EXHIBIT 10.12
299,242 Shares of Common Stock
QUICKSILVER RESOURCES INC.
AGENCY AGREEMENT
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November 30, 2000
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, N.Y. 10167
Dear Sirs:
The undersigned stockholder (the "Selling Stockholder") of Quicksilver
Resources Inc., a corporation organized and existing under the laws of Delaware
(the "Company"), proposes, subject to the terms and conditions stated herein, to
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sell (the "Offering") through Bear, Stearns & Co. Inc., as agent (the "Agent"),
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an aggregate of up to 299,242 shares (the "Shares") of the Company's common
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stock, par value $.01 per share (the "Common Stock"). The Shares are more fully
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described in the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company represents
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and warrants to, and agrees with, the Agent that:
(a) The Company meets the requirements for use of Form S-3 and has filed
with the Securities and Exchange Commission (the "Commission") a registration
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statement, and may have filed an amendment or amendments thereto, on Form S-3
(Registration No. 333-49136), and related preliminary prospectuses, as
supplemented, for the registration under the Securities Act of 1933, as amended
(the "Securities Act"), of 1,639,437 shares of Common Stock, which registration
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statement, as so amended, has been declared effective by the Commission and
copies of which have heretofore been delivered to the Agent. The registration
statement, as amended at the time it became effective, including the exhibits
and information (if any) deemed to be a part of the registration statement at
the time of effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of
the rules and regulations of the Commission under the Securities Act (the
"Securities Act Regulations"), and any post-effective amendments thereto under
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Rule 462(d) through the Closing Date (as defined below) is hereinafter called
the "Registration Statement." If the Company has filed or is required pursuant
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to the terms hereof to file a registration statement pursuant to Rule 462(b)
under the Securities Act Regulations registering additional shares of Common
Stock (a "Rule 462(b) Registration Statement"), then, and unless otherwise
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specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement. Other than a Rule
462(b) Registration Statement, if any, which became effective upon filing, no
other document with respect to the
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Registration Statement has heretofore been filed with the Commission (other than
prospectuses filed pursuant to Rule 424(b) of the Securities Act Regulations,
each in the form heretofore delivered to the Agent). No stop order suspending
the effectiveness of the Registration Statement (including any Rule 462(b)
Registration Statement) has been issued and no proceeding for that purpose has
been initiated or, to the Company's knowledge, threatened by the Commission. The
prospectus relating to the Shares, in the form in which it is to be filed with
the Commission pursuant to Rule 424(b) of the Securities Act Regulations, is
hereinafter referred to as the "Prospectus," except that, subject to Sections
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5(a) and 5(b) below, if any revised prospectus or prospectus supplement shall be
provided to the Agent by the Company for use in connection with the Offering
which differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Company pursuant to Rule
424(b) of the Securities Act Regulations), the term "Prospectus" shall refer to
such revised prospectus or prospectus supplement, as the case may be, from and
after the time it is first provided to the Agent for such use. Any preliminary
prospectus or prospectus subject to completion included in the Registration
Statement or filed with the Commission as described in Rule 430A or Rule 424 of
the Securities Act is hereafter called a "Preliminary Prospectus." All
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references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a Preliminary Prospectus and the Prospectus, or any
amendments or supplements to any of the foregoing, shall be deemed to include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR").
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(b) The Registration Statement and the Prospectus, and any amendments
thereof or supplements thereto, at the time the Registration Statement became
effective, at the time any post-effective amendment to the Registration
Statement is filed with the Commission, at the time the Prospectus is first
filed with the Commission, at the time any supplement or amendment to the
Prospectus is filed with the Commission and as of the Closing Date, and
Additional Closing Date, if any (as hereinafter respectively defined), and the
Preliminary Prospectus, and any amendments thereof or supplements thereto, as of
the date thereof, complied and comply in all material respects with the
requirements of the Securities Act and the Securities Act Regulations, and did
not and as of the Closing Date, and Additional Closing Date, if any, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus, as of the date hereof (unless the term
"Prospectus" refers to a prospectus which has been provided to the Agent by the
Company for use in connection with the Offering which differs from the
Prospectus filed with the Commission pursuant to Rule 424(b) of the Securities
Act Regulations, in which case at the time it is first provided to the Agent for
such use) and on the Closing Date, and Additional Closing Date, if any, does not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this Section (1)(b) shall not apply
to statements in or omissions from the Registration Statement or Prospectus made
in reliance upon and in conformity with information relating to the Agent
furnished to the Company in writing by the Agent expressly for use in the
Registration Statement or the Prospectus. Each Preliminary Prospectus and
Prospectus filed as part of the Registration Statement, as part of any amendment
thereto or pursuant to Rule 424 under the Securities Act Regulations, if filed
by electronic
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transmission pursuant to Regulation S-T under the Securities Act, was identical
to the copy thereof delivered to the Agent for use in connection with the offer
and sales of the Shares (except as may be permitted by Regulation S-T under the
Securities Act). There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement under the Securities Act that have not been described or filed therein
as required, and there are no business relationships or related-party
transactions directly or indirectly involving the Company, the Selling
Stockholder or any other person required to be described in the Prospectus that
have not been described therein as required.
(c) Deloitte & Touche LLP, who has certified certain financial statements
of the Company and has delivered its report with respect to the Company's
audited financial statements included in the Registration Statement, the
Prospectus and any Preliminary Prospectus, are independent public accountants as
required by the Securities Act and the Securities Act Regulations. Weaver and
Tidwell, L.L.P., who has certified certain financial statements of predecessors
of the Company, Mercury Exploration Company, Michigan Gas Partners Limited
Partnership and predecessor company acquisitions and who has delivered its
report with respect to such predecessor companies' audited financial statements
included in the Registration Statement, the Prospectus and any Preliminary
Prospectuses, are independent public accountants as required by the Securities
Act and Securities Act Regulations.
(d) Holditch-Reservoir Technologies Consulting Services ("Holditch"),
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petroleum engineers from whose reserve reports information is set forth in the
Registration Statement, the Prospectus and each Preliminary Prospectus, are
independent petroleum engineers with respect to the Company. The factual
information underlying the estimates of the reserves of the Company which was
provided by the Company to Holditch for purposes of preparing the reserve
information referenced in the Registration Statement, the Prospectus and each
Preliminary Prospectus (the "Reserve Information") including, without
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limitation, production, volumes, sales prices for production, contractual
pricing provisions under gas sales or marketing contracts, hedging arrangements,
incurred costs of operations and development, and working interest and net
revenue information relating to the Company's ownership interests in properties,
was true and correct in all material respects on the date such information was
furnished to Holditch and as of the date hereof; the estimates of future capital
expenditures and other future exploration and development costs supplied to
Holditch were prepared in good faith and with a reasonable basis. The
information provided to Holditch for purposes of preparing the Reserve
Information was prepared in accordance with customary industry practices.
Except as described in the Prospectus, the Company is not aware of any facts or
circumstances that would result in a material adverse change in its reserves in
the aggregate, or the aggregate present value of estimated future net revenues
or the standardized measure of discounted future net cash flows therefrom, as
described in the Prospectus and reflected in the Reserve Information. Estimates
of the reserves and the present value of the estimated future net revenues and
the discounted future net cash flows derived therefrom as described in the
Prospectus and reflected in the Reserve Information comply in all material
respects to the applicable requirements of Regulation S-X of the Securities Act
Regulations and Industry Guide 2 under the Securities Act.
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(e) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects, properties, operations, condition (financial
or otherwise) affairs or management of the Company, whether or not arising from
transactions in the ordinary course of business, and since the date of the
latest balance sheet presented in the Registration Statement and the Prospectus,
the Company has not incurred or undertaken any liabilities or obligations,
direct or contingent, which are material to the Company, except for liabilities
or obligations which are reflected in the Registration Statement and the
Prospectus.
(f) The Company (i) has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, (ii) has
all requisite corporate power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
to carry on its business as it is currently being conducted and as described in
the Registration Statement and the Prospectus and to own, lease and operate its
properties, (iii) has no subsidiaries other than MGV Energy, Inc., Beaver Creek
Pipeline, L.L.C., Cinnabar Energy Services Trading LLC and Terra Energy Ltd.
(the "Subsidiaries"), and (iv) is duly qualified and in good standing as a
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foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification except, with respect to clauses (i) (as it relates to good
standing) and (iv), where the failure to be in good standing or so qualified
does not and could not reasonably be expected to (x) individually or in the
aggregate, result in a material adverse effect on the business, prospects,
properties, operations, condition (financial or otherwise), affairs or
management of the Company, (y) interfere with or adversely affect the
marketability of the Shares pursuant hereto or (z) in any manner draw into
question the validity of this Agreement (any of the events set forth in clauses
(x), (y) or (z), being referred to as a "Material Adverse Effect").
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(g) Each of the Subsidiaries (i) has been duly organized and is validly
existing as a corporation, or limited liability company, as the case may be, in
good standing under the laws of the province or state of its organization, (ii)
has all requisite corporate or similar power and authority, and all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or governmental agencies
and bodies, to carry on its business as it is currently being conducted and as
described in the Registration Statement and the Prospectus and to own, lease and
operate its properties, (iii) has no subsidiaries and (iv) is duly qualified and
in good standing as a foreign corporation, or limited liability company, as the
case may be, authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification except, with respect to clauses (i) (as it relates to good
standing) and (iv), where the failure to be in good standing or so qualified
does not and could not reasonably be expected to result in a "Material Adverse
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Effect".
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(h) This Agreement and the transactions contemplated hereby have been duly
and validly authorized by the Company. This Agreement has been duly and validly
executed and delivered by the Company, and is the legal, valid, binding
agreement of the Company.
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(i) The execution, delivery, and performance of this Agreement, the
offering and sale of the Shares, and the consummation of the transactions
contemplated hereby and in the Prospectus do not and will not violate, conflict
with or constitute a breach of any of the terms and provisions of, or constitute
a default (or an event which with notice or lapse of time, or both, would
constitute a default) or require consent under, or result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets of
the Company, or result in an acceleration of any indebtedness of the Company
pursuant to (i) the Restated Certificate of Incorporation or By-Laws of the
Company, (ii) any bond, debenture, note, indenture, mortgage, deed of trust,
contract or other agreement or instrument to which the Company or any subsidiary
is a party or by which the Company or any of its subsidiaries or their
respective properties or assets are or may be bound, (iii) any statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets or (iv) any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets. No
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with (x) any court or any governmental agency or
authority having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets or (y) any other person is required for
(A) the execution, delivery and performance by the Company of this Agreement,
(B) the sale and delivery of the Shares to be sold and delivered by the Selling
Stockholder hereunder and the consummation of the transactions contemplated
hereby, except such as have been obtained under the Securities Act and such
consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the Shares
by the Agent.
(j) All of the outstanding shares of Common Stock (including the Shares
being sold hereunder by the Selling Stockholder) are duly authorized, validly
issued, fully paid and nonassessable and were not issued and are not now in
violation of or subject to any preemptive or similar rights. The Shares being
sold by the Selling Stockholder under this Agreement are duly authorized,
validly issued, fully paid and nonassessable. The capital stock of the Company
conforms to the description thereof contained in the Prospectus, or if the
Prospectus is not in existence, the most recent Preliminary Prospectus.
(k) Except as disclosed in the Prospectus, there are not currently, and
will not be as a result of the Offering, any outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire or instruments
convertible into or exchangeable for, any capital stock or other equity interest
of the Company or any of its subsidiaries (other than options issued pursuant to
the Company's stock option plans).
(l) There is (i) no action, suit or proceeding before or by any court,
arbitrator or governmental agency, body or official, domestic or foreign, now
pending or, to the best knowledge of the Company, threatened or contemplated to
which the Company is a party or to which the business or property of the Company
is subject, (ii) no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency or that has been proposed by any
governmental body and (iii) no injunction, restraining order or order of any
nature by a federal or
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state court or foreign court of competent jurisdiction to which the Company or
any of its subsidiaries is or may be subject or to which the business, assets,
or property of the Company or any of its subsidiaries are or may be subject,
that, in the case of clauses (i), (ii) and (iii) above, is required to be
disclosed in the Registration Statement and the Prospectus and which could,
individually or in the aggregate, result in a Material Adverse Effect.
(m) The Company has not directly or indirectly (i) taken (other than
through the actions, if any, of the Agent) any action designed to, or that might
reasonably be expected to, cause or result in or which constitutes or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares or (ii) since the filing of the Preliminary Prospectus (a) sold, bid for,
purchased or paid any person any compensation for soliciting purchases of,
shares of Common Stock or (b) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(n) The financial statements, together with the related notes, included in
the Registration Statement and the Prospectus (and any amendment or supplement
thereto) present fairly in all material respects the financial position, results
of operations, cash flows, and changes in stockholders' equity of the Company or
its predecessors, as applicable, as of and at the dates indicated and for the
periods specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, and comply with Regulation S-X of the
Securities Act Regulations.
(o) There are no holders of securities of the Company who, by reason of the
execution by the Company of this Agreement or the consummation by the Company or
the Selling Stockholder of the transactions contemplated hereby, have the right
to request or demand that the Company register under the Securities Act or
analogous foreign laws and regulations securities held by them, other than such
that have been duly exercised or waived.
(p) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), or be subject to
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registration under the Investment Company Act, or (ii) a "holding company" or a
"subsidiary company" or an "affiliate" of a holding company within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
(q) The Common Stock is registered (including the Shares to be sold by the
Selling Stockholder hereunder) pursuant to Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is listed for
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quotation on the American Stock Exchange, and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
American Stock Exchange, nor has the Company received any notification that the
Commission or the American Stock Exchange is contemplating terminating such
registration or listing.
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(r) The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
(s) The Company is not (i) in violation of its Restated Certificate of
Incorporation or By-Laws, (ii) in breach or default (nor does any condition
exist that, with notice, the passage of time or both, would constitute a breach
or default) in the performance of any obligation, agreement or condition
contained in any bond, debenture, note, indenture, mortgage, deed of trust or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its properties is subject, or (iii) in violation, in any
material respect, of any local, state or federal law, statute, ordinance, rule,
regulation, requirement, judgment or court decree applicable to the Company or
any of its subsidiaries or any of their respective assets or properties (whether
owned or leased).
(t) No action has been taken and no statute, rule, regulation or order has
been enacted, adopted or issued by any governmental agency that prevents the
sale of the Shares or prevents or suspends the use of the Prospectus; no
injunction, restraining order or order of any kind by a federal or state court
of competent jurisdiction has been issued that prevents or suspends the sale of
the Shares in any jurisdiction or that could adversely affect the consummation
of the transactions contemplated by this Agreement or the Prospectus; and every
request of any securities authority or agency of any jurisdiction for additional
information has been complied with in all material respects.
(u) There is (i) no significant unfair labor practice complaint pending
against the Company nor, to the best knowledge of the Company, threatened
against it, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or, to the
best knowledge of the Company, threatened against it, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Company or, to the best
knowledge of the Company, threatened against it and (iii) to the best knowledge
of the Company, no union representation question existing with respect to the
employees of the Company. To the best knowledge of the Company, no collective
bargaining organizing activities are taking place with respect to the Company.
The Company has not violated, in any material respect, (A) any federal, state or
local law or foreign law relating to discrimination in hiring, promotion or pay
of employees, (B) any applicable wage or hour laws or (C) any provision of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder (collectively, "ERISA").
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(v) The Company is not in violation of any federal or state law or
regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials ("Environmental
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Laws") and, to the best knowledge of the Company, the Company has received all
permits, licenses and other approvals required of it under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct its business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or other
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approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. There has been no
storage, disposal, generation, transportation, handling or treatment of
hazardous substances or solid wastes by the Company (or to the knowledge of the
Company any of its predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company in violation of any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit
which would require remedial action by the Company under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit except for those
which have already been remedied, have been provided for through escrow of a
portion of the acquisition consideration, have been assumed by a third party, or
which would not result in, or which would not be reasonably likely to result,
individually or in the aggregate, in a Material Adverse Effect. There has been
no spill, discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such property of
any solid wastes or hazardous substances due to or caused by the Company, except
for any such spill, discharge, leak, emission, injection, escape, dumping or
release which has already been remedied, has been assumed by a third party, or
which would not result, or which would not be reasonably expected to result,
individually or in the aggregate, in a Material Adverse Effect. The terms
"hazardous substances" and "solid wastes" shall have the meanings set forth in
any currently applicable local, state, and federal laws or regulations with
respect to environmental protection.
(w) The Company has (i) good and marketable title in fee simple to all
items of real property and defensible title to all personal property owned by
it, free and clear of all security interests, liens, charges, encumbrances,
equities, restrictions, claims and other defects, except such as are described
in the Prospectus or as would not have a Material Adverse Effect, and (ii)
peaceful and undisturbed possession of its properties under all material leases
to which it is a party as lessee. The Company has good and defensible title (x)
to its oil and gas properties, including its wells and its leasehold interests
therein, and (y) to its net revenue interests therein in accordance with such
leases, free and clear of all security interests, liens, charges, encumbrances,
equities, restrictions, claims and other defects, except such as are described
in the Prospectus or as would not have a Material Adverse Effect. The working
interests in oil and gas leases held by the Company reflect in all material
respects the right of the Company to explore or receive production from such
underlying leases, and the care taken by the Company with respect to acquiring
or otherwise procuring such leases was generally consistent with standard
industry practices for acquiring or procuring such leases. All material leases
to which the Company is a party are valid and binding, and no default by the
Company has occurred and is continuing thereunder and, to the best knowledge of
the Company, no material defaults by the landlord are existing under any such
lease that could result in a Material Adverse Effect.
(x) Except as described in the Prospectus (i) all royalties, rentals,
deposits and other amounts due on the oil and gas properties of the Company have
been properly and timely paid, and no proceeds from the sale or production
attributable to the oil and gas properties of the Company are currently being
held in suspense by any purchaser thereof, and (ii) there are no claims under
take-or-pay contracts pursuant to which natural gas purchasers have any make-up
rights affecting the interests
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of the Company in its oil and gas properties.
(y) As of the date hereof, the aggregate undiscounted monetary liability
of the Company for oil or natural gas taken or received under any operating or
other agreement relating to its oil and gas properties that permits any person
to receive any portion of the interest of the Company in oil and natural gas or
to receive cash or other payments to balance any disproportionate allocation of
oil or natural gas could not have a Material Adverse Effect.
(z) The Company has (i) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made all
declarations and filings with, all federal, state and local authorities, all
self-regulatory authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business conducted by it in the
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manner described in the Prospectus, except as described in the Prospectus or
where failure to hold such Authorizations would not, individually or in the
aggregate, have a Material Adverse Effect and (ii) no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such Authorization. Except where the failure to be in full force and effect
would not have a Material Adverse Effect, all such Authorizations are valid and
in full force and effect, and the Company is in compliance in all material
respects with the terms and conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities having jurisdiction with
respect thereto.
(aa) Neither the Company nor, to the best knowledge of the Company, any of
its officers, directors, partners, employees, agents or affiliates or any other
person acting on behalf of the Company, has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company (or assist the Company in connection with any
actual or proposed transaction), which (i) might subject the Company, or any
other individual or entity, to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if not given
in the past, might have had a Material Adverse Effect or (iii) if not continued
in the future, might have a Material Adverse Effect.
(bb) All material tax returns required to be filed by the Company in all
jurisdictions have been so filed. All taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due or claimed to be
due from such entities or that are due and payable have been paid, other than
those being contested in good faith through appropriate proceedings diligently
pursued and for which adequate reserves have been provided or those currently
payable without penalty or interest. To the knowledge of the Company, there are
no material proposed additional tax assessments against the Company or the
assets or property of the Company. The Company has made adequate (in the
opinion of the Company) charges, accruals and reserves in the applicable
financial statements included in the Prospectus in respect of all federal, state
and foreign income and franchise taxes for all periods presented therein as to
which the tax liability of the Company has not been finally
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determined.
(cc) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences thereto.
(dd) The Company maintains insurance covering its properties, operations,
personnel and businesses with institutions it believes to be financially
responsible. Such insurance insures against such losses and risks as are
adequate in accordance with customary industry practice to protect the Company
and its business. The Company has not received notice from any insurer or agent
of such insurer that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof, subject only to changes made
in the ordinary course of business, consistent with past practice, which do not,
either individually or in the aggregate, materially alter the coverage
thereunder or the risks covered thereby. The Company has no reason to believe
that it will not be able (i) to renew its existing insurance coverage as and
when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted or as presently contemplated and at a cost that would not result in a
Material Adverse Effect.
(ee) The Company and any "employee benefit plan" (as defined under ERISA)
established or maintained by the Company or its "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA. "ERISA Affiliate"
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means, with respect to the Company, any member of any group of organizations
described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company is a member. No "reportable event" (as
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defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the Company
or any of its ERISA Affiliates. No "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates, if such "employee
benefit plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company nor any of its ERISA
Affiliates has incurred or reasonably expects to incur any liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company or any of
its ERISA Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.
(ff) Subsequent to the respective dates as of which information is given in
the Prospectus and up to the Closing Date, except as set forth in the
Prospectus, (i) the Company has not incurred any liabilities or obligations,
direct or contingent, that are or will be material, either individually or
10
in the aggregate, to the Company and its subsidiaries taken as a whole, nor
entered into any transaction not in the ordinary course of business, (ii) there
has not been, either individually or in the aggregate, any change or development
that could reasonably be expected to result in a Material Adverse Effect, (iii)
the Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on its
capital stock; and (iv) there has been no material change in the capital stock,
short-term debt or long-term debt of the Company, except in each case as
described in the Prospectus, or if the Prospectus is not in existence the most
recent Preliminary Prospectus.
(gg) Except pursuant to this Agreement, there are no contracts, agreements
or understandings between the Company, the Selling Stockholder or any other
person that would give rise to a valid claim against the Company, the Selling
Stockholder or the Agent for a brokerage commission, finder's fee or like
payment in connection with the sale of the Shares.
(hh) The statements (including the assumptions described therein) included
in the Prospectus (i) are within the coverage of Rule 175(b) under the
Securities Act to the extent such data constitute forward looking statements as
defined in Rule 175(c) and (ii) were made by the Company with a reasonable basis
and reflect the Company's good faith estimate of the matters described therein.
(ii) The Company has implemented Year 2000 compliance programs designed to
ensure that its computer systems and applications will function properly beyond
1999. The Company believes that adequate resources have been allocated for this
purpose and expects the Company's Year 2000 date programs to be completed on a
timely basis, except as could not have a Material Adverse Effect.
(jj) The Company does not have any debt securities or preferred stock which
is rated by any "nationally recognized statistical rating organization" as
defined for purposes of Rule 436(g) under the Securities Act.
(kk) The Company has the power to submit, and pursuant to this Agreement
has legally, validly, effectively and irrevocably submitted, to the jurisdiction
of any federal or state court in the State of New York, County of New York, and
has the power to designate, appoint and empower and pursuant to this Agreement
has legally, validly, effectively and irrevocably designated, appointed and
empowered an agent for service of process in any suit or proceeding based on or
arising under this Agreement in any federal or state court in the State of New
York, County of New York, as provided in Section 14 hereof.
(ll) Each certificate signed by any officer of the Company and delivered to
the Agent or counsel for the Agent pursuant to this Agreement shall be deemed to
be a representation and warranty by the Company to the Agent as to the matters
covered thereby.
11
2. Representations and Warranties of the Selling Stockholder. The
---------------------------------------------------------
Selling Stockholder represents and warrants to, and agrees with, the Agent that:
(a) The Selling Stockholder is the lawful owner of the Shares to be sold by
the Selling Stockholder hereunder and the Selling Stockholder has good and
marketable title to such Shares, free and clear of all liens, encumbrances,
equities and claims whatsoever, except for the restrictions on transfer
referenced by the legends set forth on the certificates evidencing the Shares.
(b) The Selling Stockholder has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(c) No consent, approval, authorization or order of any court or
governmental agency or body is required to be obtained or made by the Selling
Stockholder for the consummation by the Selling Stockholder of the transactions
contemplated herein, in connection with the sale of the Shares, except (i) such
as may be required as a result of the identity of the purchaser or purchasers of
the Shares, including filings required under Section 13 of the Exchange Act and
filings required under the Hart-Scott-Rodino Antitrust Improvement Act of 1978,
as amended (the "HSR Act"), (ii) such as may have been obtained under the
-------
Securities Act, (iii) such as may be required by the National Association of
Securities Dealers (the "NASD") and under the blue sky laws of any jurisdiction
----
in connection with the sale of the Shares by the Selling Stockholder, and (iv)
such other approvals may be required under state securities laws.
(d) Neither the sale of the Shares being sold by the Selling Stockholder
nor the consummation of any other of the transactions herein contemplated by the
Selling Stockholder or the fulfillment of the terms hereof by the Selling
Stockholder will conflict with, result in a breach or violation of, or
constitute a default under any law or the terms of any indenture or other
agreement or instrument to which the Selling Stockholder is a party or bound, or
any judgement, order or decree applicable to the Selling Stockholder of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Selling Stockholder.
(e) This Agreement has been duly authorized, executed and delivered by or
on behalf of the Selling Stockholder and is a valid and binding agreement of the
Selling Stockholder, enforceable against the Selling Stockholder in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(f) Any certificate signed by the Selling Stockholder and delivered to the
Agent or counsel for the Agent in connection with the Offering shall be deemed a
representation and warranty by the Selling Stockholder, as to matters covered
thereby, to the Agent.
12
(g) The information in the Prospectus under the caption "Selling
Stockholders," which specifically relates to such Selling Stockholder
(consisting of such Selling Stockholder's name and number of shares of Common
Stock beneficially owned by such Selling Stockholder both before and after the
offering contemplated hereby), will not on the date of the execution of this
Agreement or on any Closing Date, contain any untrue statement of a material
fact or omit to state any 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.
(h) Upon sale, delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, and the removal by the Company
and its transfer Agent of the restrictions on transfer referenced by the legends
on the certificates evidencing such Shares, the Selling Stockholder shall have
transferred such Shares, free and clear of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever, other than any
such restriction on transfer, lien, encumbrance, security interest, equity or
claim created by this Agreement, the Agent or any purchaser of such Shares or
resulting from any actions taken by the Agent or any such purchaser of the
Shares.
The Company and the Selling Stockholder acknowledge that the Agent and, for
purposes of the opinions to be delivered to the Agent pursuant to Sections 8(b)
-------------
and 8(c) hereof, counsel to the Company, counsel to the Selling Stockholder and
----
counsel to the Agent, will rely upon the accuracy and truth of the foregoing
representations as to matters of fact and hereby consent to such reliance.
3. Appointment; Basic Terms; Compensation; Purchase, Sale and Delivery
-------------------------------------------------------------------
of the Shares.
-------------
(a) The Agent is hereby appointed as the exclusive agent for the Selling
Stockholder during the Offering Period (as hereinafter defined) for the purpose
of finding purchasers for the Shares.
(b) The Offering shall commence on the date hereof, and shall continue
until December 31, 2000 (the "Offering Period"), subject to prior termination at
---------------
any time by the Selling Stockholder or the Agent. Any termination of the
Offering Period hereunder shall be effective on not less than three (3) business
days' written notice to the other parties to this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, but subject to the terms and conditions herein set forth, the Agent
confirms its acceptance of such appointment and agrees, on the terms and
conditions herein set forth, to use its reasonable best efforts, in accordance
with its customary practice, during the Offering Period to find prospective
purchasers of the Shares. The Selling Stockholder expressly acknowledges and
agrees that the Agent's obligations hereunder are on a reasonable best efforts
basis only and that the execution of this Agreement does not in any way
constitute a commitment by the Agent to purchase the Shares and does not ensure
the successful sale of the Shares or any portion thereof. The Agent shall have
the right to appoint one or more additional agents and/or selected dealers (who
shall be members of the NASD) to assist in finding purchasers for the Shares,
and any such additional agents or selected
13
dealers may rely upon the representations and warranties and covenants of the
Company and the Selling Stockholder set forth in this Agreement.
(d) The procedure for executing sales of the Shares in the Offering shall
be as follows:
(i) The Agent shall from time to time notify the Selling Stockholder
by telephone as, if and when the Agent identifies a prospective purchaser or
purchasers for all or a portion of the Shares (in each case, a "Block of
--------
Shares"), specifying in each case the number of Shares constituting such Block
of Shares and the price per Share for such Block of Shares that such purchaser
or purchasers may be willing to pay and any other conditions relevant to the
interest of such purchaser or purchasers therein.
(ii) Upon receipt of such telephonic notice from the Agent, the
Selling Stockholder shall promptly advise the Agent whether or not the price and
other conditions (if any) included in such notice are acceptable to the Selling
Stockholder. In the event that the price and other conditions (if any) included
in such notice are acceptable to the Selling Stockholder, the Selling
Stockholder and the Agent (or such purchaser or purchasers, acting through the
Agent) will execute corresponding sale and purchase transactions in the Shares.
None of the Selling Stockholder, the Agent or any purchaser shall be obligated
on any sale of purchase of the Shares except pursuant to a transaction executed
in accordance with the foregoing. The Agent shall have no liability or
obligation to the Selling Stockholder with respect to any transaction executed
by the Selling Stockholder directly with a purchaser, except under Sections 9
and 10 hereof. All transactions in the Shares hereunder will clear and settle
through the Agent or its affiliate, Bear Stearns Securities Corp.("BSSC").
----
(iii) The Company will pay all applicable state transfer taxes, if
any, involved in the transfer of any Shares to be purchased from the Selling
Stockholder and the Agent will pay any additional stock transfer taxes involved
in further transfers.
(e) The Selling Stockholder shall pay the Agent a 4% commission on the
gross proceeds of each sale of Shares in the Offering.
(f) The Agent's appointment and agency under this Agreement, shall begin as
of the date hereof and continue through and including the earlier of (i) the
final Closing (as such term is defined below) or (ii) upon the expiration or
termination of the Offering Period (the date on which such agency is terminated
being hereinafter referred to as the "Offering Termination Date"); provided,
-------------------------
however, that termination of the Offering Period shall not affect (x) the terms
and conditions of this Agreement as they apply to any sale or purchase of the
Shares previously executed pursuant to Section 3(d) hereof or (y) the provisions
of Sections 1, 7 and 9 through 17 of this Agreement, all of which shall continue
in effect after such Offering Termination Date. Subject to the foregoing, upon
the Offering Termination Date, the agency created by this Agreement shall
terminate.
(g) With respect to each sale of Shares executed by the Selling Stockholder
and the Agent or any purchaser pursuant to Section 3(d):
14
(i) The Selling Stockholder hereby irrevocably constitutes and
appoints each of Stephen M. Parish, Wayne Stoltenberg, Gary Munowitz and any
other duly authorized officers of Bear, Stearns & Co. Inc. each with full power
and authority to act alone in any matter hereunder and with full power of
substitution, the true and lawful attorneys-in-fact of the Selling Stockholder
(individually an "Attorney" and collectively the "Attorneys"), with full power
-------- ---------
and authority in the name of, for and on behalf of, the Selling Stockholder with
respect to all matters arising in connection with the sale of the Shares by the
Selling Stockholder including, but not limited to, the power and authority on
behalf of the Selling Stockholder to take any and all of the following actions:
(A) To sell, assign, transfer and deliver to the purchaser(s) thereof
such Shares, (whether as one Block of Shares or as more than one Block of
Shares), such Shares to be represented by certificate(s) deposited by the
Selling Stockholder with BSSC, as custodian, at the purchase price per Share
agreed upon for the sale, after deducting all selling commissions and other
amounts payable by the Selling Stockholder hereunder;
(B) To instruct BSSC on all matters pertaining to the sale of the
Shares and the delivery of certificates therefor, including: (i) the transfer of
the Shares on the books of the Company in order to effect the sale of the Shares
(including designating the name or names in which new certificate(s) for Shares
are to be issued and the denominations thereof), (ii) the delivery to or for the
account of the purchaser(s) of the certificate(s) for the Shares against receipt
by BSSC of the purchase price to be paid therefor, (iii) the payment, out of the
proceeds (net of commissions) from the sale of the Shares, of any expense
incurred by the Selling Stockholder hereunder and any transfer taxes payable in
connection with the transfer of the Shares ("Transfer Taxes") and (iv) the
--------------
transmission to the Selling Stockholder of the proceeds, if any, from the sale
of the Shares (after deducting all selling commissions and other amounts payable
by the Selling Stockholder and the return to the Selling Stockholder, of new
certificate(s) representing the excess, if any, of the number of Shares
represented by certificate(s) deposited with BSSC over the number of Shares
sold.
(C) To incur or authorize the incurrence of any necessary or
appropriate expense in connection with the sale of the Shares and to determine
the amount of any Transfer Taxes payable in connection with the transfer of the
Shares;
(D) To make, execute, acknowledge and deliver all such other
contracts, stock powers, orders, receipts, notices, instructions, certificates,
letters and other writings, including, without limitation, communications with
the Commission, state securities commissions and the NASD, and in general to do
all things and to take all actions which the Attorneys, in their sole
discretion, may consider necessary or desirable in connection with the sale of
Shares, as fully as could the Selling Stockholder if present and acting;
(E) If necessary, to endorse (in blank or otherwise) on behalf of the
Selling Stockholder the certificate(s) representing the Shares, or a stock power
or powers attached to such
15
certificate(s); and
(F) To sign such other certificates, documents and agreements and take
any and all other actions as the Attorneys may deem necessary or desirable in
connection with the consummation of the transactions contemplated by the this
Agreement.
(ii) Each Attorney may act alone in exercising the rights and powers
conferred on the Attorneys in this Power of Attorney, and the act of any
Attorney shall be the act of the Attorneys. Each Attorney is hereby empowered
to determine in his or her sole discretion the time or times when, the purpose
for and the manner in which any power herein conferred upon him or her shall be
exercised, and the conditions, provisions or covenants of any instrument or
document which may be executed by him or her pursuant hereto.
(iii) The Selling Stockholder agrees, if so requested, to provide
such other documentation as the Attorneys, the Company, the Agent or any of
their respective counsel may reasonably request to effectuate any of the
provisions hereof, all of the foregoing to be in form and substance reasonably
satisfactory in all respects to the party requesting such documentation.
(iv) This power of attorney and all authority conferred hereby are
granted and conferred subject to and in consideration of the interests of the
Attorneys, the Agent, the Company and the other Selling Stockholders in the
Offering, and for the purposes of completing the transactions contemplated by
this Agreement.
(v) This power of attorney is an agency coupled with an interest and
all authority conferred hereby shall be irrevocable and shall not be withdrawn
or terminated by any act of the Selling Stockholder or by operation of law, or
by the occurrence of any other event or events (including, without limitation,
the merger, consolidation, dissolution or liquidation of any corporation or
partnership) (any of the foregoing being hereinafter referred to as an "Event").
-----
If an Event shall occur after the sale of a Block of Shares is approved by the
Selling Stockholder pursuant to Section 3(d)(ii) but before completion of such
sale, then certificate(s) representing the Shares will be delivered to the Agent
by or on behalf of the Selling Stockholder in accordance with the terms and
conditions of this Agreement and any actions taken hereunder by the Attorneys
shall be as valid as if such Event had not occurred regardless of whether or not
the BSSC, the Attorneys, the Agent, or any one of them, shall have received
notice of such Event.
(h) With respect to each sale of Shares executed by the Selling
Stockholder, the Agent and any purchaser pursuant to Section 3(d), the Selling
Stockholder irrevocably authorizes and directs BSSC, as custodian, (i) to take
all necessary action to cause the Shares to be transferred on the books of the
Company into such names as the Agent shall have instructed, including
surrendering the certificate(s) representing the Shares to the transfer agent
for the Common Stock for cancellation, in exchange for new certificate(s) for
shares of Common Stock registered in such names and in such denominations as the
Agent shall have instructed, (ii) to deliver such new certificate(s) to the
Agent for the account of the purchaser(s) thereof, against payment for such
Shares at the purchase price per
16
Share specified in accordance with this Agreement and to give receipt for such
payment, (iii) to deposit the same to the Selling Stockholder's account with
BSSC and draw upon such account to pay such Transfer Taxes as BSSC may be
instructed to pay by the Agent, and (iv) to hold for the account of the Selling
Stockholder, on the terms and conditions applicable to the Selling Stockholder's
account with BSSC, the excess, if any, of the amount received by BSSC as payment
for the Shares over the Transfer Taxes, if any.
(i) Notwithstanding anything to the contrary contained herein, the
Selling Stockholder may sell Shares to the Company, and the Company may purchase
Shares directly from the Selling Stockholder, in which case such Shares shall
not be subject to this Agreement, other than the provision for payment of
certain fees and expenses as set forth below, and no commissions shall be due
hereunder on the sale of such Shares by the Selling Stockholder to the Company;
provided, however, that the Selling Stockholder agrees that it shall pay BSSC or
the Agent, as applicable, usual and customary trading fees and expenses relating
to the transfer of such Shares.
4. Closing. A closing ("Closing") for the sale of Shares purchased in the
------- -------
Offering may be held on one or more occasions prior to the end of the Offering
Period. At each such Closing, payment of the proceeds of the Offering shall be
made by certified or bank check(s) or by wire transfer to the order of the
Selling Stockholder. The Agent may deduct its commissions and any other amounts
payable to the Agent by the Selling Stockholder from the net proceeds
deliverable to the Selling Stockholder.
5. Covenants of the Company. The Company covenants and agrees with the
------------------------
Agent that:
(a) (i) If the Registration Statement has not yet been declared effective
on the date of this Agreement, the Company will use its best efforts to cause
the Registration Statement and any amendments thereto to become effective as
promptly as possible, and if Rule 430A is used or the filing of the Prospectus
is otherwise required under Rule 424(b) or Rule 434, the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to Rule
424(b) or Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If the Company elects to rely on
Rule 434, the Company will prepare and file a term sheet that complies with the
requirements of Rule 434.
(ii) The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or of the initiation, or the threatening,
of any proceedings therefor, (v) of the receipt of any comments from the
Commission and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening
17
of any proceeding for that purpose. If the Commission shall propose or enter a
stop order at any time, the Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain the lifting of such
order as soon as possible. The Company will not file any amendment to the
Registration Statement or any amendment of or supplement to the Prospectus
(including the prospectus required to be filed pursuant to Rule 424(b)or Rule
434) that differs from the prospectus on file at the time of the effectiveness
of the Registration Statement before or after the effective date of the
Registration Statement to which you shall reasonably object in writing after
being timely furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is required to
be delivered under the Securities Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would, in the judgment
of the Agent or the Company, include an untrue statement of a material fact or
omit to state any 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, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the
Securities Act or the Securities Act Regulations, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to you) which will correct such
statement or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you two signed copies of the
Registration Statement, including exhibits and all amendments thereto, and the
Company will promptly deliver to each of the Agent such number of copies of any
preliminary prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, as you may reasonably
request.
(d) The Company will endeavor in good faith, in cooperation with you, at or
prior to the time of effectiveness of the Registration Statement, to qualify, if
necessary, the Shares for offering and sale under the securities laws relating
to the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Securities Act) to its security holders and to you as soon
as practicable, but not later than 45 days after the end of its fiscal quarter
in which the first anniversary date of the effective date of the Registration
Statement occurs, an earnings statement (in form complying with the provisions
of Rule 158 of the Securities Act Regulations) covering a period of at least
twelve consecutive months beginning after the effective date of the Registration
Statement.
(f) Other than the Company's issuance of Common Stock, (i) pursuant to any
existing employee benefit plans, (ii) upon the exercise, conversion or exchange
of any currently outstanding
18
stock options or warrants, (iii) in exchange for shares of MGV Energy, Inc.
currently held by minority shareholders thereof, or (iv) in a transaction
described in Rule 145(a)(2) or (3) promulgated under the Securities Act which is
exempt from registration under the Securities Act, during the period of 90 days
from the date hereof, the Company will not, and will not permit any of its
affiliates, directly or indirectly, to issue, sell, offer or agree to sell,
grant any option for the sale of, pledge, make any short sale or maintain any
short position, establish or maintain a "put equivalent position" (within the
meaning of Rule 16a-1(h) under the Exchange Act), enter into any swap,
derivative transaction or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Common Stock
(whether any such transaction is to be settled by delivery of Common Stock,
other securities, cash or other consideration) or otherwise dispose of, any
Common Stock (or any securities convertible into, exercisable for or
exchangeable for Common Stock) or any interest therein or announce any intention
to do any of the foregoing without the prior written consent of the Agent.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange.
6. Covenants of the Selling Stockholder. The Selling Stockholder
------------------------------------
covenants and agrees with the Agent that:
(a) The Selling Stockholder will not take any action designed to or which
has constituted or which might reasonably be expected to cause or result, under
the Exchange Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares.
(b) The Selling Stockholder will advise you promptly, and if requested by
you, will confirm such advice in writing, so long as delivery of a prospectus
relating to the Shares by an Agent or dealer may be required under the
Securities Act, of (i) any change in information in the Registration Statement
or the Prospectus relating to the Selling Stockholder, or (ii) any new material
information relating to the information stated in the Prospectus about the
Selling Stockholder which comes to the attention of the Selling Stockholder.
(c) The Selling Stockholder shall deposit the Shares in an account with
BSSC, as custodian, on or prior to the date hereof and, to the extent such
Shares have not previously been sold hereunder, shall maintain such Shares on
deposit in such account until the expiration of the Offering Period.
7. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company and the Selling Stockholder hereunder, including
those in connection with (i) preparing, printing, duplicating, filing
19
and distributing the Registration Statement, as originally filed and all
amendments thereof (including all exhibits thereto), any Preliminary Prospectus,
the Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel), the
underwriting documents (including this Agreement) and all other documents
related to the public offering of the Shares (including those supplied to the
Agent in quantities as herein above stated), (ii) the transfer and delivery of
the Shares to the Agent, including any transfer or other taxes payable thereon
(iii) the qualification of the Shares under state or foreign securities or blue
sky laws, including the costs of printing and mailing a preliminary and final
"Blue Sky Survey" and the fees of counsel for the Agent and such counsel's
disbursements in relation thereto, (iv) filing fees of the Commission and the
NASD, and (v) the cost and charges of any transfer agent or registrar for the
Common Stock. Notwithstanding the foregoing, the Selling Stockholder agrees to
pay its portion of actual out of pocket costs incurred in filing of the
Registration Statement up to a maximum of $1,000 for registration and filing
fees and $4,500 for legal fees.
8. Conditions of Agent Obligations. The obligations of the Agent under
-------------------------------
Section 3 hereof shall be subject to the accuracy of the representations and
- ---------
warranties of the Company and the Selling Stockholder herein contained, as of
the date hereof and as of the Closing Date (for purposes of this Section 8
"Closing Date" shall refer to the Closing Date for the Shares); to the absence
from any certificates, opinions, written statements or letters furnished to you
or to Jenkens & Gilchrist ("Agent's Counsel") pursuant to this Section 8 of any
misstatement or omission, to the performance by the Company or the Selling
Stockholder of their respective obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later than
5:30 p.m., New York time, on the date of this Agreement, or at such later time
and date as shall have been consented to in writing by you; if the Company shall
have elected to rely upon Rule 430A or Rule 434 of the Securities Act
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 5(a) hereof; and, at or prior to the
Closing Date no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the opinion of Cantey &
Hanger, L.L.P., counsel for the Company, dated the Closing Date addressed to the
Agent and in form and substance satisfactory to Agent's Counsel, to the effect
that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of Delaware. The
Company is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned, leased
or licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
which will not in the aggregate have a Material Adverse Effect. The Company has
all requisite corporate or similar
20
authority to own, lease and license its
properties and conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus.
(ii) All of the outstanding shares of Common Stock (including the
Shares to be sold by the Selling Stockholder hereunder) are duly and validly
authorized and issued, are fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights, and no preemptive rights of
stockholders exist with respect to any of the Company=s Common Stock. The
Shares to be delivered by the Selling Stockholder on the Closing Date have been
duly and validly authorized, and are fully paid and nonassessable. The
certificates for the Common Stock are in due and proper form. The Common Stock
and the Shares conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(iii) The shares of Common Stock currently outstanding (including the
Shares to be sold by the Selling Stockholder hereunder) are listed on the
American Stock Exchange.
(iv) This Agreement has been duly and validly authorized, executed and
delivered by the Company.
(v) There is no litigation or governmental or other action, suit,
proceeding or investigation before any court or before or by any public,
regulatory or governmental agency or body pending or to the best of such
counsel's knowledge, threatened against, or involving the properties or business
of, the Company, which is of a character required to be disclosed in the
Registration Statement and the Prospectus which has not been properly disclosed
therein.
(vi) The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby by the Company do not
and will not violate, conflict with or constitute a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default), or result in the creation
or imposition of any lien, charge or encumbrance upon any properties or assets
of the Company or result in any acceleration of any indebtedness of the Company
pursuant to (A) any bond, debenture, note, indenture, mortgage, deed of trust,
contract or other agreement known to such counsel to which the Company is a
party or by which the Company or its properties or assets are or may be bound
(B) any statute, rule or regulation applicable to the Company or any of its
properties or assets or (C) to the best knowledge of such counsel, any judgment,
order or decree of any court or governmental agency or authority having
jurisdiction over the Company or any of its properties or assets. No consent,
approval, authorization, order, registration, filing, qualification, license or
permit of or with any court or any governmental agency or authority having
jurisdiction over the Company or its properties or assets is required for the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except for (1) such as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Agent (as to which such counsel need express
no opinion) and (2) such as have been made or obtained under the Securities Act.
21
(vii) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial statements
and other financial or statistical data included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Securities Act and the Securities Act Regulations.
(viii) The Registration Statement is effective under the Securities
Act, and, to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof has been issued and no proceedings therefor have been initiated or
threatened by the Commission and all filings required by Rule 424(b) of the
Securities Act Regulations have been made.
(ix) There are no holders of securities of the Company who, by reason
of the execution by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, have the right to request or
demand that the Company register under the Securities Act or analogous foreign
laws and regulations securities held by them, other than those such that have
been duly exercised or waived.
(x) The statements in the Prospectus which purport to summarize the
provisions of statutes, regulations, contracts, and other documents, insofar as
such statements constitute a summary of documents referred to therein or matters
of law, are, in all material respects, accurate summaries and fairly and
correctly present the information required to be shown with respect to such
matters and documents.
(xi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or Prospectus which are not so filed or described as
required.
(xii) The Company has all approvals, licenses and permits required
to conduct its business lawfully, except where the failure to so possess would
not have a Material Adverse Effect.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and the Agent at which the contents of the Prospectus and related matters were
discussed and, no facts have come to the attention of such counsel which would
lead such counsel to believe that either the Registration Statement at the time
it became effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A(b) or
Rule 434, if applicable), or any amendment thereof made prior to the Closing
Date as of the date of such amendment, contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the
22
statements therein not misleading, or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and other financial or
statistical data included therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the federal laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to Agent's
Counsel) of other counsel reasonably acceptable to Agent's Counsel, familiar
with the applicable laws; (B) as to federal regulatory issues, on the opinion of
special regulatory counsel; (C) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company and its subsidiaries, provided that copies of any such statements
or certificates shall be delivered to Agent's Counsel. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is being relied upon and for what purpose.
(c) The Selling Stockholder shall have caused its counsel to have furnished
to the Agent its opinion dated the Closing Date and addressed to the Agent to
the effect that:
(i) The Selling Stockholder has full right, power and authority to
sell, assign, transfer and deliver the Shares delivered by the Selling
Stockholder hereunder, except for the restrictions on transfer referenced by the
legends set forth on the certificates evidencing such Shares.
(ii) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required to be obtained or made
by the Selling Stockholder for the consummation by the Selling Stockholder of
the transactions contemplated by this Agreement in connection with the sale of
the Shares except (i) such as may be required as a result of the identity of the
purchaser or purchasers of the Shares, including filings required under Section
13 of the Exchange Act and filings required under the HSR Act, (ii) such as may
have been obtained and made under the Securities Act, (iii) such as may be
required by the NASD and under the blue sky laws of any jurisdiction, in
connection with the sale of the Shares by the Selling Stockholder, and (iv) such
other approvals as may be required under state securities laws;
(iii) The execution, delivery and performance of this Agreement and
the consummation of the transactions therein and herein contemplated will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (A) any statute, any rule, regulation or order of
any governmental agency or body applicable to the Selling Stockholder or any
court having jurisdiction over the Selling Stockholder or any of its properties
or (B) any agreement or instrument to which the Selling Stockholder is a party
or by which the Selling Stockholder is bound or to which any of the properties
of the Selling Stockholder is subject, which agreements or instruments have been
identified to such counsel by the Selling Stockholder as being material to the
Selling Stockholder, or (C) the constituent documents of the Selling
Stockholder; and
23
(iv) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Selling Stockholder.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the federal laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to Agent's
Counsel) of other counsel reasonably acceptable to Agent's Counsel, familiar
with the applicable laws; (B) as to federal regulatory issues, on the opinion of
special regulatory counsel; (C) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Selling Stockholder and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Selling Stockholder and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to Agent's
Counsel. The opinion of such counsel for the Selling Stockholder shall state
that the opinion of any such other counsel is being relied upon and for what
purpose.
(d) All proceedings taken in connection with the sale of the Shares as
herein contemplated shall be satisfactory in form and substance to you and to
Agent's Counsel, and the Agent shall have received from said Agent's Counsel a
favorable opinion, dated as of the Closing Date with respect to the sale of the
Shares, the Registration Statement and the Prospectus and such other related
matters as you may reasonably require, and the Company shall have furnished to
Agent's Counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(e) At the Closing Date you shall have received a certificate of the
President and Chief Operating Officer and the Executive Vice President and Chief
Financial Officer of the Company, dated the Closing Date, to the effect that (i)
the condition set forth in subsection (a) of this Section 8 has been satisfied,
(ii) as of the date hereof and as of the Closing Date the representations and
warranties of the Company set forth in Section 1 hereof are accurate, (iii) as
of the Closing Date the obligations of the Company to be performed hereunder on
or prior thereto have been duly performed and (iv) subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, the Company has not sustained any material loss or interference with
its business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding, and there has not been any material adverse
change, or any development involving a material adverse change, in the business,
prospects, properties, operations, condition (financial or otherwise), affairs
or management of the Company, except in each case as described in or
contemplated by the Prospectus.
(f) At the time this Agreement is executed and at the Closing Date, you
shall have received a letter from Deloitte & Touche LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Agent and in form and
-----
substance satisfactory to you, stating that, among other things: (i) they are
independent certified public accountants with respect to the Company within the
meaning of the
24
Securities Act and the Securities Act Regulations and stating that the
information provided in response to Item 10 of the Registration Statement is
correct insofar as it relates to them, (ii) in their opinion, the financial
statements and schedules of the Company included in the Registration Statement
and the Prospectus and covered by their opinion therein comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the applicable published rules and regulations of the Commission
thereunder, (iii) on the basis of procedures consisting of a reading of the
latest available unaudited interim financial statements of the Company, a
reading of the minutes of meetings and consents of the stockholders and Board of
Directors of the Company and the committees of such Board of Directors
subsequent to December 31, 1999, inquiries of officers and other employees of
the Company who have responsibility for financial and accounting matters of the
Company with respect to transactions and events subsequent to December 31, 1999,
a review of interim financial information in accordance with the standards
established by the American Institute of Certified Public Accountants in
Statement of Auditing Standards No. 71, Interim Financial Information with
respect to the nine month period ended September 30, 2000 and other specified
procedures and inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause them to
believe that: (A) the unaudited financial statements and schedules of the
Company presented in the Registration Statement and the Prospectus, including
the quarterly information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations," do not comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and, if applicable, the Exchange Act and the applicable
published rules and regulations of the Commission thereunder or that such
unaudited consolidated financial statements are not fairly presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement and the Prospectus; (B) with respect to the period
subsequent to September 30, 2000, there were, as of the date of the most
recently available monthly consolidated financial statements of the Company, if
any, and as of a specified date not more than five days prior to the date of
such letter, any changes in the capital stock or long-term indebtedness of the
Company or any decrease in the net current assets or shareholders' equity of the
Company, in each case as compared with the amounts shown in the most recent
balance sheet presented in the Registration Statement and the Prospectus, except
for changes or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in such letter; (C)
that during the period from October 1, 2000 to the date of the most recent
available monthly financial statements of the Company, if any, and to a
specified date not more than five days prior to the date of such letter, there
was any decrease, as compared with the corresponding period in the prior fiscal
year, in total revenues, or total or per share net income, except for decreases
which the Registration Statement and the Prospectus disclose have occurred or
may occur or which are set forth in such letter; (D) the unaudited pro forma
income statements and balance sheets presented in the Registration Statement and
the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and, if applicable, the
Exchange Act and the applicable published rules and regulations of the
Commission thereunder, that such unaudited pro forma income statements and
balance sheets are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration Statement and the
Prospectus or that the pro forma
25
adjustments have not been properly applied to the historical amounts in the
compilation of those statements; or (E) any other unaudited pro forma income
statement data or balance sheet items included in the Registration Statement or
Prospectus do not agree with the corresponding amounts in the pro forma income
statements or balance sheets included in the Registration Statement and
Prospectus; and (iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, and other financial information
pertaining to the Company set forth in the Registration Statement and the
Prospectus, which have been specified by you prior to the date of this
Agreement, to the extent that such amounts, numbers, percentages, and
information may be derived from the general accounting and financial records of
the Company or from schedules furnished by the Company, and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries, and other
appropriate procedures specified by you set forth in such letter, and found them
to be in agreement.
(g) At the time this Agreement is executed and at the Closing Date, you
shall have received a letter from Weaver and Tidwell, L.L.P., independent
accountants for predecessor entities to the Company, including Mercury
Exploration Company and Michigan Gas Partners Limited Partnership and certain
acquired properties (collectively, the APredecessor Entities@), dated,
respectively, as of the date of this Agreement and as of the Closing Date
addressed to the Agent and in form and substance satisfactory to you, stating
that, among other things: (i) they are independent certified public accountants
with respect to the Predecessor Entities within the meaning of the Securities
Act and the Securities Act Regulations and stating that the information provided
in response to Item 10 of the Registration Statement is correct insofar as it
relates to them; (ii) in their opinion, the financial statements and schedules
of the Predecessor Entities included in the Registration Statement and the
Prospectus and covered by their opinion therein comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the applicable published rules and regulations of the Commission
thereunder; and (iii) they have compared specific dollar amounts, number of
shares, percentages of revenues and earnings, and other information pertaining
to the Predecessor Entities set forth in the Registration Statement and the
Prospectus, which have been specified by you prior to the date of this
Agreement, to the extent such amounts, numbers, percentages and information may
be derived from the general accounting records of the Company or the Predecessor
Entities from schedules furnished by the Company, and excluding any questions
requiring an interpretation by legal counsel, and other appropriate procedures
specified by you set forth in such letter, and found them to be in agreement.
(h) The Selling Stockholder shall have furnished to the Agent a
certificate, signed by the Selling Stockholder, dated the Closing Date, to the
effect that the signer of such certificate has caused to be carefully examined
the portions of the Registration Statement, the Prospectus, any supplement to
the Prospectus and this Agreement that describe or pertain to the Selling
Stockholder and that the representations and warranties of the Selling
Stockholder in this Agreement are true and correct in all material respects on
and as of the Closing Date to the same effect as if made on the Closing Date.
(i) Prior to the Closing Date the Company and the Selling Stockholder shall
have furnished to you such further information, certificates and documents as
you may reasonably request.
26
(j) You shall have received from Holditch a letter, dated as of the
Closing Date, addressed to the Agent and in form and substance satisfactory to
you, stating, among other things (i) they are independent petroleum engineers
with respect to the Company, and (ii) nothing has come to their attention that
would lead them to conclude that the Reserve Information referenced in the
Registration Statement or the Prospectus is inaccurate or incomplete in any
material respect.
If any of the conditions specified in this Section 8 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to Agent's Counsel
pursuant to this Section 8 shall not be in all material respects reasonably
satisfactory in form and substance to you and to Agent's Counsel, all
obligations of the Agent hereunder may be canceled by you at, or at any time
prior to, the Closing Date. Notice of such cancellation shall be given to the
Company and the Selling Stockholder in writing, or by telephone, telex or
telegraph, confirmed in writing.
9. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Agent and each
person, if any, who controls the Agent within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), to which it may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the Shares, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
or the Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company will not be liable
in any such case to the extent but only to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Agent through you expressly for
use therein.
(b) The Selling Stockholder agrees to indemnify and hold harmless the Agent
and each person, if any, who controls the Agent within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, against any and all
losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or
27
litigation), to which it may become subject under the Securities Act, the
Exchange Act or otherwise, that arise out of or are based upon the inclusion in
the Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, of any untrue statement relating to the Selling Stockholder
or alleged untrue statement or any omission or alleged omission relating to the
Selling Stockholder made therein in reliance upon and in conformity with written
information furnished to the Company or the Agent by the Selling Stockholder
expressly for use therein. The Company and the Agent acknowledge that the
statements relating to the Selling Stockholder set forth under the caption
"Selling Stockholders" in the Prospectus constitute the only information
furnished in writing by or on behalf of the Selling Stockholder expressly for
use in the Registration Statement relating to the Shares as originally filed or
in any amendment thereof, any related Preliminary Prospectus or the Prospectus
or in any amendment thereof, any related Preliminary Prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case may
be.
(c) The Agent agrees to indemnify and hold harmless the Company, each of
the directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement and each other person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act and the Selling Stockholder, against any and all
losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), jointly or severally, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Agent through you
expressly for use therein; provided, however, that in no case shall the Agent be
liable or responsible for any amount in excess of the commission applicable to
the Shares sold by the Agent hereunder. This indemnity will be in addition to
any liability which the Agent may otherwise have, including under this
Agreement. The Company and the Selling Stockholder acknowledge that the
statements set forth under the caption "Sale of Shares" in the Prospectus
constitute the only information furnished in writing by or on behalf of the
Agent expressly for use in the Registration Statement relating to the Shares, as
originally filed or in any amendment thereof, any related Preliminary Prospectus
or the Prospectus or in any amendment thereof or supplement thereto, as the case
may be.
28
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 9, except to the extent such
failure prejudiced the indemnifying party). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
or claims that are the subject matter of such proceeding.
10. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 9 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, then upon the occurrence of such
circumstance, the Company and the Selling Stockholder, on the one hand, and the
Agent, on the other hand, shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Agent, who may
also be liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company, the Selling
Stockholder and the Agent may be subject, in such proportions as is appropriate
to reflect the relative benefits received by the Company, the
29
Selling Stockholder and the Agent from the Offering or, if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company, the Selling Stockholder and the Agent in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholder, on
the one hand, and the Agent, on the other hand, shall be deemed to be in the
same proportion as (x) the total proceeds from the Offering (net of commissions
but before deducting expenses) received by the Selling Stockholder, and (y) the
commissions received by the Agent, respectively. The relative fault of the
Company, the Selling Stockholder and of the Agent shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholder or the
Agent and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholder and the Agent agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 10, (i) in no case shall the Agent be liable or responsible for
any amount in excess of the commissions applicable to the Shares sold by the
Agent hereunder, and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 10 and the
preceding sentence, the Agent shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that the Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 10, each person, if any, who controls the
Agent within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act shall have the same rights to contribution as the Agent, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to clauses (i) and (ii) of this Section 10. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 10 or
otherwise, except to the extent such failure prejudiced such party. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
withheld. Notwithstanding anything in this Agreement to the contrary, the
liability of the Selling Stockholder under the Selling Stockholder's
representations and warranties contained in Section 2 hereof and under the
indemnity and contribution agreements contained in this Section 10 shall be
limited to an amount equal to the net purchase price of the Shares received by
the Selling Stockholder.
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11. Survival of Representations and Agreements. All representations
------------------------------------------
and warranties, covenants and agreements of the Agent, the Company and the
Selling Stockholder contained in this Agreement, including representations of
the Company and the Selling Stockholder in Section 1 and 2, the agreements
contained in Sections 5, the indemnity agreements contained in Section 9, the
contribution agreements contained in Section 10 and the agreements contained in
Section 14, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Agent or any controlling person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling person thereof or on behalf of the Selling Stockholder, and
shall survive delivery of and payment for the Shares to and by the Agent. The
representations contained in Section 1 and the agreements contained in Sections
5, 9, 12(d) and 14 hereof shall survive the termination of this Agreement,
including termination pursuant to Section 12 hereof.
12. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective, upon the later of when (i) you,
the Company and the Selling Stockholder shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. To the extent that any Shares remain unsold hereunder at the
expiration of the Offering Period, this Agreement shall thereupon terminate
without liability to the Company, the Selling Stockholder or the Agent except as
herein expressly provided. Until this Agreement becomes effective as aforesaid,
it may be terminated by the Company and the Selling Stockholder by notifying you
or by you by notifying the Company or the Selling Stockholder. Notwithstanding
the foregoing, the provisions of this Section 12 and of Sections 1, 7 and 9
through 17 hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any time prior
to the Closing Date if (A) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or securities
in general; or (B) if trading on the New York or American Stock Exchanges shall
have been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges by the New York or American Stock
Exchanges or by order of the Commission or any other governmental authority
having jurisdiction; or (C) if a banking moratorium has been declared by a state
or federal authority or if any new restriction materially adversely affecting
the distribution of the Shares or the Additional Shares, as the case may be,
shall have become effective; or (D) if the United States becomes engaged in
hostilities or there is an escalation of hostilities involving the United States
or there is a declaration of a national emergency or war by the United States or
(ii) if there shall have been such change in political, financial or economic
conditions if the effect of any such event in (i) or (ii) as in your judgment
makes it impracticable or inadvisable to proceed with the offering, sale and
delivery of the Shares or the Additional Shares, as the case may be, on the
terms contemplated by the Prospectus.
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(c) Any notice of termination pursuant to this Section 12 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than pursuant to (i) notification by you as provided in
Section 12(a) hereof or (ii) Section 12(b) hereof), or if the sale of the Shares
provided for herein is not consummated because any condition to the obligations
of the Agent set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company or the Selling Stockholder to
perform any agreement herein or comply with any provision hereof, the Company or
the Selling Stockholder, as applicable, will, subject to demand by you,
reimburse the Agent for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of their counsel), incurred by the Agent in
connection herewith.
13. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and, if sent to the Agent,
shall be mailed, delivered, or telexed or telegraphed and confirmed in writing,
Bear, Stearns & Co. Inc., 245 Park Avenue, New York, NY 10167, Attention:
, with a copy to: Jenkens & Gilchrist, a Professional Corporation,
- --------------
1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, Attention: L. Steven Leshin,
Esq.; if sent to the Company, shall be mailed, delivered, or telegraphed and
confirmed in writing to the Company, 777 West Rosedale Street, Suite 300, Fort
Worth, Texas 76104, Attention: Chief Financial Officer, with a copy to Cantey &
Hanger, LLP, 801 Cherry Street, Suite 2100, Fort Worth, Texas 76102, Attention:
Dean A. Tetirick, Esq.; or, if sent to the Selling Stockholder to Union Oil
Company of California, 2141 Rosecrans Avenue, Suite 4000, El Segundo, California
90245, Attention: Dennis P.R. Codon, Senior Vice President, Chief Legal Officer
and General Counsel.
14. Consent to Jurisdiction; Waiver of Immunities; Appointment of Agent
-------------------------------------------------------------------
for Service.
-----------
(a) The Company and the Selling Stockholder:
(i) irrevocably submit to the nonexclusive jurisdiction of any New
York State or federal court sitting in the State of New York, County of New York
and any appellate court from any thereof in any action, suit or proceeding
arising out of or relating to this Agreement or any other document delivered in
connection herewith and irrevocably waives any immunity from such action or
proceeding it may otherwise enjoy in the aforementioned courts;
(ii) irrevocably agree that all claims in respect of any such action
or proceeding may be heard and determined in such New York State court or in
such federal court; and
(iii) irrevocably waive, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding.
(iv) The parties hereto waive all rights to trial by jury in any
action, suit or proceeding brought to resolve any dispute whether sounding in
contract, tort or otherwise, between
32
the parties arising out of, connected with, related to, or incidental to the
relationship established between them in connection with this Agreement or the
transactions contemplated herein.
(v) Any and all legal process, summons, notices and documents that may
be served on a party hereto in any action, suit or proceeding brought against
it, with respect to such party's obligations, liabilities or any other matter
arising out of or relating to this Agreement or any other document delivered in
connection herewith may be served on such party by certified mail or physical
delivery to such party at the address for such party specified in Section 13
----------
hereof.
(b) Nothing in this Section 14 shall affect the right of any person to
serve legal process in any other manner permitted by law or affect the right of
any person to bring any action or proceeding against the Company or its
properties in the courts of other jurisdictions.
(c) The provisions of this Section 14 shall survive any termination of this
Agreement, in whole or in part.
15. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Agent, the Company, the Selling Stockholder and the
controlling persons, directors, officers and others referred to in Sections 9
and 10, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The term "successors and assigns" shall not include a purchaser, in
its capacity as such, of Shares from the Agent.
16. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York for contracts made and to be
fully performed in such state without regard to principles of conflicts of law.
17. Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
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If the foregoing correctly sets forth the understanding between you, the
Company and the Selling Stockholder, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
THE COMPANY: QUICKSILVER RESOURCES INC.
By: /s/GLENN DARDEN
--------------------------------------
Name: Glenn Darden
------------------------------------
Title: President
-----------------------------------
THE SELLING STOCKHOLDER: Union Oil Company of California
By: /s/DANIEL A. FRANCHI
--------------------------------------
Name: Daniel A. Franchi
------------------------------------
Title: Assitant Treasurer
-----------------------------------
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, N.Y. 10167
By: /s/STEPHEN STRATY
--------------------------------------
Name: Stephen Straty
------------------------------------
Title: Senior Managing Director
-----------------------------------
34