EXHIBIT 10.1
Execution Copy
$175,000,000
CROSS TIMBERS OIL COMPANY
(a Delaware corporation)
8 3/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
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October 21, 1997
XXXXXX BROTHERS INC.
XXXXXX XXXXXXX & CO. INCORPORATED
X.X. XXXXXX SECURITIES INC.
NATIONSBANC XXXXXXXXXX SECURITIES, INC.
as Representatives of the several Initial Purchasers
c/x XXXXXX BROTHERS INC.
Three World Financial Center
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Cross Timbers Oil Company, a Delaware corporation (the "Company"), confirms
its agreement with Xxxxxx Brothers Inc., ("Xxxxxx Brothers") and each of the
other Initial Purchasers named in Schedule A hereto (collectively, the "Initial
Purchasers", which term shall also include any initial purchaser substituted as
hereinafter provided in Section 10 hereof), for whom Xxxxxx Brothers Inc.,
Xxxxxx Xxxxxxx & Co. Incorporated, X.X. Xxxxxx Securities Inc. and NationsBanc
Xxxxxxxxxx Securities, Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Company and the
purchase by the Initial Purchasers, acting severally and not jointly, of the
respective principal amounts set forth in said Schedule A of $175,000,000
aggregate principal amount of the Company's 8 3/4% Senior Subordinated Notes due
2009 (the "Securities"). The Securities are to be issued pursuant to an
indenture to be dated as of October 28, 1997 (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Trustee"). Securities issued
in book-entry form will be issued to Cede & Co. as nominee of The Depository
Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the
Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the
Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are
to be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the 1933 Act
is available (including the exemption afforded by Rule 144A ("Rule 144A") or
Regulation S ("Regulation S") of the rules and regulations promulgated under the
1933 Act by the Securities and Exchange Commission (the "Commission")).
The Company has prepared and delivered to each Initial Purchaser copies of
a preliminary offering memorandum dated October 9, 1997 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to each Initial
Purchaser, on the date hereof or the next succeeding business day, copies of a
final offering memorandum dated October 21, 1997 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with its
solicitation of purchases of, or offering of, the Securities. "Offering
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement to
either such document), including exhibits thereto and any documents incorporated
therein by reference, which has been prepared and delivered by the Company to
the Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Securities.
At the Closing Time, and as a condition to the obligations of the Initial
Purchasers hereunder, the Company and each of the Initial Purchasers will enter
into a Registration Rights Agreement (the "Registration Rights Agreement"),
substantially in the form attached hereto as Exhibit A. Pursuant to the
Registration Rights Agreement, the Company will agree, among other things, to
use its reasonable best efforts to file with, and cause to be declared effective
by, the Commission a registration statement with respect to a registered
exchange offer under the 1933 Act, relating to the offer to exchange the
Securities for like respective principal amount of debt securities of the
Company identical in all material respects to the Securities.
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
are incorporated by reference in the Offering Memorandum; and all references in
this Agreement to amendments or supplements to the Offering Memorandum shall be
deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the "1934 Act") which is incorporated by
reference in the Offering Memorandum.
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Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or
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indirectly, solicited any offer to buy or offered to sell, and will not,
directly or indirectly, solicit any offer to buy or offer to sell, in the
United States or to any United States citizen or resident, any security
which is or would be integrated with the sale of the Securities in a manner
that would require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does
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not, and at the Closing Time will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through the
Representatives expressly for use in the Offering Memorandum. No stop order
preventing the use of the Preliminary Offering Memorandum or the Final
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the 1933 Act have been issued.
(iii) Incorporated Documents. The Offering Memorandum as
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delivered from time to time shall incorporate by reference the most recent
Annual Report of the Company on Form 10-K filed with the Commission and
each Quarterly Report of the Company on Form 10-Q and each Current Report
of the Company on Form 8-K filed with the Commission since the end of the
fiscal year to which such Annual Report relates. The documents incorporated
or deemed to be incorporated by reference in the Offering Memorandum at the
time they were or hereafter are filed with the Commission complied and will
comply in all material respects with the requirements of the 1934 Act and
the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), and, when read together with the other information in the
Offering Memorandum, at the date of the Offering Memorandum and at the
Closing Time, do not and will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(iv) Independent Accountants. The accountants who certified
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the financial statements and supporting schedules included in the Offering
Memorandum are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of Regulation S-X under the
1933 Act.
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(v) Financial Statements. The financial statements,
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together with the related schedules and notes, included in the Offering
Memorandum present fairly in all material respects the financial position
of the Company and its consolidated subsidiaries at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The financial statement schedules, if any,
included in the Offering Memorandum present fairly in all material respects
in accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included in
the Offering Memorandum present fairly in all material respects the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Offering
Memorandum. The column entitled "Pro Forma," in the section of the Offering
Memorandum entitled "Capitalization" presents fairly in all material
respects the information shown therein, has been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements and has been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(vi) No Material Adverse Change in Business. Since the
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respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise (a "Material Adverse Effect"),
whether or not arising in the ordinary course of business, (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) except for regular quarterly dividends on the
common stock, par value $0.01 per share, of the Company (the "Common
Stock") and on the Series A Convertible Preferred Stock, par value $0.01
per share, of the Company (the "Series A Preferred Stock") in amounts per
share that are consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(vii) Good Standing of the Company. The Company has been
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duly organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under this Agreement, the Indenture, the Securities
and the Registration Rights Agreement; and the Company is duly qualified as
a foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the
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conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(viii) Good Standing of Subsidiaries. The only direct or
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indirect subsidiaries of the Company are the corporations listed on
Schedule B hereto. Each subsidiary of the Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock of each
subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of the subsidiaries was issued in violation of any preemptive
or similar rights arising by operation of law, or under the charter or by-
laws of any subsidiary or under any agreement to which the Company or any
subsidiary is a party.
(ix) Capitalization. The issued and outstanding capital
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stock of the Company is as set forth in the Offering Memorandum in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
employee benefit plans referred to in the Offering Memorandum or pursuant
to the exercise of convertible securities or options referred to in the
Offering Memorandum).
(x) Authorization of Agreement. This Agreement has been
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duly authorized, executed and delivered by the Company.
(xi) Authorization of the Indenture and the Registration
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Rights Agreement. The Indenture and the Registration Rights Agreement have
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been duly authorized by the Company and, at the Closing Time, will have
been duly executed and delivered by the Company and will constitute valid
and binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). At the
Closing Time, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "1939
Act"), and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
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(xii) Authorization of the Securities. The Securities have
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been duly authorized and, at the Closing Time, will have been duly executed
by the Company and, when authenticated in the manner provided for in the
Indenture and delivered against payment of the purchase price therefor,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law), and will be in the form contemplated by, and entitled to
the benefits of, the Indenture.
(xiii) Authorization of Amoco Acquisition Agreement. The
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agreement with Amoco Production Company to acquire the Amoco Properties (as
such term is defined in the Offering Memorandum) has been duly authorized,
executed and delivered by the Company.
(xiv) Description of the Securities and the Indenture. The
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Securities and the Indenture will conform in all material respects to the
respective statements relating thereto contained in the Offering Memorandum
and will be in substantially the respective forms previously delivered to
the Initial Purchasers.
(xv) No Outstanding Registration Rights. Other than the
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Registration Rights Agreement and registration rights granted to
shareholders who received common stock of the Company prior to the
Company's initial public offering in exchange for limited partnership
interests in the predecessor to the Company, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the 1933 Act with respect to any securities of the Company
or any of its subsidiaries, owned or to be owned, by such person or to
require the Company to include such securities with any securities being
registered pursuant to any registration statement filed by the Company
under the 1933 Act.
(xvi) Absence of Defaults and Conflicts. Neither the
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Company nor any of its subsidiaries is in violation of its charter or by-
laws or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(collectively, "Agreements and Instruments") except for such defaults that
would not result in a Material Adverse Effect; and the execution, delivery
and performance of this Agreement, the Registration Rights Agreement, the
Indenture and the Securities and any other agreement or instrument entered
into or issued or to be entered into or issued by the Company in connection
with the transactions contemplated hereby or
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thereby or in the Offering Memorandum and the consummation of the
transactions contemplated herein and in the Offering Memorandum (including
the issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Offering Memorandum under
the caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default or a Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, the
Agreements and Instruments except for such conflicts, breaches or defaults
or liens, charges or encumbrances that, singly or in the aggregate, would
not result in a Material Adverse Effect, nor will such action result in any
violation of any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their assets or properties, which violation
would result in a Material Adverse Effect, nor will such action result in
any violation of the provisions of the charter or by-laws of the Company or
any of its subsidiaries. No event of default exists under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument constituting Senior Indebtedness (as defined in the Indenture).
As used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
(xvii) Absence of Labor Dispute. No labor dispute with the
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employees of the Company or any of its subsidiaries exists or, to the
knowledge of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its or
any of its subsidiaries' principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result in
a Material Adverse Effect. Neither the Company nor any of its subsidiaries
has violated (i) any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees applicable to the
Company or any of its subsidiaries or (ii) any applicable wage or hour laws
in any manner, which violation could reasonably be expected to have a
Material Adverse Effect.
(xviii) ERISA. The Company and each of its subsidiaries is
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in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act, as amended, or
the rules and regulations promulgated thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension
plan" (as defined in ERISA) for which the Company or any of its
subsidiaries would have any material liability; neither the Company nor any
of its subsidiaries has incurred or expects to incur material liability
under (i) Title IV of ERISA with respect to the termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the
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Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(xix) Unlawful Contributions. Neither the Company nor any
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of its subsidiaries, nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds during the last five years for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any unlawful payment to any foreign or
domestic government official or employee from corporate funds; violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any illegal bribe, rebate, payoff, influence payment,
kickback or other unlawful payment
(xx) Absence of Proceedings. Except as disclosed in the
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Offering Memorandum, there is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any subsidiary thereof
which might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely affect
the properties or assets of the Company or any of its subsidiaries or the
consummation of this Agreement or the performance by the Company of its
obligations under the Indenture, the Securities, the Registration Rights
Agreement or this Agreement. The aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary thereof is
a party or of which any of their respective property or assets is the
subject which are not described in the Offering Memorandum, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xxi) Possession of Intellectual Property. The Company and
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its subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
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(xxii) Absence of Further Requirements. No filing with, or
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authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement or the Registration Rights Agreement, except
such as may be required under state securities laws, and, in the case of
the performance of the Company's obligations under the Registration Rights
Agreement, such as may be required under the federal securities laws.
(xxiii) Possession of Licenses and Permits. The Company and
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its subsidiaries possess such certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now conducted by them;
the Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure so
to comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would
not have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxiv) Title to Property. The Company and its subsidiaries
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have good and defensible title to their producing oil and gas properties,
and any gas gathering properties that it owns, free and clear of all liens,
encumbrances and defects, except (a) those described in the Offering
Memorandum, (b) liens securing taxes and other governmental charges, or
claims of materialmen, mechanics and similar persons, not yet due and
payable, (c) liens and encumbrances under operating agreements, unitization
and pooling agreements, and gas sales contracts, securing payment of
amounts not yet due and payable and of a scope and nature customary in the
oil and gas industry and (d) liens, encumbrances and defects that do not in
the aggregate materially affect the value of such oil and gas properties or
gas gathering properties or materially interfere with the use made or
proposed to be made of such properties by the Company and its subsidiaries.
Except to the extent described in the Offering Memorandum, the oil, gas and
mineral leases, coal methane leases, options to lease, drilling concessions
or other property interests therein held by the Company and its
subsidiaries reflect in all material respects the right of the Company and
its subsidiaries, as the case may be, to explore or receive production from
the undeveloped properties described in the Offering Memorandum, and the
care taken by the Company and its subsidiaries with respect to acquiring or
otherwise procuring such leases, options to lease, drilling concessions and
other property interests was generally consistent with standard industry
practices for acquiring or procuring leases and interests therein to
explore such for hydrocarbons. All other leases and subleases material to
the business of the Company and its subsidiaries,
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considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Offering Memorandum are in
full force and effect, and neither the Company nor any of its subsidiaries
has actual notice of any material claim of any sort that has been asserted
by anyone adverse to the rights of the Company or any subsidiary under any
of such leases or subleases, or affecting or questioning the rights of the
Company or such subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xxv) Tax Returns. All United States federal income tax
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returns of the Company and its subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise assessed,
which are due and payable, have been paid, except assessments against which
appeals have been or will be promptly taken and as to which adequate
reserves have been provided. The Company and its subsidiaries have filed
all other tax returns that are required to have been filed by them pursuant
to applicable foreign, state, local or other law except insofar as the
failure to file such returns would not result in a Material Adverse Effect,
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and its subsidiaries, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The charges, accruals and reserves on
the books of the Company in respect of any income and corporation tax
liability for any years not finally determined are adequate to meet any
assessments or re-assessments for additional income tax for any years not
finally determined, except to the extent of any inadequacy that would not
result in a Material Adverse Effect.
(xxvi) Environmental Laws. Except as described in the
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Offering Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative order, consent, decree or
judgment thereof, including any judicial or administrative order, consent,
decree or judgment relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or, to the knowledge of
the Company, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) there are no events
or circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an
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action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any of its subsidiaries
relating to Hazardous Materials or Environmental Laws.
(xxvii) Internal Accounting Controls. The Company and its
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subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization and
(D) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(xxviii) Insurance. The Company and its subsidiaries carry
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or are entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts and covering such risks as is generally
maintained by companies of established repute engaged in the same or
similar business, and all such insurance is in full force and effect.
(xxix) Solvency. The Company is, and immediately after the
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Closing Time will be, Solvent. As used herein, the term "Solvent" means,
with respect to the Company on a particular date, that on such date (A) the
fair market value of the assets of the Company is greater than the total
amount of liabilities (including contingent liabilities) of the Company,
(B) the present fair salable value of the assets of the Company is greater
than the amount that will be required to pay the probable liabilities of
the Company on its debts as they become absolute and matured, (C) the
Company is able to realize upon its assets and pay its debts and other
liabilities, including contingent obligations, as they mature, and (D) the
Company does not have unreasonably small capital.
(xxx) No Stabilization. Neither the Company nor any of
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its officers, directors or controlling persons has taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
(xxxi) Investment Company Act; Public Utility Holding
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Company Act. The Company is not, and upon the issuance and sale of the
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Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Offering Memorandum will not be (A) an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated
thereunder (the "1940 Act") or (B) a "holding company" or "affiliate" of a
"holding company" or "public utility," as such
11
terms are defined in the Public Utility Holding Company Act of 1935, and
the rules and regulations of the Commission promulgated thereunder (the
"PUHCA").
(xxxii) Rule 144A Eligibility. The Securities are eligible
---------------------
for resale pursuant to Rule 144A and will not be, at the Closing Time, of
the same class as securities listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a U.S. automated
interdealer quotation system. Each of the Preliminary Offering Memorandum
and the Final Offering Memorandum as of its respective date and each
amendment or supplement thereto, as of its date, contains all the
information specified, and meeting the requirements of Rule 144A(d)(4)
under the 1933 Act.
(xxxiii) No General Solicitation. None of the Company, its
-----------------------
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on its or any of their behalf (other
than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage, in connection with the offering
of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxxiv) No Registration Required. Subject to compliance by
------------------------
the Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Securities under the 1933 Act or to qualify the Indenture under the 1939
Act.
(xxxv) No Directed Selling Efforts. With respect to those
---------------------------
Securities sold in reliance on Regulation S, (A) none of the Company, its
Affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation) has
engaged or will engage in any directed selling efforts within the meaning
of Regulation S and (B) each of the Company and its Affiliates and any
person acting on its or their behalf (other than the Initial Purchasers, as
to whom the Company makes no representation) has complied and will comply
with the offering restrictions requirement of Regulation S. To the
knowledge of the Company, the sale of the Securities pursuant to Regulation
S is not part of a plan or scheme to evade the registration provisions of
the 1933 Act.
(xxxvi) Petroleum Engineering Consultants. The information
---------------------------------
supplied by the Company to the independent petroleum engineering
consultants for the Company for purposes of preparing the reserve reports
and estimates of such consultants included in the Offering Memorandum,
including, without limitation, production, costs of operation and
development, current prices for production, agreements relating to current
and future operations and sales of production, was true and correct in all
material respects on the date supplied and was prepared in accordance with
customary industry practices; Xxxxxx and
12
Xxxxx, Ltd., independent consulting petroleum engineers, who prepared
estimates of the extent and value of proved oil and natural gas reserves of
the Company are independent with respect to the Company.
(xxxvii) No Change in Ratings. No "nationally recognized
--------------------
statistical rating organization" as such term is defined for purposes of
Rule 436(g)(2) under the 1933 Act (i) has imposed (or has informed the
Company that it is considering imposing) any condition (financial or
otherwise) on the Company's retaining any rating assigned as of the date
hereof to the Company, or any securities of the Company or (ii) has
indicated to the Company that it is considering (a) the downgrading,
suspension or withdrawal of, or any review for a possible change that does
not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company.
(xxxviii) No Margin Violations. Neither the Company nor any
--------------------
of its subsidiaries nor any agent thereof acting on behalf of them has
taken, and none of them will take, any action that might cause this
Agreement to violate Regulation G (12 C.F.R. part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(xxxix) No Business with Cuba. The Company and its
---------------------
subsidiaries have complied with all of the provisions of Florida H.B. 1771,
codified as Section 517.075, of the Florida statutes, and all regulations
promulgated thereunder relating to companies doing business with the
Government of Cuba or with any person or any affiliate located in Cuba.
The Company acknowledges that the Initial Purchaser and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 5
hereof, counsel to the Company and counsel to the Initial Purchaser, will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Company to each Initial Purchaser as to the matters covered thereby.
Section 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Initial Purchaser, severally and not
jointly, and each Initial Purchaser, severally and not jointly, agrees to
purchase from the Company, a purchase price equal to 97.50% of the principal
amount thereof, the aggregate principal amount of Securities set forth in
Schedule A opposite the name of such Initial Purchaser, plus any additional
principal amount of Securities which such Initial Purchaser may become obligated
to purchase pursuant to the provisions of Section 10 hereof.
13
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Xxxxx, Xxxx &
Xxxxxxx, P.C., or at such other place as shall be agreed upon by the
Representatives and the Company, at 8:00 A.M. local time on the fifth business
day after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representatives and the Company (such time and
date of payment and delivery being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives, for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Xxxxxx Brothers, individually and
not as representative of the Initial Purchasers, may (but shall not be obligated
to) make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
(c) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company that it is a "qualified institutional buyer" within the meaning of Rule
144A under the 1933 Act (a "Qualified Institutional Buyer") and an "accredited
investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited
Investor").
(d) Denominations; Registration. Certificates for the Securities
shall be in such denominations ($1,000 or integral multiples thereof) and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time. The certificates representing the
Securities sold to Qualified Institutional Buyers shall be registered in the
name of Cede & Co. pursuant to the DTC Agreement and shall be made available for
examination and packaging by the Initial Purchasers in The City of New York not
later than 10:00 A.M. on the last business day prior to the Closing Time.
Certificates representing Securities sold to Institutional Accredited Investors
(as defined below) shall be issued in definitive form.
Section 3. Covenants of the Company.
The Company covenants with each Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible,
will furnish to each Initial Purchaser, without charge, such number of copies of
the Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
14
(b) Notice and Effect of Material Events. The Company will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (i) any filing made by the Company of information relating to the offering of
the Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (ii) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the earnings, business affairs or business prospects of the Company
and its subsidiaries which (A) make any statement in the Offering Memorandum
false or misleading or (B) are not disclosed in the Offering Memorandum. In such
event or if during such time any event shall occur as a result of which it is
necessary, in the reasonable opinion of the Company, its counsel, the Initial
Purchasers or counsel for the Initial Purchasers, to amend or supplement the
Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing (in reasonable number)
to each Initial Purchaser an amendment or amendments of, or a supplement or
supplements to, the Final Offering Memorandum (in form and substance
satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so
that, as so amended or supplemented, the Final Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a Subsequent Purchaser,
not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company
will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect such amendment or
supplement without the consent of the Initial Purchasers, which consent will not
be unreasonably withheld. Neither the consent of the Initial Purchasers, nor the
Initial Purchaser's delivery of any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company
will use its best efforts, in cooperation with the Initial Purchasers, to
qualify the Securities for offering and sale under the applicable securities
laws of such jurisdictions as the Representatives may designate and will
maintain such qualifications in effect as long as required for the sale of the
Securities; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(e) Rating of Securities. The Company shall take all reasonable
action necessary to enable Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc. ("S&P"), and Xxxxx'x Investors Service, Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
15
(f) DTC. The Company will cooperate with the Representatives and
use its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Offering Memorandum under "Use of Proceeds."
(h) Restriction on Sale of Securities. During a period of 90 days
from the date of the Offering Memorandum, the Company will not, without the
prior written consent of Xxxxxx Brothers, directly or indirectly, issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise dispose
of, securities of the Company that are similar to, convertible into, or
exchangeable for, the Securities, except for the Exchange Notes (as such term is
defined in the Offering Memorandum).
(i) No Stabilization. The Company agrees not to take, not to
permit any of its subsidiaries to take and to use its best efforts to prevent
its affiliates from taking, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of its
subsidiaries to facilitate the sale or resale of the Securities. Except as
permitted by the 1933 Act, the Company and its subsidiaries will not distribute
any (i) preliminary offering memorandum, including, without limitation, the
Preliminary Offering Memorandum, (ii) offering memorandum, including, without
limitation, the Final Offering Memorandum or (iii) other offering material in
connection with the offering and sale of the Securities.
Section 4. Payment of Expenses.
(a) Expenses. Whether or not the transactions contemplated in
this Agreement are consummated, the Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
printing and any filing of the Offering Memorandum (including financial
statements and any schedules or exhibits and any document incorporated therein
by reference) and of each amendment or supplement thereto, (ii) the printing and
delivery to the Initial Purchasers of this Agreement, the Indenture and such
other documents as may be required in connection with the offering, purchase,
sale and delivery of the Securities, (iii) the issuance and delivery of the
certificates for the Securities to the Initial Purchasers, including any charges
of DTC in connection therewith, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors (other than the Representatives), (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Initial Purchasers in connection therewith
and in connection with the preparation of the Blue Sky Survey, any supplement
thereto and any Legal Investment Survey, (vi) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities, (vii) any fees payable in
connection with the rating of the Securities, and (viii) any fees payable to the
National Association
16
of Securities Dealers, Inc. (the "NASD") in connection with the initial and
continued designation of the Securities as PORTAL securities under the PORTAL
Market Rules pursuant to NASD Rule 5322.1.
(b) Termination of Agreement. If this Agreement is terminated by
the Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
Section 5. Conditions of Initial Purchasers' Obligations.
The obligations of the several Initial Purchasers hereunder are subject to
the accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any of its
subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Xxxxx, Xxxx & Xxxxxxx, P.C., counsel for the Company, in form
and substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letter for each of the other Initial
Purchasers to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the Initial Purchasers may reasonably request.
(b) Opinion of Counsel for Initial Purchasers. At the Closing
Time, the Representatives shall have received the favorable opinion, dated as of
the Closing Time, of Xxxxxxx & Xxxxx, L.L.P., counsel for the Initial
Purchasers, together with signed or reproduced copies of such letter for each of
the other Initial Purchasers with respect to the matters set forth in (i)
(solely as to the incorporation status of the Company), (iv) through (vii),
inclusive, (x) (solely as to the information in the Offering Memorandum under
"Description of the Notes") and the penultimate paragraph of Exhibit B hereto.
Such opinion shall be limited to the laws of the State of New York, the federal
law of the United States and the General Corporation Law of the State of
Delaware. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(c) Officers' Certificate. At the Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that
17
(i) there has been no such material adverse change, (ii) the representations and
warranties in Section 1 hereof are true and correct with the same force and
effect as though expressly made at and as of the Closing Time, and (iii) the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the Closing Time.
(d) Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from Xxxxxx Xxxxxxxx LLP
a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers containing statements and information of
the type ordinarily included in accountants' "comfort letters" to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from Xxxxxx Xxxxxxxx LLP a letter, dated as
of the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities
shall be rated at least B2 by Moody's and B by S&P, and the Company shall have
delivered to the Representatives a letter dated the Closing Time, from each such
rating agency, or other evidence satisfactory to the Representatives, confirming
that the Securities have such ratings; and since the date of this Agreement,
there shall not have occurred a downgrading in the rating assigned to the
Securities or any of the Company's other securities by any nationally recognized
securities rating agency, and no such securities rating agency shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the Company's
other securities.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(h) Petroleum Engineering Consultants. At the time of execution
of this Agreement and also at the Closing Time, the Representatives shall have
received letters from Xxxxxx and Xxxxx, Ltd. dated such date in form and
substance satisfactory to the Representatives.
(i) Registration Rights Agreement. At the Closing Time, the
Company shall have executed and delivered the Registration Rights Agreement.
(j) Additional Documents. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
they may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the
18
Company in connection with the issuance and sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Representatives and counsel for the Initial Purchasers.
(k) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 7 and 8 shall survive any such termination and remain in
full force and effect.
Section 6. Subsequent Offers and Resales of the Securities.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and
the Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales only to Institutional Accredited
-------------------------------------------------
Investors, Qualified Institutional Buyers or Certain Non-U.S. Persons.
---------------------------------------------------------------------
Offers and sales of the Securities will be made only by the Initial
Purchasers or Affiliates thereof qualified to do so in the jurisdictions in
which such offers or sales are made. Each such offer or sale shall only be
made (A) to persons whom the offeror or seller reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the
Securities Act), (B) to a limited number of other institutional accredited
investors (as such term is defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D) that the offeror or seller reasonably believes to be and,
with respect to sales and deliveries, that are Accredited Investors
("Institutional Accredited Investors") or (C) non-U.S. persons outside the
United States to whom the offeror or seller reasonably believes offers and
sales of the Securities may be made in reliance upon Regulation S under the
1933 Act.
(ii) No General Solicitation. The Securities will be offered
-----------------------
by the Initial Purchasers only by approaching prospective Subsequent
Purchasers on an individual basis. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 0000 Xxx) will be
used in the United States in connection with the offering of the
Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a
---------------------------------
non-bank Subsequent Purchaser of a Security acting as a fiduciary for one
or more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (a) (i) above, each third party shall, in the
judgment of the applicable Initial Purchaser, be an Institutional
Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person
outside the United States.
19
(iv) Subsequent Purchaser Notification. Each Initial
---------------------------------
Purchaser will take reasonable steps to inform, and cause each of its U.S.
affiliates to take reasonable steps to inform, persons acquiring Securities
from such Initial Purchaser or affiliate, as the case may be, in the United
States that the Securities (A) have not been and will not be registered
under the 1933 Act, (B) are being sold to them without registration under
the 1933 Act in reliance on Rule 144A or in accordance with another
exemption from registration under the 1933 Act, as the case may be, and (C)
may not be offered, sold or otherwise transferred except (1) to the
Company, (2) outside the United States in accordance with Rule 904 of
Regulation S, or (3) inside the United States in accordance with (x) Rule
144A to a person whom the seller reasonably believes is a Qualified
Institutional Buyer that is purchasing such Securities for its own account
or for the account of a Qualified Institutional Buyer to whom notice is
given that the offer, sale or transfer is being made in reliance on Rule
144A or (y) the exemption from registration under the 1933 Act provided by
Rule 144, if available.
(v) Restrictions on Transfer. The transfer restrictions and
------------------------
the other provisions set forth in Section 2.07 of the Indenture, including
the legend required thereby, shall apply to the Securities except as
otherwise agreed by the Company and the Initial Purchasers. Following the
sale of the Securities by the Initial Purchasers to Subsequent Purchasers
pursuant to the terms hereof, the Initial Purchasers shall not, in their
capacities as Initial Purchasers, be liable or responsible to the Company
for any losses, damages or liabilities suffered or incurred by the Company,
including any losses, damages or liabilities under the 1933 Act, arising
from or relating to any subsequent resale or transfer of any Security.
(vi) Delivery of Offering Memorandum. Each Initial Purchaser
-------------------------------
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the Securities,
a copy of the Offering Memorandum, as amended and supplemented at the date
of such delivery.
(b) Covenants of the Company. The Company covenants with each
Initial Purchaser as follows:
(i) Due Diligence. In connection with the original
-------------
distribution of the Securities, the Company agrees that, prior to any offer
or resale of the Securities by the Initial Purchasers, the Initial
Purchasers and counsel for the Initial Purchasers shall have the right to
make reasonable inquiries into the business of the Company and its
subsidiaries. The Company also agrees to provide answers to each
prospective Subsequent Purchaser of Securities who so requests concerning
the Company and its subsidiaries (to the extent that such information is
available or can be acquired and made available to prospective Subsequent
Purchasers without unreasonable effort or expense and to the extent that
officers of the Company determine, in their reasonable judgment, such
information need not be kept confidential and the provision thereof is not
prohibited by applicable law) and the terms and conditions of the offering
of the Securities, as provided in the Offering Memorandum.
20
(ii) Integration. The Company agrees that it will not and
-----------
will cause its affiliates not to make any offer or sale of any class of
securities of the Company if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale would render
invalid (for the purpose of (A) the sale of the Securities by the Company
to the Initial Purchasers, (B) the resale of the Securities by the Initial
Purchasers to Subsequent Purchasers or (C) the resale of the Securities by
such Subsequent Purchasers to others) the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or Regulation
thereunder or by Rule 144A or otherwise.
(iii) Rule 144A Information. The Company agrees that, in
---------------------
order to render the Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Securities remain outstanding, it will
make available, upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule 144A(d)(4) (the
"Rule 144A Information"), unless the Company furnishes information to the
Commission pursuant to Section 13 or 15(d) of the 1934 Act (such
information, whether made available to holders or prospective purchasers or
furnished to the Commission, is herein referred to as "Additional
Information").
(iv) Restriction on Repurchases. Until the expiration of
--------------------------
two years after the original issuance of the Securities, the Company will
not, and will cause its affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions) unless, immediately upon
any such purchase, the Company or any Affiliate shall submit such
Securities to the Trustee for cancellation.
(c) Selling Restrictions for Offers and Sales Outside the United
States. Each Initial Purchaser understands that the Securities have not been and
will not be registered under the 1933 Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons except
in accordance with Regulation S under the 1933 Act or pursuant to an exemption
from the registration requirements of the 1933 Act. Each Initial Purchaser
represents and agrees, that except as permitted by Section 6(a) above, it has
offered and sold Securities and will offer and sell Securities (i) as part of
their distribution at any time and (ii) otherwise until forty days after the
later of the date upon which the offering of the Securities commences and the
Closing Time, only in accordance with Rule 903 of Regulation S or Rule 144A
under the 1933 Act. Accordingly, neither the Initial Purchasers, their
affiliates nor any persons acting on their behalf have engaged or will engage in
any directed selling efforts with respect to Securities, and the Initial
Purchasers, their affiliates and any person acting on their behalf have complied
and will comply with the offering restriction requirements of Regulation S. Each
Initial Purchaser agrees that at or prior to confirmation of a sale of
Securities (other than a sale of Securities pursuant to Rule 144A), it will have
sent to each distributor, dealer or person receiving a selling concession, fee
or other
21
remuneration that purchases Securities from it or through it during the
restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and
may not be offered or sold within the United States or to or for
the account or benefit of U.S. persons (i) as part of their
distribution at any time and (ii) otherwise until forty days
after the later of the date upon which the offering of the
Securities commenced and the date of closing, except in either
case in accordance with Regulation S or Rule 144A under the
Securities Act. Terms used above have the meaning given to them
by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
Each Initial Purchaser severally represents and agrees that it has not
entered and will not enter into any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.
Section 7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless the Initial
Purchasers, their directors, officers and employees and each person, if any, who
controls the Initial Purchasers within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act, from and against any and all losses, claims,
damages, liabilities, judgments and actions, joint or several, or any action in
respect thereof including, but not limited to, any loss, claim, damage,
liability, judgment or action that arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Offering Memorandum or the Final Offering Memorandum or in any
amendment or supplement thereto or (B) any Rule 144A Information provided by the
Company to any holder or prospective purchaser of Securities pursuant to Section
6(b)(iii) or (ii) the omission or alleged omission to state in any Preliminary
Offering Memorandum or the Final Offering Memorandum, or in any amendment or
supplement thereto, or in any Rule 144A Information any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse the Initial Purchasers and each director, officer, employee
or controlling person promptly upon demand for any legal or other expenses
reasonably incurred by such Initial Purchasers, director, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability, judgment or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability, judgment or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Offering Memorandum or the Final Offering Memorandum, or in any
such amendment or supplement, in reliance upon and in conformity with written
information concerning the Initial Purchasers furnished to the Company by or on
behalf of
22
the Initial Purchasers specifically for inclusion therein and provided, further,
that this indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser from whom the
person asserting any such losses, liabilities, claims, damages or expenses
purchased Securities, or any person controlling such Initial Purchaser, if a
copy of the Offering Memorandum, as then amended or supplemented, was not sent
or given by or on behalf of the Initial Purchaser to such person at or prior to
the written confirmation of the sale of such Securities to such person and if
the Offering Memorandum, as so amended or supplemented, would have corrected any
untrue statement or omission, or alleged untrue statement or omission, giving
rise to such loss, liability, claim, damage or expense (provided the Company has
delivered the Offering Memorandum, as then amended or supplemented, to the
several Initial Purchasers in requisite quantity on a timely basis to permit
such delivery or sending). The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to the Initial Purchasers or
to any director, officer, employee or controlling person of the Initial
Purchasers.
(b) The Initial Purchasers agree, severally and not jointly, to
indemnify and hold harmless the Company, and their respective directors,
officers and employees and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the 1934 Act,
from and against any and all losses, claims, damages, liabilities, judgments or
actions, joint or several, or any action in respect thereof, to which the
Company, or any such director, officer or controlling person may become subject,
under the 1933 Act or otherwise, insofar as such loss, claim, damage, judgment
or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Final Offering Memorandum or in any amendment or supplement
thereto, or (ii) the omission or alleged omission to state in any Preliminary
Offering Memorandum or the Final Offering Memorandum, or in any amendment or
supplement thereto, any material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning the Initial Purchasers furnished to the Company by or on
behalf of the Initial Purchasers specifically for inclusion therein, and shall
reimburse the Company, and any such director, officer or controlling person
promptly upon demand for any legal or other expenses reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability, judgement or action as such expenses are incurred. The
foregoing indemnity agreement is in addition to any liability which the Initial
Purchasers may otherwise have to the Company, or any such director, officer,
employee or controlling person.
(c) Promptly after receipt by any person in respect of which
indemnity may be sought pursuant to Section 7(a) or (b) (the "indemnified
party") of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against any
person against whom indemnity may be sought pursuant to Section 7(a) or (b) (the
"indemnifying party"), notify the indemnifying party in writing of the claim or
the commencement of that action; provided, however, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent it has been materially
23
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 7. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party, and the payment of all
fees and expense of such counsel shall be the responsibility of the indemnifying
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation. In
addition, any indemnified party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the indemnified party unless
(i) employment of such counsel shall have been specifically authorized in
writing by the indemnifying party, (ii) the indemnifying party shall have failed
to assume the defense of such action or employ counsel reasonably satisfactory
to the indemnified party or (iii) the named parties to any such action
(including any impleaded parties) include both the Initial Purchasers and the
indemnifying party, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all indemnified parties, and all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in writing by
Xxxxxx Brothers, in the case of case of the parties indemnified pursuant to
Section 7(a), and by the Company, in the case of parties indemnified pursuant to
Section 7(b). No indemnifying party shall (i) without the prior written consent
of the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) (other than by reason of the exceptions stated
therein) in respect of any loss, claim, damage, liability,
24
judgment or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, liability, judgment or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Initial Purchasers, on the
other, from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, on the one hand, and the
Initial Purchasers, on the other, with respect to the statements or omissions
which resulted in such loss, claim, damage, liability, judgment or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other, with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company, on the one hand, and the total discounts and commissions
received by the Initial Purchasers with respect to the Securities purchased
under this Agreement, on the other hand, bear to the total gross proceeds from
the offering of the Securities under this Agreement, in each case as set forth
in the table on the cover page of the Final Offering Memorandum. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Initial Purchasers,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 7 were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage, liability, judgment
or action in respect thereof, referred to above in this Section 7 shall be
deemed to include, for purposes of this Section 7(d), any legal or other expense
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7(d), the Initial Purchasers shall not be required to contribute any
amount in excess of the amount by which the total price at which the Securities
purchased by it and distributed to investors in exempt resales exceeds the
amount of any damages which the Initial Purchasers have otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The Initial Purchasers confirm and the Company acknowledges
that the statements with respect to the offering of the Securities by the
Initial Purchasers set forth on the cover page of, the stabilization legend
inside the front cover, the fourth sentence of the section
25
captioned "Risk Factors--Absence of Public Market for the Notes," and (i) the
fifth paragraph, (ii) the sixth paragraph, (iii) the sixth sentence of the ninth
paragraph and (iv) the tenth paragraph under the section captioned "Plan of
Distribution" in the Offering Memorandum constitute the only information
concerning such Initial Purchasers furnished in writing to the Company by or on
behalf of the Initial Purchasers specifically for inclusion in the Offering
Memorandum.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any Initial Purchaser or controlling person, or by or on
behalf of the Company, and shall survive delivery of the Securities to the
Initial Purchasers.
Section 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or
elsewhere, any outbreak of hostilities or escalation thereof or other calamity
or crisis or any change or development involving a prospective change in
national or international political, financial or economic conditions, in each
case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market System has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal, New York or Texas authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7 and 8 shall survive such termination and remain in full force and effect.
26
Section 10. Default by One or More of the Initial Purchasers.
If one or more of the Initial Purchasers shall fail at the Closing Time to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth: if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the aggregate principal amount of the Securities to be purchased hereunder, each
of the non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-defaulting
Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section 10.
Section 11. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers shall be directed
to the Representatives c/x Xxxxxx Brothers at Three World Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, attention of the Office of the General Counsel; notices to
the Company shall be directed to them at 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxx
Xxxxx, Xxxxx 00000, attention of Xxxxx X. Xxxxxxx.
Section 12. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Initial Purchasers, the Company and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Initial
27
Purchasers, the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 7 and 8 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Initial Purchasers, the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
Section 13. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 14. Effect of Headings.
The Section headings herein are for convenience only and shall not affect
the construction hereof.
28
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
CROSS TIMBERS OIL COMPANY
By: /s/ XXXX X. O'REAR
------------------------------------
Name: Xxxx X. O'Rear
Title: Vice President & Treasurer
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXX BROTHERS INC.
XXXXXX XXXXXXX & CO. INCORPORATED
X.X. XXXXXX SECURITIES INC.
NATIONSBANC XXXXXXXXXX SECURITIES, INC.
By: XXXXXX BROTHERS INC.
By: /s/ XXXX XXXXXXXXX
----------------------------
Authorized Signatory
For themselves and as Representatives of the other Initial Purchasers named in
Schedule A hereto.
SCHEDULE A
Name of Initial Purchaser Principal Amount
------------------------- of Securities
----------------
Xxxxxx Brothers Inc.......................... $ 87,500,000
Xxxxxx Xxxxxxx & Co. Incorporated............ 43,750,000
X.X. Xxxxxx Securities Inc................... 21,875,000
NationsBanc Xxxxxxxxxx Securities, Inc....... 21,875,000
Total........................................ $175,000,000
============
SCHEDULE B
SUBSIDIARIES OF CROSS TIMBERS OIL COMPANY
JURISDICTION OF INCORPORATION
-----------------------------
Cross Timbers Operating Company Texas
Cross Timbers Energy Services, Inc. Texas
Cross Timbers Trading Company Texas
Ringwood Gathering Company Delaware
Timberland Gathering & Processing Company, Inc. Texas
WTW Properties, Inc. Texas
Exhibit A
REGISTRATION RIGHTS AGREEMENT
A-1
Exhibit B
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(B)
(i) The Company was incorporated, exists and is in good standing under
the laws of the State of Delaware, with corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Offering Memorandum; the Company is qualified to do business in the
several states set forth on an exhibit to such counsel's opinion; and such
counsel has no knowledge that the nature of the properties of the Company or
the conduct of its business requires such qualification in other jurisdictions
or places, except in such jurisdictions or places in which the Company is
subject to no material liability or disability by reason of its failure to be
so qualified.
(ii) The authorized capital stock of the Company consists of 100 million
shares of common stock, par value $0.01 per share, and 2.5 million shares of
preferred stock, par value $.01 per share; the issued and outstanding capital
stock of the Company is as set forth under the caption "Capitalization" in the
Offering Memorandum (except for subsequent issuances or purchases pursuant to
employee benefit plans); all shares of issued and outstanding capital stock of
the Company have been authorized and validly issued and are fully paid and
nonassessable; and such counsel has no knowledge that any of the outstanding
shares of capital stock of the Company was issued in violation of the
preemptive or other similar rights of any securityholder of the Company.
(iii) Each subsidiary of the Company was incorporated, exists and is in
good standing under the laws of the State of Texas or Delaware, as applicable,
with corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum; each
subsidiary of the Company is qualified as a foreign corporation to transact
business and is in good standing in the jurisdictions set forth on an exhibit
to such counsel's opinion; such counsel has no knowledge that the nature of
the properties of any subsidiary or the conduct of their respective businesses
requires such qualification in other jurisdictions or places, except in such
jurisdictions or places in which the relevant subsidiary is subject to no
material liability or disability by reason of its failure to be so qualified;
and all the issued and outstanding capital stock of each subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable and is
owned of record by the Company, directly or through subsidiaries, free of any
adverse claim within the meaning of Article 8 of the Uniform Commercial Code.
B-1
(iv) The Company has corporate power and authority to enter into the
Purchase Agreement, and the Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(v) The Indenture and the Registration Rights Agreement have been duly
authorized, executed and delivered by the Company and (assuming the due
authorization, execution and delivery of the Indenture by the Trustee and the
Registration Rights Agreement by the Initial Purchasers) constitute valid and
binding agreements of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
(vi) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and delivered against payment of the purchase price therefor will constitute
valid and binding obligations of the Company, enforceable against the Company
in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), or other
similar laws relating to or affecting enforcement of creditor's rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and will be
entitled to the benefits of the Indenture.
(vii) The Securities and the Indenture conform in all material respects
to the descriptions thereof contained in the Offering Memorandum.
(viii) The documents incorporated by reference in the Offering
Memorandum (other than the financial statements and supporting schedules
therein, as to which no opinion need be rendered), when they were filed with
the Commission complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder.
(ix) Such counsel has no knowledge of any pending or threatened action,
suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property of the Company or any
subsidiary thereof is subject, before or brought by any court or governmental
agency or body, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions
B-2
contemplated in the Purchase Agreement or the performance by the Company of
its obligations thereunder or the transactions contemplated by the Offering
Memorandum.
(x) The information in the Offering Memorandum under "Business and
Properties--Federal and State Regulation," "Description of the Credit
Agreement," and "Description of the Notes," to the extent that it constitutes,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by such counsel and is
correct in all material respects.
(xi) The descriptions or references to contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments of the Company
or any of its subsidiaries described or referred to in the Offering
Memorandum, or incorporated by reference therein, to the extent that they
constitute summaries of legal matters or legal conclusions, are correct, fair
and complete in all material respects. Such counsel has no knowledge (a) that
the Company or any of its subsidiaries is in violation of its charter or
bylaws, or (b) that any default exists in the due performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
so described, referenced or incorporated by reference.
(xii) No authorization, approval, consent or order of any court or
governmental authority or agency (other than such as may be required under the
applicable securities laws of the various jurisdictions in which the
Securities will be offered or sold, and, in the case of the Registration
Rights Agreement, under the federal securities laws as to which such counsel
need express no opinion) is required in connection with the due authorization,
execution and delivery of the Purchase Agreement or the due execution,
delivery or performance of the Indenture or the Registration Rights Agreement,
by the Company or for the offering, issuance, sale or delivery of the
Securities to the Initial Purchasers or the resale by the Initial Purchasers
in accordance with the Purchase Agreement.
(xiii) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by the Purchase Agreement and the
Offering Memorandum to register the Notes under the 1933 Act or to qualify the
Indenture under the 1939 Act.
(xiv) The execution, delivery and performance by the Company of the
Purchase Agreement, the Registration Rights Agreement, the DTC Agreement, the
Indenture and the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Offering Memorandum
(including the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use Of Proceeds") and
compliance by the Company with its obligations under the Purchase Agreement,
the Registration Rights Agreement, the Indenture and the Securities will not,
whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xvi) of the
B-3
Purchase Agreement) under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any subsidiary thereof pursuant to any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to such counsel, to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any subsidiary thereof
is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor
will such action result in any violation of the provisions of the charter or
by-laws of the Company or any of its subsidiaries, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known to such
counsel, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or
any of their respective properties, assets or operations.
(xv) The Company is not (a) an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act or (b) a "holding company" or "affiliate" of a "holding company" or
"public utility" as such terms are defined in the PUHCA.
Although such counsel are not passing on, and do not assume any
responsibility for, the accuracy or completeness of the statements in the
Offering Memorandum, on the basis of such counsel's participation in conferences
with officers and employees of the Company and representatives of the Initial
Purchasers, nothing has come to such counsel's attention that would lead such
counsel to believe that the Offering Memorandum or any amendment or supplement
thereto (except for financial statements and schedules and other financial data
included or incorporated by reference therein and information relating to
estimated natural resource reserves, the estimated future net revenues therefrom
and the discounted present value of such estimated future net revenues included
or incorporated by reference therein, as to which such counsel need make no
statement), at the time the Offering Memorandum was issued, at the time any such
amended or supplemented Offering Memorandum was issued, at the date of the
Purchase Agreement or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion may be
limited by customary assumptions, exclusions and exceptions but shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
B-4
