1
EXHIBIT 1.1
Stone Energy Corporation
3,200,000 Shares*
Common Stock
($0.01 par value)
Underwriting Agreement
, New Jersey
November , 1996
Salomon Brothers Inc
▇▇▇▇▇▇▇ ▇▇▇▇ & Company L.L.C.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
As Representatives of the several Underwriters
c/o Salomon Brothers Inc
Seven ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Stone Energy Corporation, a Delaware corporation (the
"Company"), proposes to sell to the underwriters named in Schedule I hereto
(the "Underwriters"), for whom you (the "Representatives") are acting as
representatives, 2,741,159 shares of Common Stock, $0.01 par value ("Common
Stock") of the Company, and the persons named in Schedule II hereto (the
"Selling Stockholders") propose to sell to the Underwriters 458,841 shares of
Common Stock (said shares to be issued and sold by the Company and shares to be
sold by the Selling Stockholders collectively being hereinafter called the
"Underwritten Securities"). The Company also proposes to grant to the
Underwriters an option to purchase up to 480,000 additional shares of Common
Stock (the "Option Securities"; the Option Securities, together with the
Underwritten Securities, being hereinafter called the "Securities").
__________________________________
* Plus an option to purchase from Stone Energy Corporation up to
480,000 additional shares to cover over-allotments.
2
1. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with,
each Underwriter as set forth below in this Section 1. Certain terms used in
this Section 1 are defined in paragraph (xxvi) hereof.
(i) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement
(Registration No. 33-93486) on Form S-3, including a related
preliminary prospectus, for the registration under the Securities Act
of 1933, as amended (the "Act"), of the offering and sale of the
Securities. The Company may have filed one or more amendments
thereto, including the related preliminary prospectus, each of which
has previously been furnished to you. The Company will next file with
the Commission either (A) prior to effectiveness of such registration
statement, a further amendment to such registration statement
(including the form of final prospectus), (B) after effectiveness of
such registration statement, a final prospectus in accordance with
Rules 430A and 424(b)(1) or (4) or (C) an abbreviated registration
statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Act ("Rule 462 Registration Statement"). In the
case of clause (B), the Company has included in such registration
statement, as amended at the Effective Date, all information (other
than Rule 430A Information) required by the Act and the rules
thereunder to be included in the Prospectus with respect to the
Securities and the offering thereof. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all
Rule 430A Information, together with all other such required
information, with respect to the Securities and the offering thereof
and, except to the extent the Representatives shall agree in writing
to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior
to the Execution Time, will be included or made therein.
(ii) On the Effective Date, the Registration Statement did
or will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date, the Prospectus
(and any supplements thereto) will, comply in all material respects
with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder (the "Rules and
Regulations"); on the Effective Date, the Registration Statement did
not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
on the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), did not or will not, and on the date of any filing pursuant to
Rule 424(b) and on the Closing Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
Company makes no representations or warranties
-2-
3
as to the information contained in or omitted from the Registration
Statement, or the Prospectus (or any supplement thereto) in reliance
upon and in conformity with information furnished in writing to the
Company (A) by or on behalf of any Underwriter through the
Representatives specifically for inclusion in the Registration
Statement or the Prospectus (or any supplement thereto) or (B) by any
Selling Stockholder who is not an officer or director of the Company
for inclusion in the Registration Statement or the Prospectus (or any
supplement thereto).
(iii) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(iv) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole.
(v) All of the outstanding shares of capital stock of
each subsidiary that is a corporation and all of the limited
partnership interests of each subsidiary that is a partnership are
validly issued and outstanding, fully paid and non-assessable, with no
personal liability attaching to the ownership thereof, and, except as
may be disclosed in the Prospectus, all of the shares or limited
partnership interests, as the case may be, of each subsidiary of the
Company are owned, directly or indirectly, by the Company, free and
clear of any liens, charges or encumbrances or any other claim of any
third party.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company.
(vii) The authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus.
(viii) The shares of Common Stock (including the shares to
be sold by the Selling Shareholders) outstanding prior to the issuance
of the Securities to be sold by the Company have been duly authorized
and are validly issued, fully paid and non-assessable.
-3-
4
(ix) The Securities to be sold by the Company have been
duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and non
assessable, and the issuance of such Securities will not be subject to
any preemptive or similar rights.
(x) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of the certificate of incorporation
or by-laws of the Company or any agreement or other instrument binding
upon the Company or any of its subsidiaries or any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over the Company or any subsidiary, in each case that is material to
the Company and its subsidiaries, taken as a whole, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities.
(xi) The financial statements included in the Registration
Statement and the Prospectus present fairly the financial position,
results of operations and, if applicable, cash flows of the Company
and its subsidiaries, in each case at the dates and for the periods
presented, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods presented; and the pro forma financial
information and notes thereto included in the Registration Statement
and the Prospectus were prepared in accordance with the applicable
requirements of the Act and the Rules and Regulations, include all
adjustments necessary to present fairly the pro forma financial
condition and results of operations of the Company and its
subsidiaries at the respective dates and for the periods indicated,
and all assumptions used in preparing such pro forma financial
information were reasonable. Since the respective dates of such
financial statements, there has been no material adverse change in the
condition or general affairs, financial or otherwise, of the Company
and its subsidiaries taken as a whole, other than as described in the
Prospectus.
(xii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P., whose reports appear in the
Registration Statement and the Prospectus, were, as of the date of
each respective report, and are, as of the date hereof, independent
public accountants with respect to the Company and its subsidiaries,
as required by the Act and the Rules and Regulations.
(xiii) Except as described in the Registration Statement and
the Prospectus, the Company and each of its subsidiaries owns, or has
valid rights to use, all items of real and personal property (other
than oil and gas properties) which are material to the business as
currently conducted of the Company and its subsidiaries taken as a
whole, free and clear of all liens, encumbrances and claims which may
materially interfere with the business, properties, financial
condition, results of operations or prospects of the Company and its
subsidiaries taken as a whole.
-4-
5
(xiv) Each of the Company and its subsidiaries has good and
defensible title to its oil and gas properties, free and clear of all
liens, encumbrances, security interests, and claims, except (i) as
specified in the Registration Statement and the Prospectus; (ii) liens
for taxes not yet due; (iii) liens, claims and encumbrances under gas
sales contracts, operating agreements, unitization and pooling
agreements and such other agreements as are customarily found in
connection with comparable drilling and producing operations; and (iv)
other liens, claims, encumbrances and title defects that are, singly
and in the aggregate, not material in amount and do not materially
interfere with the Company's or any of its subsidiaries' use or
enjoyment of their respective oil and gas properties.
(xv) ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Associates, Inc. ("▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ Consultants, Ltd. ("Atwater"), petroleum
engineers from whose reserve reports information is set forth or
incorporated by reference in the Registration Statement and the
Prospectus, were, as of the date of each respective report, and are,
as of the date hereof, independent petroleum engineers with respect to
the Company and its subsidiaries. The information underlying the
estimates of the reserves of the Company and the subsidiaries,
supplied by the Company to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ for purposes
of preparing such reserve reports (including, without limitation,
production, costs of operation and development, current prices for
production, agreements relating to current and future operations and
sales of production) was true and correct in all material respects on
the dates such information was supplied and such reserve reports were
prepared.
(xvi) There has not occurred any material adverse change,
or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(xvii) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required.
(xviii) Each Preliminary Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Act and the applicable Rules
and Regulations.
(xix) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not
-5-
6
be an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
(xx) The Company and its subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(xxi) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean up, closure of
properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties). On the basis of such
review, the Company has reasonably concluded that such associated
costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as
a whole.
(xxii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company or to require the
Company to include such securities with the Securities registered
pursuant to the Registration Statement.
(xxiii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances 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 existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxiv) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
-6-
7
(xxv) The Company has not taken and shall not take,
directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the
Securities.
(xxvi) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term "Effective Date" shall
mean each date that the Registration Statement and any post-effective
amendment or amendments thereto became or become effective.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in
paragraph (i) above and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A
Information. "Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph (i) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at
the Execution Time, in the form in which it shall become effective)
and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall
also mean such registration statement as so amended. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. Such term shall also include
any Rule 462 Registration Statement. "Rule 424" and "Rule 430A" refer
to such rules under the Act. "Rule 430A Information" means
information with respect to the Securities and the offering thereof
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A.
(b) Each Selling Stockholder represents and warrants to,
and agrees with, each Underwriter that:
(i) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder.
(ii) Such Selling Stockholder is, and on the Closing Date
will be, the lawful owner of the Securities to be sold by such Selling
Stockholder hereunder, and has, and on the Closing Date will have, the
legal right and power, and all authorization and approval required by
law, to enter into this Agreement, the Custody Agreement (as
hereinafter defined) and the Power of Attorney (as hereinafter
defined) and to sell, transfer and deliver the Securities to be sold
by such Selling Stockholders. Upon sale and delivery of, and payment
for, such Securities, as provided herein, such Selling Stockholder
will convey good and marketable title to such Securities, free and
clear of all liens, encumbrances, equities and claims whatsoever.
-7-
8
(iii) The Custody Agreement and the Power of Attorney have
been duly authorized, executed and delivered by such Selling
Stockholder and are valid and binding agreements of such Selling
Stockholder.
(iv) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Securities Exchange Act of 1934, as amended (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
Securities and has not effected any sales of shares of Common Stock
which, if effected by the issuer, would be required to be disclosed in
response to Item 701 of Regulation S-K.
(v) Certificates in negotiable form for such Selling
Stockholder's Securities have been placed in custody, for delivery
pursuant to the terms of this Agreement, under a Custody Agreement
executed and delivered by such Selling Stockholders, in the form
heretofore furnished to you (the "Custody Agreement") with Chase,
Mellon Shareholder Services, L.L.C., as custodian (the "Custodian")
and under the Power of Attorney executed and delivered by such Selling
Stockholder in the form furnished to you appointing certain
individuals as such Selling Stockholder's attorneys-in-fact to the
extent set forth therein, relating to the transactions contemplated
hereby and by the Registration Statement (the "Power of Attorney");
the Securities represented by the certificates so held in custody for
each Selling Stockholder are subject to the interests hereunder of the
Underwriters, the Company and the other Selling Stockholders; the
arrangements for custody and delivery of such certificates, made by
such Selling Stockholder hereunder and under the Custody Agreement and
the Power of Attorney, are not subject to termination by any acts of
such Selling Stockholder, or by operation of law, whether by the death
or incapacity of such Selling Stockholder or the occurrence of any
other event; and if any such death, incapacity or any other such event
shall occur before the delivery of such Securities hereunder,
certificates for the Securities will be delivered by the Custodian in
accordance with the terms and conditions of this Agreement, the
Custody Agreement and the Power of Attorney as if such death,
incapacity or other event had not occurred, regardless of whether or
not the Custodian shall have received notice of such death, incapacity
or other event.
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by such Selling Stockholder of the transactions contemplated herein,
including, without limitation, except such as may have been obtained
under the Act and such as may be required under the Blue Sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters and such other approvals as have
been obtained.
(vii) Neither the sale of the Securities being sold by such
Selling Stockholder, the execution and delivery by such Selling
Stockholder of the Custody Agreement and the Power of Attorney, nor
the consummation of any other of the transactions herein contemplated
by
-8-
9
such Selling Stockholder or the fulfillment of the terms hereof by
such Selling Stockholder will conflict with, result in a breach or
violation of, or constitute a default under any law or the charter or
by-laws of such Selling Stockholder (if such Selling Stockholder is a
corporation) or the terms of any indenture or other agreement or
instrument to which such Selling Stockholder (or, if such Selling
Stockholder is a corporation, any of its subsidiaries) is a party or
bound, or any judgement, order or decree applicable to such Selling
Stockholder (or, if such Selling Stockholder is a corporation, any of
its subsidiaries) of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such
Selling Stockholder (or, if such Selling Stockholder is a corporation,
any of its subsidiaries).
In respect of any statements in or omissions from the Registration Statement or
the Prospectus or any supplements thereto made in reliance upon and in
conformity with information furnished in writing to the Company by any Selling
Stockholder specifically for use in connection with the preparation thereof,
such Selling Stockholder hereby makes the same representations and warranties
to each Underwriter as the Company makes to such Underwriter under paragraph
(a)(ii) of this Section.
2. Purchase and Sale. (a) Subject to the terms and
conditions and in reliance upon the representations and warranties herein set
forth, the Company and the Selling Stockholders agree, severally and not
jointly, to sell to each Underwriter, and each Underwriter agrees, severally
and not jointly, to purchase from the Company and the Selling Stockholders, at
a purchase price of $ per share, the amount of the Underwritten
Securities set forth opposite such Underwriter's name in Schedule I hereto;
provided that, with respect to the Underwritten Securities purchased from the
Company by the Underwriters, such amount shall be increased by an amount equal
to the quotient obtained by dividing (a) the product of (i) the number of
shares sold by the Underwriters to ▇▇▇▇▇ ▇. ▇▇▇▇▇ and (ii) the difference
between the price to the public and $ by (b) the total number of
Underwritten Securities purchased from the Company by the Underwriters.
(b) Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Company hereby
grants an option to the several Underwriters to purchase, severally and not
jointly, up to 480,000 shares of the Option Securities at the same purchase
price per share as the Underwriters shall pay for the Underwritten Securities.
Said option may be exercised only to cover over-allotments in the sale of the
Underwritten Securities by the Underwriters. Said option may be exercised in
whole or in part at any time (but not more than once) on or before the 30th day
after the date of the Prospectus upon written or telegraphic notice by the
Representatives to the Company setting forth the number of shares of the Option
Securities as to which the several Underwriters are exercising the option and
the settlement date. Delivery of certificates for the shares of Option
Securities by the Company, and payment therefor to the Company, shall be made
as provided in Section 3 hereof. The number of shares of the Option Securities
to be purchased by each Underwriter shall be the same percentage of the total
number of shares of the Option Securities to be purchased by the several
Underwriters as such Underwriter is
-9-
10
purchasing of the Underwritten Securities, subject to such adjustments as you
in your absolute discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third business
day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
, 1996, or such later date (not later than , 1996)
as the Representatives shall designate, which date and time may be postponed
by agreement among the Representatives, the Company and the Selling
Stockholders or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representatives for
the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representatives of the respective purchase
price of the Securities being sold by the Company and each of the Selling
Stockholders to or upon the order of the Company and the Selling Stockholders
by wire transfer in same-day funds. Delivery of the Underwritten Securities
and the Option Securities shall be made at such location as the
Representatives shall reasonably designate at least one business day in
advance of the Closing Date, and payment for such Securities shall be made at
the office of , , New Jersey. Certificates for
the Securities shall be registered in such names and in such denominations as
the Representatives may request not less than three full business days in
advance of the Closing Date.
The Company and the Selling Stockholders agree to have the
Securities available for inspection, checking and packaging by the
Representatives in New York, New York, not later than 1:00 PM on the business
day prior to the Closing Date.
Each Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the several Underwriters of
the Securities to be purchased by them from such Selling Stockholder, and the
respective Underwriters will pay any additional stock transfer taxes involved
in further transfers.
If the option provided for in Section 2(b) hereof is exercised
after the third business day prior to the Closing Date, the Company will
deliver (at the expense of the Company) to the Representatives, at one New York
Plaza, New York, New York, on the date specified by the Representatives (which
shall be within three business days after exercise of said option),
certificates for the Option Securities in such names and denominations as the
Representatives shall have requested against payment of the purchase price
thereof to or upon the order of the Company by wire transfer in same-day funds.
If settlement for the Option Securities occurs after the Closing Date, the
Company will deliver to the Representatives on the settlement date for the
Option Securities, and the obligation of the Underwriters to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
-10-
11
4. Offering by Underwriters. It is understood that the
several Underwriters propose to offer the Securities for sale to the public as
set forth in the Prospectus.
5. Agreements.
(a) The Company agrees with the several Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and
any amendment thereof to become effective. Prior to the termination
of the offering of the Securities, the Company will not file any
amendment of the Registration Statement or supplement to the
Prospectus without your prior consent. Subject to the foregoing
sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule
424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The
Company will promptly advise the Representatives (A) when the
Registration Statement, if not effective at the Execution Time, and
any amendment thereto, shall have become effective, (B) when the
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (C) when, prior
to termination of the offering of the Securities, any amendment to the
Registration Statement shall have been filed or become effective, (D)
of any request by the Commission for any amendment of the Registration
Statement or supplement to the Prospectus or for any additional
information, (E) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact 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 to amend the Registration Statement or supplement
the Prospectus to comply with the Act or the rules thereunder, the
Company promptly will prepare and file with the Commission, subject to
the second sentence of paragraph (a) of this Section 5, an amendment
or supplement which will correct such statement or omission or effect
such compliance.
(iii) As soon as practicable, the Company will make
generally available to its security holders and to the Representatives
an earnings statement or statements of the
-11-
12
Company and its subsidiaries which will satisfy the provisions of
Section 11(a) of the Act and Rule 158 under the Act.
(iv) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Act, as many copies of each Preliminary
Prospectus and the Prospectus and any supplement thereto as the
Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering.
(v) The Company will arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in
effect so long as required for the distribution of the Securities and
will pay the fee of the National Association of Securities Dealers,
Inc., in connection with its review of the offering.
(vi) The Company will not, for a period of 120 days following
the Execution Time, without the prior written consent of the
Representatives, (i) offer, sell, pledge, contract to sell, sell any
option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise
dispose of, directly or indirectly, or announce the offering of, any
other shares of Common Stock or any securities convertible into, or
exchangeable for, shares of Common Stock; provided, however, that the
Company may issue and sell Common Stock pursuant to any employee stock
option plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the Execution Time, and the Company may issue
Common Stock issuable upon the conversion of securities or the
exercise of warrants outstanding at the Execution Time or (ii) enter
into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in
cash or otherwise.
(b) Each Selling Stockholder agrees with the several
Underwriters that it will not, during the period of 120 days following the
Execution Time, without the prior written consent of the Representatives, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise dispose of, directly or indirectly, or announce the
offering of, any other shares of Common Stock beneficially owned by such
person, or any securities convertible into, or exchangeable for, shares of
Common Stock, other than shares of Common Stock disposed of as bona fide gifts
or (ii) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. In addition, each Selling Stockholder agrees that, without the
prior written consent of the
-12-
13
Representatives, it will not, for a period of 120 days following the Execution
Time, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
6. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Underwritten Securities and
the Option Securities, as the case may be, shall be subject to the accuracy of
the representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and
any settlement date pursuant to Section 3 hereof, to the accuracy of the
statements of the Company and the Selling Stockholders made in any certificates
pursuant to the provisions hereof, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder and to the
following additional conditions:
(a) If the Registration Statement has not become
effective prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become effective not
later than (i) 6:00 PM New York City time on the date of determination of the
public offering price, if such determination occurred at or prior to 3:00 PM
New York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if such
determination occurred after 3:00 PM New York City time on such date; if filing
of the Prospectus, or any supplement thereto, is required pursuant to Rule
424(b), the Prospectus, and any such supplement, will be filed in the manner
and within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
threatened.
(b) The Company shall have furnished to the
Representatives the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the Company,
dated the Closing Date, to the effect that:
(i) each of the Company and its subsidiaries
(individually a "Subsidiary" and collectively, the "Subsidiaries") has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to own
its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases material properties or conducts material business, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in
the Prospectus, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company either directly or through
wholly owned subsidiaries free and clear of any perfected security
interest and, to the knowledge of such counsel, after due inquiry, any
other security interests, claims, liens or encumbrances;
-13-
14
(iii) the Company's authorized equity capitalization is as
set forth in the Prospectus; the capital stock of the Company conforms
to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock (including the Securities being
sold hereunder by the Selling Stockholders) have been duly and validly
authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder by the Company have been duly and
validly authorized, and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities being sold by the Selling Stockholders
are duly listed and admitted for trading on the New York Stock
Exchange; the Securities being sold hereunder by the Company are duly
authorized for listing, subject to official notice of issuance on the
New York Stock Exchange; the certificates for the Securities are in
valid and sufficient form; and the holders of outstanding shares of
capital stock of the Company are not entitled to preemptive or other
rights to subscribe for the Securities;
(iv) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus, and there is no franchise, contract or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit,
which is not described or filed as required;
(v) the Registration Statement has become effective under
the Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements and
other financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
rules thereunder; and such counsel has no reason to believe that at
the Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Act and such as may be required under the Blue
-14-
15
Sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters and such other
approvals (specified in such opinion) as have been obtained; and
(viii) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter or by-laws of the Company or the terms of any indenture or
other agreement or instrument known to such counsel and to which the
Company or any of its subsidiaries is a party or bound or any
judgment, order or decree known to such counsel to be applicable to
the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of its subsidiaries.
In rendering such opinion, such counsel may rely (A) as to matters involving
the application of laws of any jurisdiction other than the corporate laws of
the State of Delaware and the laws of the State of Texas or the United States,
to the extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and public officials. References to the Prospectus in this paragraph
(b) include any supplements thereto at the Closing Date.
(c) The Selling Stockholders shall have furnished to the
Representatives the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., or such other counsel
for the Selling Stockholders that is acceptable to the Underwriters, dated the
Closing Date, to the effect that:
(i) this Agreement, the Custody Agreement and the Power
of Attorney have been duly authorized, executed and delivered by the
Selling Stockholders, and the Custody Agreement is valid and binding
on the Selling Stockholders;
(ii) immediately prior to the delivery by each Selling
Stockholder to the several Underwriters of certificates for the
Securities being sold hereunder by such Selling Stockholder, each
Selling Stockholder (A) had good and valid title to such Securities
and, to the knowledge of such counsel after due inquiry, such
Securities were at such time free and clear of all liens,
encumbrances, equities or claims, and (B) had full right, power and
authority to sell, assign, transfer and deliver such Securities;
(iii) upon delivery of certificates for the Securities
being sold hereunder by each Selling Stockholder to the Underwriters
against payment therefor as provided herein, good and valid title to
such Securities, free and clear of all liens, encumbrances, equities
and claims whatsoever will be transferred to each of the several
Underwriters who have purchased such Securities in good faith and
without notice of any such liens, encumbrance,
-15-
16
equity or claim or any other adverse claim within the meaning of the
Uniform Commercial Code;
(iv) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by any Selling Stockholder of the transactions contemplated herein,
except such as may have been obtained under the Act and such as may be
required under the Blue Sky laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the
Underwriters and such other approvals (specified in such opinion) as
have been obtained; and
(v) neither the sale of the Securities being sold by any
Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by any Selling Stockholder or the
fulfillment of the terms hereof by any 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 known to such counsel and to which any Selling
Stockholder is a party or bound, or any judgment, order or decree
known to such counsel to be applicable to any Selling Stockholder of
any court, regulatory body, administrative agency, governmental body
or arbitrator having jurisdiction over any Selling Stockholder.
In rendering such opinion, such counsel may rely (A) as to matters involving
the application of laws of any jurisdiction other than the corporate laws of
the State of Delaware and the laws of the State of Texas or the United States,
to the extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters, and (B) as to matters of fact, to
the extent they deem proper, on certificates of the Selling Stockholders (or,
if a Selling Stockholder is a corporation, then responsible officers of such
Selling Stockholder) and public officials.
(d) The Representatives shall have received from ▇▇▇▇▇▇▇
& ▇▇▇▇▇ L.L.P., counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and
the Company and each Selling Stockholder shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass upon
such matters.
(e) The Company shall have furnished to the
Representatives a certificate of the Company, signed by the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on and as
of the Closing Date with the same effect as if
-16-
17
made on the Closing Date and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in the condition
(financial or other), earnings, business or properties of the Company
and its subsidiaries, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(f) Each Selling Stockholder shall have furnished to the
Representatives a certificate, signed by such Selling Stockholder (or, if such
Selling Stockholder is a corporation, signed by the Chairman of the Board or
the President and the principal financial or accounting officer of such Selling
Stockholder), dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplement to the Prospectus and this Agreement and that the
representations and warranties of such 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.
(g) At the Execution Time and at the Closing Date, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ L.L.P. shall have furnished to the Representatives a letter or
letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the Act and the
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma financial statements
included in the Registration Statement and the Prospectus and reported
by them comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited interim financial information for the three-month
period ended March 31, 1996, and as at March 31, 1996, for the
six-month period ended June 30, 1996 and as at June 30, 1996 and for
the nine-month period ended September 30, 1996 and as at September 30,
1996 as indicated in their reports relating to such unaudited interim
financial information; carrying out certain specified procedures (but
not an examination in accordance with generally
-17-
18
accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the stockholders,
directors and committees of the boards of directors of the Company and
the Subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters of the
Company and its subsidiaries as to transactions and events subsequent
to December 31, 1995, nothing came to their attention which caused
them to believe that:
(1) any unaudited financial statements included
in the Registration Statement and the Prospectus do not comply
in form in all material respects with applicable accounting
requirements of the Act and with the published rules and
regulations of the Commission with respect to registration
statements on Form S-3; and said unaudited financial
statements are not 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
(2) with respect to the period subsequent to
September 30, 1996, there were any changes, at a specified
date not more than five business days prior to the date of the
letter, in the long-term loans of the Company and its
subsidiaries or Common Stock of the Company or decreases in
the stockholders' equity of the Company or increases in other
long-term liabilities of the Company and its subsidiaries as
compared with the amounts shown on the September 30, 1996
consolidated balance sheet included in the Registration
Statement and the Prospectus, or for the period from October
1, 1996 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year,
in total revenues or net income before income taxes or in
total or per share amounts of net income of the Company and
its subsidiaries, except in all instances for changes or
decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed
necessary by the Representatives;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature (which
is limited to accounting, financial or statistical information derived
from the general accounting records of the Company and its
subsidiaries) set forth in the Registration Statement and the
Prospectus, including the information set forth under the captions
"Summary Financial Data," "Capitalization" and "Selected Historical
Financial Data" in the Prospectus, agrees with the accounting records
of the Company and its subsidiaries, excluding any questions of legal
interpretation;
(iv) On the basis of: a reading of the unaudited pro forma
financial statements included in the Registration Statement and the
Prospectus (the "pro forma financial
-18-
19
statements"); carrying out certain specified procedures; inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters; and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in
the pro forma financial statements, nothing came to their attention
which caused them to believe that the pro forma financial statements
do not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Prospectus in this paragraph (g) includes
any supplement thereto at the date of the letter.
(h) At the Execution Time and at the Closing Date,
Atwater and Cawley, Gillespie, independent petroleum engineers, shall have
furnished to the Representatives a letter with respect to reserve information
of the Company contained in the Registration Statement and the Prospectus in
form and substance satisfactory to the Representatives.
(i) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Registration Statement (exclusive
of any amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (g) of this Section 6 or (ii) any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company and its subsidiaries the effect of which,
in any case referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(j) The Securities shall have been approved for listing
on the New York Stock Exchange, subject only to official notice of issuance.
(k) At the Execution Time, the Company shall have
furnished to the Representatives a letter substantially in the form of Exhibit
A hereto from each officer and director of the Company addressed to the
Representatives, in which each such person agrees not to offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
an offering of, any shares of Common Stock beneficially owned by such person or
any securities convertible into, or exchangeable for, shares of Common Stock
for a period of 120 days following the Execution Time without the prior written
consent of the Representatives, other than shares of Common Stock disposed of
as bona fide gifts.
(l) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
-19-
20
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company and
each Selling Stockholder in writing or by telephone or telegraph confirmed in
writing.
7. Reimbursement of Underwriters' Expenses. If the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof or because
of any refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities. If the Company is required to make any payments to the
Underwriters under this Section 7 because of any Selling Stockholder's refusal,
inability or failure to satisfy any condition to the obligations of the
Underwriters set forth in Section 6, the Selling Stockholders, pro rata in
proportion to the percentage of Securities to be sold by each, shall reimburse
the Company on demand for all amounts so paid.
8. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person who controls
any Underwriter within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject under the Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (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 Securities as originally filed or in any
amendment thereof, or in any 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,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability 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 any Underwriter through
the Representatives specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
-20-
21
(b) Each Selling Stockholder severally agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person who controls
the Company or any Underwriter within the meaning of either the Act or the
Exchange Act and each other Selling Stockholder to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information furnished to the Company by or on behalf of
such Selling Stockholder specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in addition to
any liability which any Selling Stockholder may otherwise have.
(c) Each Underwriter severally agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each Selling
Stockholder, to the same extent as the foregoing indemnity from the Company to
each Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Company by or on behalf of such Underwriter
through the Representatives specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any Underwriter may otherwise have. The
Company and each Selling Stockholder acknowledge that the statements set forth
in the last paragraph of the cover page and under the heading "Underwriting" in
any Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus, and you, as the
Representatives, confirm that such statements are correct.
(d) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a),
(b) or (c) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
-21-
22
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph
(a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company, the Selling
Stockholders and the Underwriters agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Company, one or more of the Selling Stockholders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company, by the Selling
Stockholders and by the Underwriters from the offering of the Securities;
provided, however, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the underwriting
discount or commission applicable to the Securities purchased by such
Underwriter hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, the Selling Stockholders
and the Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company, of the Selling Stockholders and of the Underwriters in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company and by the
Selling Stockholders shall be deemed to be equal to the total net proceeds from
the offering (before deducting expenses) received by each of them, and benefits
received by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the cover
page of the Prospectus. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information
provided by the Company, the Selling Stockholders or the Underwriters. The
Company, the Selling Stockholders and the Underwriters agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall
-22-
23
have the same rights to contribution as such Underwriter, and each person who
controls the Company within the meaning of either the Act or 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 the applicable terms and conditions of
this paragraph (e).
9. Default by an Underwriter. If any one or more
Underwriters shall fail to purchase and pay for any of the Securities agreed to
be purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the
amount of Securities set forth opposite their names in Schedule I hereto bears
to the aggregate amount of Securities set forth opposite the names of all the
remaining Underwriters) the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the
event that the aggregate amount of Securities which the defaulting Underwriter
or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
amount of Securities set forth in Schedule I hereto, the remaining Underwriters
shall have the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such nondefaulting Underwriters do not
purchase all the Securities, this Agreement will terminate without liability to
any nondefaulting Underwriter, the Selling Stockholders or the Company. In the
event of a default by any Underwriter as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the Representatives shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall
relieve any defaulting Underwriter of its liability, if any, to the Company,
the Selling Stockholders and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in the Company's Common Stock shall have been suspended
by the Commission or the New York Stock Exchange or trading in securities
generally on the New York Stock Exchange shall have been suspended or limited
or minimum prices shall have been established on such Exchange, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Representatives, impracticable or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers, of each Selling Stockholders and of
the Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
any
-23-
24
Underwriter, any Selling Stockholder or the Company or any of the officers,
directors or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the Securities. The provisions of Sections
7 and 8 hereof shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the Representatives,
will be mailed, delivered or telegraphed and confirmed to them, care of Salomon
Brothers Inc, at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇; or, if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, III, of the legal department; or if sent to the Selling Stockholders,
will be mailed, delivered or telegraphed and confirmed to them at the addresses
set forth in Schedule II hereto.
13. Successors. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
the officers and directors and controlling persons referred to in Section 8
hereof, and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by
and construed in accordance with the laws of the State of New York.
-24-
25
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
STONE ENERGY CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
THE SELLING STOCKHOLDERS named in
Schedule II hereto, acting severally
By:
-----------------------------------------
Attorney-in-Fact
-25-
26
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
▇▇▇▇▇▇▇ ▇▇▇▇ & Company L.L.C.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
By: Salomon Brothers Inc
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
For themselves and the other several
Underwriters named in Schedule I
to the foregoing Agreement.
-26-
27
SCHEDULE I
Number of shares of
Underwritten Securities
Underwriters To Be Purchased
------------ ---------------
Salomon Brothers Inc . . . . . . . . . . . . . . . . . .
▇▇▇▇▇▇▇ ▇▇▇▇ & Company L.L.C. . . . . . . . . . . . . . .
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. . . . . . . . . . . . . . .
---------------
Total
===============
28
SCHEDULE II
Number of Shares of
Underwritten Securities
Selling Stockholders to Be Sold
-------------------- ----------
D. ▇▇▇▇▇ ▇▇▇▇▇ (1) 100,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (1) 100,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (1) 75,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (2) 20,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (2) 6,566
Bernhard Trust "B" (2) 18,914
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Charitable Remainder Trust (2) 18,361
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (3) 20,000
KGB Trust (3) 50,000
▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ Investments, L.L.C. 50,000
-------
Total 458,841
=======
________________
(1) The address for notice to each such Selling Stockholder is ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(2) The address for notice to each such Selling Stockholder is ▇▇▇▇, ▇▇▇▇▇▇▇▇
& Associates, ▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(3) The address for notice to each such Selling Stockholder is ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
29
SCHEDULE III
Maximum Number
of Shares of Option
Name Securities to be Sold
---- ---------------------
Salomon Brothers Inc . . . . . . . . . . . . . . . . . .
▇▇▇▇▇▇▇ ▇▇▇▇ & Company L.L.C. . . . . . . . . . . . . . .
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. . . . . . . . . . . . . . .
-------------
Total . . . . . . . . . . . . . . . . . . . . .
=============
30
EXHIBIT A
[Letterhead of officer, director or major shareholder of
Stone Energy Corporation]
Stone Energy Corporation
Public Offering of Common Stock
Salomon Brothers Inc
▇▇▇▇▇▇▇ ▇▇▇▇ & Company L.L.C.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
As Representatives of the several Underwriters,
c/o Salomon Brothers Inc
Seven ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between Stone
Energy Corporation, a Delaware corporation (the "Company"), certain Selling
Stockholders named therein and each of you as representatives of a group of
Underwriters named therein, relating to an underwritten public offering of
Common Stock, $0.01 par value (the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement, the undersigned agrees not to offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
an offering of, any shares of Common Stock beneficially owned by the
undersigned or any securities convertible into, or exchangeable for, shares of
Common Stock for a period of 120 days following the day on which the
Underwriting Agreement is executed without your prior written consent, other
than shares of Common Stock disposed of as bona fide gifts.
If for any reason the underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting
Agreement), the agreement set forth above shall likewise be terminated.
Yours very truly,
[Signature of officer,
director or major shareholder]
[Name and address of
officer, director or major shareholder]