1
EXHIBIT 1.1
SOLICITING DEALER AGREEMENT
Xxxxxxxxx Energy 99-00 Drilling Programs
, 1999
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") in a series of two limited partnerships (the
"Partnerships") formed pursuant to the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act"). MD intends to name the Partnerships as
follows: Xxxxxxxxx Energy Partners 99-A, L.P. and Xxxxxxxxx Energy Partners
00-A, L.P. Each 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 such 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 each Partnership and MD, a Registration Statement on Form
S-1 (Registration No. ) dated , 1999, 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, (the
"Act"). On , 1999, MD filed with the Commission on behalf of the
Partnerships Amendment No. 1 to the Registration Statement. The Registration
Statement was declared effective by the Commission on , 1999. MD, the
Partnerships and the Interests are described in the Prospectus dated ,
1999 (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 each Partnership by the sale of up to 4,000
($4,000,000) limited partner interests (the "Limited Partner Interests") and up
to 16,000 ($16,000,000) general partner interests (the "General Partner
Interests") in the Partnerships (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).
Xxxxxxxxx Securities, Inc., a Texas corporation (the "Dealer Manager")
has entered into a Dealer Manager Agreement with the Managing Partner under
which the Dealer Manager is appointed the exclusive agent of the Managing
Partner and of the Partnerships to form a group of National Association of
Securities Dealers, Inc. member firms who will solicit subscribers for the
purchase of Interests.
The following are the terms on which the Managing Partner, on behalf
of the Partnerships, and the Dealer Manager appoint you and you agree to such
appointment to solicit subscribers for the purchase of Interests:
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Section 1. Appointment as Soliciting Dealer. On the basis of the
representations, warranties and covenants contained in this Agreement, but
subject to the terms and conditions set forth herein, you are hereby appointed
to serve as a soliciting dealer ("Soliciting Dealer") during the Offering
Period (as defined below) for Interests in both Partnerships for the purpose of
finding subscribers for the Interests through a public offering, at the price
of $1,000 per Interest, with a minimum subscription of five Interests ($5,000),
as described in the Prospectus. The "Offering Period" (as such term is used in
this Agreement) for Interests in Xxxxxxxxx Energy Partners 99-A, L.P. will
commence on or about the date on which the Registration Statement is declared
effective and will end no later than November 5, 1999. The Offering Period for
Interests in Xxxxxxxxx Energy Partners 00-A, L.P. will commence on ,1999
and will end no later than December 31, 2000. MD has the right in its sole and
absolute discretion to terminate the offering of Interests and end an Offering
Period at any time. You hereby accept appointment as a Soliciting Dealer and
agree on the terms and conditions set forth in this Agreement to use your
reasonable efforts to solicit subscriptions for the Interests during each
Offering Period and until the earlier of (i) the termination of an Offering
Period or (ii) the Closing (as hereinafter defined) with respect to that
Partnership. Neither your acceptance of that appointment nor this Agreement
shall constitute you and MD or a Partnership as an association, partnership,
unincorporated business or other separate entity. If an offering for Interests
in a Partnership is commenced and subscriptions funds of $1,000,000 or more are
not received by the termination of that Partnership's Offering Period with
respect to Interests in that Partnership, all subscription funds received by
the termination of such Offering Period with respect to Interests in that
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 as to that Partnership 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 sales commissions and due diligence fees received by you pursuant to
Section 6(b) hereof, and (b) the indemnification and contribution provisions of
Section 9 hereof shall continue after such termination of this Agreement. In
the event that you violate the terms, conditions, agreements or warranties
herein, the Managing Partner or the Dealer Manager, in their sole and absolute
discretion, may terminate this Agreement.
Section 2. Representations and Warranties of MD and the Dealer
Manager. MD, in its individual capacity and in its capacity as Managing
Partner, and the Dealer Manager, jointly and severally, hereby represent and
warrant to you that:
(a) In the name and on behalf of the Partnerships, 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 in a Partnership, the related 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 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 General or
Limited Partners). In addition, such Partnership shall have full and adequate
partnership power and partnership authority to enter into and perform this
Agreement and the related 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 last 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 Agreements 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 a Partnership entitled to all the rights of a Limited
Partner under the Agreement of Partnership for that Partnership and the
Delaware Act upon (i) payment of the consideration for those Limited Partner
Interests specified in that subscriber's Subscription Agreement
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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 a Partnership entitled to all the rights of a General
Partner under the Agreement of Partnership for that 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 and the
Dealer Manager. MD and the Dealer Manager have duly executed and delivered this
Agreement, which constitutes a valid and binding agreement of MD and the Dealer
Manager 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 last 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 a
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 each Partnership, upon its
formation, will be classified as a partnership for federal income tax purposes.
A Partnership, at the related Closing, will be classified as a 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.
(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 a
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 a 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 a
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 a 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
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in accordance with generally accepted accounting principles, and there has
been, and through the last 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 each Closing Date with respect to the
related Partnership substantially conform to the descriptions thereof contained
in the Prospectus.
(m) MD will timely apply, on behalf of each 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 General and Limited
Partners of such Partnership within a reasonable time after their admission to
that Partnership or within a reasonable time after the Partnership has received
such number, whichever occurs later.
Section 3. Covenants and Representations of Soliciting Dealer. 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 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").
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(g) You agree to make reasonable efforts to comply with all rules of
the NASD applicable to you 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.
(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 higher 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
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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.
(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
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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
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.
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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.
(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.
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(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 in 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) Specifically, 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 promptly forward all subscription checks before noon of the next business
day after their receipt for deposit 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 the last 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 a 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
becomes materially deficient, you will suspend sales until such time as the
Prospectus is appropriately amended or 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) 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 of all pertinent facts relating to the liquidity of the
Interests during the life of that Partnership.
(p) Your representations, warranties and covenants as contained in
this Section 3 will continue in effect throughout the last Offering Period.
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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 received by you shall be subject to, and MD
and you hereby agree that you each shall act in accordance with, the following
provisions:
(i) Upon receipt of each Subscription Agreement and check,
you shall, by noon of the business day following your receipt thereof,
forward to NationsBank, Texas, N.A., Tyler, Texas or other escrow
agent designated by MD (the "Escrow Agent") (a) a copy of that
Subscription Agreement, retaining in your possession the original
executed Subscription Agreement, and (b) that check for deposit 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 that copy of the Subscription Agreement, advise you by
telegram, telecopy or other similar means of telecommunications or by
telephone (confirmed in writing), if MD initially accepts or rejects
the 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 of that rejection, direct the Escrow Agent to return to
you the subscriber's check, and you shall return the originally
executed Subscription Agreement and that check to the subscriber.
(c) MD will notify you of the closing of the offering of Interests in
a Partnership and the date as of which the Partnership is to be funded with
subscription proceeds held under the Escrow Agreement. A closing (a "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 a Partnership, or on
such date and at such place as MD may determine (a "Closing Date").
(d) The right of a 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 related 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,
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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 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.
(b) If any event that occurs before the last Closing Date and that
relates to or affects the business or condition (financial or other) of MD or a
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 best 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 and the Dealer
Manager 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 and the Dealer Manager 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.
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Section 6. Payment of Expenses and Fees.
(a) Except as specifically provided elsewhere in this Agreement, you,
the Dealer Manager, MD and the Partnerships 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 a Partnership are received and accepted, MD may, but is not obligated to,
advance 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. Any such advancement
shall be made initially to the Dealer Manager and the Dealer Manager shall
immediately reallow to you such portion of the advancement as represents sales
commissions and due diligence fees which would otherwise be payable to you. In
the event that either (i) subscription funds of $1,000,000 or more are not
received by the termination of the Offering Period with respect to Interests in
a Partnership or (ii) MD otherwise elects not to close the offering of the
Interests in a Partnership, you will promptly upon notice transmit to MD funds
in the amount of the sales commissions and due diligence fees advanced to you
by means of such reallowance.
(c) Upon the receipt and acceptance of $1,000,000 in subscriptions for
a Partnership, MD may, but is not obligated to, advance from its own funds
prior to the Closing of the offering of Interests in that Partnership 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. Any such advancement shall be made initially to
the Dealer Manager and the Dealer Manager shall immediately reallow to you such
advancement.
(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 that 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 by means of such
reallowance to the extent that such relate to your acceptance of an order for
Interests from such subscriber.
(e) If the Closing for the sale of Interests in a Partnership occurs,
as compensation for your services under this Agreement MD will pay from its own
funds at that Closing, to the Dealer Manager and the Dealer Manager shall
immediately reallow to you (i) cash sales commissions based on eight percent
(8%) of the sales price of Interests sold by you and (ii) you may also be
reimbursed up to one-half percent (1/2%) of the sales price for Interests sold
by you for actual expenses incurred in affirmatively discharging your due
diligence responsibilities pursuant to Rule 2810 of the NASD Conduct Rules and
its subsections, less any sales commissions and due diligence fees previously
reallowed to you prior to that Closing under Section 6(b) or (c) above, except
that you will receive no 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) any of your officers,
directors, employees or registered representatives. No sales commissions or due
diligence fees will be paid on subscriptions returned for any reason to
subscribers prior to that Closing.
Section 7. Conditions to Obligations of Soliciting Dealer. Your
obligations under this Agreement with respect to a particular Partnership are
subject to the following:
(a) the accuracy of and compliance with the representations and
warranties of MD and the Dealer Manager 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
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(b) the absence, on the Closing Date for the sale of Interests in that
Partnership, 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 such Partnership, this Agreement with respect to that Partnership
and all of your obligations under it relating thereto, 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 that 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 8. Conditions to Obligations of MD and the Dealer Manager. The
obligations of MD and the Dealer Manager under this Agreement with respect to a
particular Partnership 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;
(b) the absence, on the Closing Date for the sale of Interests in that
Partnership, 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 received by you 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 such Partnership, this Agreement with respect to that Partnership
and all obligations of that Partnership and MD relating thereto, 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 that 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 indemnify 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 a 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 a Partnership of any of its
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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 a 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 a 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) A 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 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 indemnify and hold harmless the Dealer Manager, MD
and the Partnerships 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 a
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 the Dealer Manager, MD and the Partnerships
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 a Partnership and to each officer,
director and other person, if any, who controls either the Dealer Manager or
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
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Page 15
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 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 related Partnership (to the extent permitted by subsection (b)
of this Section 9) the Dealer Manager 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 misrepresentation. This subsection (e) shall not be operative
as to you to the extent that a Partnership, the Dealer Manager or MD or any
person who controls a Partnership, the Dealer Manager 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, the Dealer Manager or MD, and will
survive the last 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 Dealer
Manager, MD or a Partnership will be mailed, delivered or telegraphed and
confirmed to the Dealer Manager, MD or the Partnership at:
Xxxxxxxxx Securities, Inc.
Xxxxxxxxx Development Corporation
0000 X. Xxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: X. Xxxxxxx Xxxxx
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Section 12. Parties. This Agreement will inure to the benefit of and
be binding upon you, the Dealer Manager, MD, the Partnerships 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.
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.
[Remainder of page intentionally left blank.]
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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, the Dealer Manager, MD and the Partnerships, all in accordance with its
terms.
Sincerely,
XXXXXXXXX DEVELOPMENT CORPORATION
By:
--------------------------------------
Its:
-------------------------------------
XXXXXXXXX ENERGY PARTNERS 99-A, L.P.
DRILLING PROGRAM
By: Xxxxxxxxx Development Corporation
Managing General Partner
By:
---------------------------------
Its:
--------------------------------
XXXXXXXXX ENERGY PARTNERS 00-A, L.P.
DRILLING PROGRAM
By: Xxxxxxxxx Development Corporation
Managing General Partner
By:
---------------------------------
Its:
--------------------------------
XXXXXXXXX SECURITIES, INC.
By:
--------------------------------------
Its:
-------------------------------------
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Confirmed, accepted and agreed to as of
the date first above written.
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a corporation incorporated under the laws
of the State of
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By:
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Name:
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Title:
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Address for Notice:
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Copy to:
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