to which you may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement of any material fact contained in the Registration
Statement, the Prospectus or any Sales Literature or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading (other than any untrue statement or omission made in reliance upon
and in conformity with information furnished to MD or the Partnership by or on
behalf of you, your officers, directors or controlling persons or at your or
their request specifically for use in the preparation of the Registration
Statement, the Prospectus or any Sales Literature or any amendment thereof or
supplement thereto); provided that the foregoing indemnity is subject to the
condition that, insofar as it relates to any untrue statement or omission made
in the Prospectus but eliminated or remedied in an amendment thereof or
supplement thereto available to you prior to delivery of written confirmation
of sale, such indemnity shall not inure to the benefit of any person from whom
the person asserting any such loss, claim, damage or liability purchased the
Interests that are the subject thereof (or to the benefit of any person who
controls any such person), if a copy of the amendment or supplement to the
Prospectus was not sent or given to that person with or prior to the written
confirmation of the sale of those Interests to that person or (ii) a breach by
MD or the Partnership of any of its respective representations, warranties,
agreements or covenants contained in this Agreement; and MD will reimburse you
for all legal or other expenses (including reasonable expenses of internal and
outside counsel) reasonably incurred by you in connection with defending any
such action or claim. The agreement of indemnity in this Section 9(a) and in
Section 9(b) below shall be in addition to any liability that MD or the
Partnership may otherwise have and shall extend upon the same terms and
conditions to each person, if any, who controls you and shall apply whether or
not any negligent act or omission by you is alleged or proven; provided,
however, that neither MD nor the Partnership shall be responsible under this
Agreement for any losses, damages or liabilities to the extent they are found
in a final judgment of a court of competent jurisdiction to have resulted
solely from your gross negligence or willful misconduct in performing services
hereunder.
(b) The Partnership shall indemnify you for any losses, claims,
damages or liabilities relating to the partnership and to which you may become
subject due to an alleged violation of federal or state securities laws and
which arise out of or are based upon the items set forth in Sections 9(a)(i)
and (ii) above (and are subject to the same conditions and limitations set
forth in 9(a)(i) and (ii) above) if (i) there has been a successful
adjudication on the merits of each
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count involving alleged securities laws violations as to you, (ii) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to you or (iii) a court of competent jurisdiction approves a
settlement of the claims against you. In connection with any claim for
indemnification for federal or state securities law violations under this
Section 9(b), you shall place before such court the positions of the Securities
and Exchange Commission, the Securities Commission of the State of Texas and
any other applicable regulatory authority with respect to such indemnification
for securities law violations.
(c) You agree to indemnity and hold harmless MD and the
Partnership against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement of a material
fact made by you with respect to your offering of the Interests, (ii) any
untrue statement of a material fact contained in the Registration Statement,
the Prospectus or any Sales Literature or any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made not
misleading, but only to the extent that such untrue statement or omission was
made in reliance upon and in conformity with information furnished to MD or the
Partnership by or on behalf of you, your officers, directors or controlling
persons or at your or their request for use in the preparation of the
Registration Statement, the Prospectus or any Sales Literature or an amendment
thereof or supplement thereto or (iii) a breach by you of any of your
representations, warranties, covenants or agreements contained in this
Agreement; and you will reimburse MD and the Partnership for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such action or claim. The agreement of indemnity contained in
this subsection (c) shall be in addition to any liability which you may
otherwise have and shall extend, upon the same terms and conditions, to each
partner of the Partnership and to each officer, director and other person, if
any, who controls MD.
(d) Within seven days after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
that indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under that subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under that subsection. In case any such
action shall be brought against any indemnified party, and the indemnified
party 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
retention of such counsel, the indemnifying party shall not be liable to such
indemnified party under such part for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation unless (i) the employment by the
indemnified party of separate counsel shall have been authorized in writing in
advance by an indemnifying party in connection with the defense of such action,
(ii) the indemnifying parties shall not have employed counsel to have charge of
the defense of such action, (iii) such indemnified party shall have reasonably
concluded that there may be one or more defenses available to it which are
different from or additional to those available to one or more of the
indemnifying parties, or (iv) such indemnified party shall have concluded that
there is any material conflict of interest such that representation of the
indemnifying party and the indemnified party would not be in the best interests
of the indemnified party. Notwithstanding anything to the contrary in this
Section 9, the indemnifying party shall not be liable for any settlement of a
claim or action without its written consent.
(e) To provide for just and equitable contribution in any action
in which a claim for indemnification is made pursuant to this Section 9, but
when it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last appeal) that indemnification may not be enforced in that
case notwithstanding that this Section 9 provides for indemnification in that
case, all the parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after
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contribution from others) in such proportion so that you are responsible for
the portion represented by the percentage that the sales commissions and due
diligence fees received by you bears to the gross proceeds of the offering of
the Interests, and so that the Partnership (to the extent permitted by
subsection (b) of this Section 9) and MD are responsible for the remaining
portion; provided, however, that no person found guilty (by the entry of a
final judgment or decree by a court of competent jurisdiction) of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not similarly found guilty of
such fraudulent representation. This subsection (e) shall not be operative as
to you to the extent that the Partnership or MD or any person who controls the
Partnership or MD within the meaning of the Act is entitled to receive or has
received indemnification under this Section 9.
Section 10. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates delivered pursuant to this Agreement
will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of you or MD, and will survive the Closing.
Section 11. Notices. All communications hereunder shall be in writing
and, if sent to you, will be mailed, delivered or telegraphed and confirmed to
you at the address set forth on the signature page hereof, or if sent to
Managing Dealer, MD or the Partnership will be mailed, delivered or telegraphed
and confirmed to you, MD or the Partnership at:
Xxxxxxxxx Development Corporation
0000 X. Xxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: A. Xxxxxxx Xxxxx
Section 12. Parties. This Agreement will inure to the benefit of and
be binding upon you, MD, the Partnership and your and their respective
successors, heirs and representatives. This Agreement and its conditions and
provisions are intended to be and are for the sole and exclusive benefit of the
parties to it and their respective successors, heirs and representatives and
not for the benefit of any other person, firm or corporation unless otherwise
expressly stated.
Section 13. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Texas.
Section 14. Modifications. No provision of this Agreement may be
changed or terminated except by a writing signed by the party or parties to be
charged therewith.
Section 15. Waiver. Any party to this Agreement may waive compliance
by any other party with any of the terms, provisions and conditions set forth
in this Agreement; provided, however, that any such waiver must be in a writing
specifically setting forth the provisions of this Agreement waived thereby.
Section 16. Entire Agreement. This Agreement contains the entire
agreement among the parties to it and is intended to supersede any and all
prior agreements among those parties relating to the same subject matter.
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Section 17. Invalidity. In the event any provision of this Agreement
shall be held to be invalid in any circumstance, that invalidity shall not
affect any other provision of this Agreement.
Section 18. Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
Section 19. Assignment. No party may assign its rights or
obligations under this Agreement without the prior written consent of each
other party hereto, except that MD may assign its rights and obligations under
this Agreement in connection with a merger, consolidation, reorganization or
other similar transaction.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement, among
you, MD and the Partnership, all in accordance with its terms.
Sincerely,
XXXXXXXXX DEVELOPMENT CORPORATION
By:
--------------------------------------
Its:
--------------------------------------
XXXXXXXXX ENERGY PARTNERS 97-A, L.P.
By: Xxxxxxxxx Development Corporation
Managing General Partner
By:
----------------------------------
Its:
----------------------------------
XXXXXXXXX SECURITIES, INC.
By: --------------------------------------
Its: --------------------------------------
