EXHIBIT 1.1
ENCORE ACQUISITION COMPANY
8,000,000 Shares of Common Stock
Underwriting Agreement
November 13, 2003
Deutsche Bank Securities Inc.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Encore Acquisition Company, a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters listed in Schedule 1
hereto (the "Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of 8,000,000 shares of common stock, par value
$0.01 per share, of the Company (the "Underwritten Shares") and, at the option
of the Underwriters, up to an additional 1,200,000 shares of common stock of the
Company (the "Option Shares"). The Underwritten Shares and the Option Shares are
herein referred to as the "Shares". The shares of common stock of the Company to
be outstanding after giving effect to the sale of the Shares are herein referred
to as the "Common Stock".
The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as follows:
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement (File No.
333-106943), including a prospectus, relating to the Shares. Such registration
statement, as amended to the date of this Agreement, is referred to herein as
the "Registration Statement". As used herein, the term "Base Prospectus" means
the prospectus included in the Registration Statement. The Company has filed
with, or transmitted for filing to, or shall promptly hereafter file with or
transmit for filing to, the Commission a prospectus supplement (the "Prospectus
Supplement") to the Base Prospectus specifically relating to the Shares pursuant
to Rule 424 under the Securities Act. The "Preliminary Prospectus" means the
preliminary prospectus supplement, together with the Base Prospectus, filed
prior to the date hereof pursuant to Rule 424 under the Securities Act. The term
"Prospectus" means the Prospectus Supplement, together with
the Base Prospectus, in the form first used to confirm sales of the Shares. Any
reference in this Agreement to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the effective date of the Registration Statement
or the date of such Preliminary Prospectus or the Prospectus, as the case may be
and any reference to "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") that are deemed to
be incorporated by reference therein.
2. Purchase of the Shares by the Underwriters. (i) The Company agrees
to issue and sell the Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
number of Underwritten Shares set forth opposite such Underwriter's name in
Schedule 1 hereto at a price per share of $19.44 (the "Purchase Price"). The
public offering price of the Shares has been determined in accordance with Rule
2720 of the Rules of Conduct of the National Association of Securities Dealers,
Inc.
In addition, the Company agrees to issue and sell the Option Shares to
the several Underwriters as provided in this Agreement, and the Underwriters, on
the basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option to purchase,
severally and not jointly, from the Company the Option Shares at the Purchase
Price.
If any Option Shares are to be purchased, the number of Option Shares
to be purchased by each Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of Underwritten Shares set forth opposite the name of such
Underwriter in Schedule 1 hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representatives in
their sole discretion shall make.
The Underwriters may exercise the option to purchase the Option Shares
at any time in whole, or from time to time in part, on or before the thirtieth
day following the date of this Agreement, by written notice from the
Representatives to the Company. Such notice shall set forth the aggregate number
of Option Shares as to which the option is being exercised and the date and time
when the Option Shares are to be delivered and paid for which may be the same
date and time as the Closing Date (as hereinafter defined) but shall not be
earlier than the Closing Date nor later than the tenth (10th) full business day
(as hereinafter defined) after the date of such notice (unless such time and
date are postponed in accordance with the provisions of Section 9 hereof). Any
such notice shall be given at least two Business Days prior to the date and time
of delivery specified therein. The Representatives may cancel such option at any
time prior to its expiration by giving written notice of such cancellation to
the Company.
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(a) The Company understands that the Underwriters intend to make a
public offering of the Shares as soon after the parties hereto have executed and
delivered this Agreement as in the judgment of the Representatives is advisable,
and initially to offer the Shares on the terms set forth in the Prospectus. The
Company acknowledges and agrees that the Underwriters may offer and sell Shares
to or through any affiliate of an Underwriter and that any such affiliate may
offer and sell Shares purchased by it to or through any Underwriter.
(b) Payment for the Shares shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representatives in the case of the Underwritten Shares, at the offices of ▇▇▇▇▇
▇▇▇▇▇ L.L.P, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ by 10:00 A.M. New York
City time on November 19, 2003, or at such other time or place on the same or
such other date, not later than the fifth business day thereafter, as the
Representatives and the Company may agree upon in writing or, in the case of the
Option Shares, on the date and at the time and place specified by the
Representatives in the written notice of the Underwriters' election to purchase
such Option Shares. The time and date of such payment for the Underwritten
Shares is referred to herein as the "Closing Date" and the time and date for
such payment for the Option Shares, if other than the Closing Date, are herein
referred to as the "Additional Closing Date". On the Closing Date or the
Additional Closing Date, as the case may be, the Company shall cause its
transfer agent to deposit as original issue the Shares pursuant to the Full Fast
Delivery Program of The Depository Trust Company ("DTC") for the account of each
Underwriter against payment to or upon the order of the Company of the Purchase
Price by wire transfer in immediately available funds.
3. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Preliminary Prospectus. No order preventing or suspending the use
of any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, complied in all material
respects with the Securities Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use in any Preliminary Prospectus.
(b) Registration Statement and Prospectus. The Registration Statement
has been declared effective by the Commission. No order suspending the
effectiveness of the Registration Statement has been issued by the Commission
and no proceeding for that purpose has been initiated or, to the knowledge of
the Company, threatened by the Commission; as of the effective date of the
Registration Statement and any amendment thereto, the Registration Statement
complied and will comply, as the case may be, in all material respects with the
Securities Act, and did not and will not contain, as of the applicable effective
date, any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and as of the applicable filing date of the Prospectus
and any amendment or supplement thereto and as of the Closing Date and as of the
Additional
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Closing Date, as the case may be, the Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that the Company makes no representation and warranty with respect to any
statements or omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use in the Registration
Statement and the Prospectus and any amendment or supplement thereto.
(c) Incorporated Documents. The documents incorporated by reference in
the Prospectus, when they became effective or were filed with the Commission, as
the case may be, conformed in all material respects to the requirements of the
Exchange Act, and none of such documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and any further documents so filed
and incorporated by reference in the Prospectus, when such documents become
effective or are filed with the Commission will conform in all material respects
to the requirements of the Exchange Act and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Financial Statements. The financial statements and the related
notes thereto of the Company and its consolidated subsidiaries included or
incorporated by reference in the Registration Statement and the Prospectus
comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and present fairly the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates indicated and the results of their operations and the changes in
their consolidated cash flows 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 covered thereby,
and the supporting schedules included or incorporated by reference in the
Registration Statement present fairly the information required to be stated
therein; the other financial information included or incorporated by reference
in the Registration Statement and the Prospectus, including oil and gas
production information, has been derived from the accounting records of the
Company and its subsidiaries and presents fairly the information shown thereby;
and any pro forma financial information and the related notes thereto included
or incorporated by reference in the Registration Statement and the Prospectus
has been prepared in accordance with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and the assumptions
underlying such pro forma financial information are reasonable and are set forth
or included or incorporated by reference in the Registration Statement and the
Prospectus.
(e) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, (i) there
has not been any change in the capital stock (other than restricted stock and
any options granted or shares of Common Stock of the Company issued upon
exercise of options granted or to be granted under the Company's employee stock
option plans existing on the date of the Prospectus) or long-term debt of the
Company or any of its subsidiaries, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by the Company on any class of
capital stock, or any material adverse
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change, or any development involving a prospective material adverse change, in
or affecting the general affairs, business, earnings, assets, rights,
properties, management, condition (financial or otherwise), stockholders'
equity, results of operations or prospects of the Company and its subsidiaries
taken as a whole, whether or not occurring in the ordinary course of business;
(ii) neither the Company nor any of its subsidiaries has entered into any
transaction or agreement that is material to the Company and its subsidiaries
taken as a whole or incurred any liability or obligation, direct or contingent,
that is material to the Company and its subsidiaries taken as a whole; and (iii)
neither the Company nor any of its subsidiaries has sustained any material loss
or material interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor disturbance or
dispute or from any action, order or decree of any court or arbitrator or
governmental or regulatory authority, except in the case of clauses (i), (ii)
and (iii) as otherwise disclosed in the Registration Statement and the
Prospectus.
(f) Organization and Good Standing. The Company and each of its
subsidiaries have been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each jurisdiction in
which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all corporate or
other power and authority, as the case may be, necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to be so qualified or have such power or authority
would not, individually or in the aggregate, have a material adverse effect on
the business, earnings, assets, rights, properties, management, condition
(financial or otherwise), stockholders' equity, results of operations or
prospects of the Company and its subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business (a "Material Adverse Effect"). The
subsidiaries listed in Schedule 2 to this Agreement are the only subsidiaries of
the Company.
(g) Capitalization. As of October 31, 2003, the Company has 30,275,113
shares of Common Stock issued and outstanding; all the outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable and are not subject to any pre-emptive or
similar rights; except as described in or expressly contemplated by the
Prospectus, there are no outstanding rights (including, without limitation,
pre-emptive rights), warrants or options (other than restricted stock and any
options granted or shares of Common Stock of the Company issued upon exercise of
options granted or to be granted under the Company's employee stock option plans
existing on the date of the Prospectus) to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in the Company or any of its subsidiaries, or any contract, commitment,
agreement, understanding or arrangement of any kind relating to the issuance of
any capital stock of the Company or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options (other than
restricted stock and any options granted or shares of Common Stock of the
Company issued upon exercise of options granted or to be granted under the
Company's employee stock option plans existing on the date of the Prospectus);
the capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the Prospectus;
and all the outstanding shares of capital stock or other equity interests of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and nonassessable and are owned directly or indirectly by the
Company, free and clear of any lien, charge, encumbrance, security interest,
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restriction on voting or transfer or any other claim of any third party except
as otherwise described in the Prospectus and except for such liens that may
arise under that certain Credit Agreement dated as of June 25, 2002 among the
Company, Encore Operating, L.P., Fleet National Bank, Wachovia Bank, N.A.,
Fortis Capital Corp. and the financial institutions listed on Schedule 1
thereto.
(h) Due Authorization. The Company has the corporate right, power and
authority to execute and deliver this Agreement and that certain Stock Purchase
Agreement dated November 13, 2003 (the "Purchase Agreement" and together with
this Agreement, the "Transaction Documents") by and among the Company and ▇.▇.
▇▇▇▇▇▇ Partners (SBIC), LLC and Warburg, ▇▇▇▇▇▇ Equity Partners L.P.
(collectively, the "Significant Shareholders") and to perform its obligations
hereunder and thereunder (including, without limitation, the use of proceeds
from the sale of the Shares as described in the Prospectus); and all action
required to be taken for the due and proper authorization, execution and
delivery of each of the Transaction Documents and the consummation of the
transactions contemplated thereby (including, without limitation, the use of
proceeds from the sale of the Shares as described in the Prospectus) has been
duly and validly taken.
(i) Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(j) The Shares. The Shares to be issued and sold by the Company
hereunder have been duly authorized by the Company and, when issued and
delivered and paid for as provided herein, will be duly and validly issued and
will be fully paid and nonassessable and will conform to the descriptions
thereof contained in the Prospectus; and the issuance of the Shares is not
subject to any preemptive or similar rights.
(k) Purchase Agreement. The Purchase Agreement has been duly
authorized, executed and delivered by the Company and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by equitable principles relating to
enforceability.
(l) Descriptions of the Transaction Documents. The description of each
Transaction Document contained in the Registration Statement and the Prospectus
conforms in all material respects with the terms of each actual Transaction
Document.
(m) No Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter or by-laws or similar
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of clauses (ii) and
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(iii) above, for any such default or violation that would not, individually or
in the aggregate, have a Material Adverse Effect.
(n) No Conflicts. The execution, delivery and performance by the
Company of each of the Transaction Documents, the issuance and sale of the
Shares by the Company hereunder and the consummation of the transactions
contemplated herein and in the Prospectus (including the use of proceeds from
the sale of the Shares as described in the Prospectus) will not (i) conflict
with or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter or
by-laws or similar organizational documents of the Company or any of its
subsidiaries or (iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except in the case of clause (i) and (iii), for such
conflicts, breaches, violations or defaults that would not, individually or in
the aggregate, have a Material Adverse Effect.
(o) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of each of the Transaction Documents, the issuance and sale of
the Shares and the consummation of the transactions contemplated by the
Transaction Documents, except (i) as have been obtained under the Securities
Act, (ii) such filings and consents as may be required by the National
Association of Securities Dealers, Inc. and (iii) such consents, approvals,
authorizations, orders and registrations or qualifications as may be required
under applicable state securities laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(p) Legal Proceedings. Except as described in the Prospectus, there are
no legal, governmental or regulatory investigations, actions, suits or
proceedings pending to which the Company or any of its subsidiaries is or may be
a party or to which any property of the Company or any of its subsidiaries is or
may be the subject that, individually or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under the Transaction
Documents; no such investigations, actions, suits or proceedings are, to the
best knowledge of the Company, threatened or contemplated by any governmental or
regulatory authority or by others; and (i) there are no current or pending
legal, governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the Prospectus that are not
so described and (ii) there are no statutes, regulations or contracts or other
documents that are required under the Securities Act to be filed as exhibits to
the Registration Statement or described in the Registration Statement or the
Prospectus that are not so filed or described.
(q) Independent Accountants. Ernst & Young LLP, who has certified
certain financial statements of the Company, are independent public accountants
with respect to the Company as required by the Securities Act; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, who certified certain financial
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statements of the Company prior to January 1, 2002, were independent public
accountants with respect to the Company as required by the Securities Act.
(r) Title to Real and Personal Property. The Company and its
subsidiaries have (1) good and indefeasible title to all of their interests in
the oil and gas properties described in the Prospectus, (2) good and
indefeasible title in fee simple to all other real property owned by the Company
or any of its subsidiaries and (3) good title to all personal property owned by
the Company or any of its Subsidiaries, in each case, free and clear of all
liens, encumbrances and defects, except (i) as described in the Prospectus, (ii)
liens securing taxes and other governmental charges, or claims of materialmen,
mechanics and similar persons, not yet due and payable, (iii) liens and
encumbrances under oil and gas leases, options to lease, operating agreements,
utilization and pooling agreements, participation and drilling concessions
agreements and gas sales contracts, securing payment of amounts not yet due and
payable and of a scope and nature customary in the oil and gas industry and (iv)
liens, encumbrances and defects that do not, individually or in the aggregate,
materially affect the value of such properties or materially interfere with the
use made or proposed to be made of such properties by the Company or its
subsidiaries; except as described in the Prospectus, the leases, options to
lease, drilling concessions or other arrangements held by the Company and its
subsidiaries reflect in all material respects the right of the Company and its
subsidiaries to explore the unexplored and undeveloped acreage described in the
Prospectus, and the care taken by the Company and its subsidiaries with respect
to acquiring or otherwise procuring such leases, options to lease, drilling
concessions and other arrangements was generally consistent with standard
industry practices for acquiring or procuring leases to explore acreage for
hydrocarbons; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made or proposed to be made of such real property and buildings by
the Company or its subsidiaries.
(s) Title to Intellectual Property. The Company and its subsidiaries
own or possess adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service ▇▇▇▇
registrations, copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses,
except where the failure to own or possess such patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service ▇▇▇▇
registrations, copyrights, licenses and know-how would not, individually or in
the aggregate, have a Material Adverse Effect; and the conduct of their
respective businesses will not conflict in any material respect with any such
rights of others, and the Company and its subsidiaries have not received any
notice of any claim of infringement or conflict with any such rights of others.
(t) No Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company or any of its subsidiaries, on the one hand,
and the directors, officers, stockholders, customers or suppliers of the Company
or any of its subsidiaries, on the other, that is required by the Securities Act
to be described in the Registration Statement and the Prospectus and that is not
so described.
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(u) Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to register as, an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder (collectively, "Investment Company
Act").
(v) Taxes. The Company and its subsidiaries have paid all federal,
state, local and foreign taxes and filed all tax returns required to be paid or
filed through the date hereof to the extent that such taxes have become due and
are not being contested in good faith with such exceptions as would not singly
or in the aggregate result in a Material Adverse Effect; and except as otherwise
disclosed in the Prospectus, there is no tax deficiency that has been asserted
against the Company or any of its subsidiaries or any of their respective
properties or assets which has had, nor does the Company have any knowledge of
any tax deficiency, which if determined adversely to the Company or its
subsidiaries might have, a Material Adverse Effect.
(w) Licenses and Permits. The Company and its subsidiaries possess all
licenses, franchises, certificates, permits, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by, and have made
all declarations and filings with, the appropriate federal, state, local or
foreign governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement and the
Prospectus, except where the failure to possess or make such Governmental
Licenses would not, individually or in the aggregate, have a Material Adverse
Effect; the Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure to so
comply would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect; and except as described in the Prospectus,
neither the Company nor any of its subsidiaries has received notice of any
revocation or modification of any such license, certificate, permit or
authorization or has any reason to believe that any such Governmental Licenses
will not be renewed in the ordinary course, except for such notices or
modifications as would not, individually or in the aggregate, have a Material
Adverse Effect.
(x) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its subsidiaries exists or, to the best
knowledge of the Company, is contemplated or threatened, which disturbance or
dispute would reasonably be expected to have a Material Adverse Effect.
(y) Compliance With Environmental Laws. Except as otherwise stated or
incorporated by reference in the Registration Statement or Prospectus, the
Company and its subsidiaries (i) are in compliance with any and all applicable
federal, state, local and foreign laws, rules, regulations, decisions and orders
relating to pollution or the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (collectively, "Environmental Laws"); (ii) have received and are in
compliance
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with all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and (iii) have not
received notice of any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous or toxic substances or
wastes, pollutants or contaminants, except in the case of clauses (i), (ii) and
(iii) for any such failure to comply, or failure to receive required permits,
licenses or approvals, or liability as would not, individually or in the
aggregate, have a Material Adverse Effect.
(z) Accounting Controls. The Company and its subsidiaries maintain
systems 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 asset accountability; (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.
(aa) Insurance. The Company and its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their business and the value of their respective properties as is
customary for companies engaged in similar businesses in similar industries; and
neither the Company nor any of its subsidiaries has (i) received notice from any
insurer or agent of such insurer that capital improvements or other expenditures
are required or necessary to be made in order to continue such insurance or (ii)
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage at
reasonable cost from similar insurers as may be necessary to continue its
business.
(bb) No Restrictions on Subsidiaries. Except as described in the
Prospectus, no subsidiary of the Company is currently prohibited, directly or
indirectly, under any agreement or other instrument to which it is a party or is
subject, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's properties or assets to the Company or any other
subsidiary of the Company.
(cc) No Broker's Fees. Neither the Company nor any of its subsidiaries
is a party to any contract, agreement or understanding with any person (other
than this Agreement) that would give rise to a valid claim against the Company
or any of its subsidiaries or any Underwriter for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of the
Shares.
(dd) No Registration Rights. No person has the right to require the
Company or any of its subsidiaries to register any securities for sale under the
Securities Act by reason of the filing of the Registration Statement with the
Commission or the issuance and sale of the Shares that have not been waived.
(ee) No Stabilization. Neither the Company, nor to the Company's
knowledge, any of its affiliates, has taken or will 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
-10-
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares. The Company acknowledges that the Underwriters may
engage in passive market making transactions in the Shares on the New York Stock
Exchange in accordance with Regulation M under the Exchange Act.
(ff) Statistical and Market Data. Nothing has come to the attention of
the Company that has caused the Company to believe that the statistical and
market-related data included in the Registration Statement and the Prospectus is
not based on or derived from sources that are reliable and accurate in all
material respects.
(gg) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 and
15d-14 under the Exchange Act); such disclosure controls and procedures are
designed to ensure that material information relating to the Company, including
its consolidated subsidiaries, is made known to the Company's principal
executive officer and its principal financial officer by others within those
entities, and such disclosure controls and procedures are effective to perform
the functions for which they were established; the Company's auditors and the
Audit Committee of the Board of Directors have been advised of: (i) any
significant deficiencies in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize, and
report financial data; and (ii) any fraud, whether or not material, that
involves management or other employees who have a role in the Company's internal
controls; any material weaknesses in internal controls have been identified for
the Company's auditors; since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses; the principal executive officer and
principal financial officer of the Company have made all certifications required
by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and any related
rules and regulations promulgated by the Commission, and the statements
contained in any such certification are complete and correct; and the Company is
otherwise in compliance with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
that are effective.
(hh) Form S-3 Eligibility. The conditions for use of Form S-3 as set
forth in the General Instructions thereto have been satisfied.
(ii) Reserve Information. ▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd. (the "Engineer"),
whose reserve evaluations are referenced or appear, as the case may be, in the
Prospectus were, as of December 31, 2001 and December 31, 2002, and are, as of
the date hereof, independent engineers with respect to the Company; the
historical information underlying the estimates of the reserves of the Company
supplied by the Company to the Engineer for the purposes of preparing the
reserve reports of the Company referenced in the Prospectus (the "Reserve
Reports"), including, without limitation, production volumes, sales prices for
production, contractual pricing provisions under oil or gas sales or marketing
contracts or under hedging arrangements, 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 of each such Reserve Report; the estimates of future capital
expenditures and other future exploration and development costs supplied to the
Engineer were prepared in good faith and with a
-11-
reasonable basis; the information provided to the Engineer for purposes of
preparing the Reserve Reports was prepared in all material respects in
accordance with customary industry practices; the Engineer were, as of the date
of each of the Reserve Reports prepared by them, and are, as of the date hereof,
independent petroleum engineers with respect to the Company; other than normal
production of reserves and intervening spot market product price fluctuations,
and except as disclosed in the Prospectus, the Company is not aware of any facts
or circumstances that would result in a material decline in the reserves in the
aggregate, or the aggregate present value of future net cash flows therefrom, as
described in the Prospectus and as reflected in the Reserve Reports; estimates
of such reserves and the present value of the future net cash flows therefrom as
described in the Prospectus and reflected in the Reserve Reports comply in all
material respects with the Securities Act.
4. Further Agreements of the Company. The Company covenants and agrees
with each Underwriter that:
(a) Effectiveness of the Registration Statement. The Company will file,
in a form reasonably approved by the Representatives, the final Prospectus with
the Commission within the time periods specified by Rule 424(b) under the
Securities Act and file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares and, at the
expense of the Company, the Company will furnish copies of the Prospectus to the
Underwriters in New York City prior to 10:00 A.M., New York City time, on the
business day next succeeding the date of this Agreement in such quantities as
the Representatives may reasonably request.
(b) Delivery of Copies. The Company will deliver, without charge, (i)
to each of the Representatives and counsel to the Underwriters, a signed copy of
the Registration Statement as originally filed and each amendment thereto, in
each case including all exhibits and consents filed therewith and documents
incorporated by reference therein; and (ii) to each Underwriter (A) a conformed
copy of the Registration Statement as originally filed and each amendment
thereto (without exhibits) and (B) during the Prospectus Delivery Period, as
many copies of the Prospectus (including all amendments and supplements thereto)
and documents incorporated by reference therein as the Representatives may
reasonably request. As used herein, the term "Prospectus Delivery Period" means
such period of time after the first date of the public offering of the Shares as
in the opinion of counsel for the Underwriters a prospectus relating to the
Shares is required by law to be delivered in connection with sales of the Shares
by any Underwriter or dealer.
(c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement, the Prospectus or any document
incorporated by reference therein, during the Prospectus Delivery Period, the
Company will furnish to the Representatives and counsel for the Underwriters a
copy of the proposed amendment, supplement or document for review and will not
file any such proposed amendment, supplement or document to which the
Representatives reasonably object; provided, that the foregoing restriction
shall not preclude the Company from filing without the consent of the
Representatives any document required to be filed under the Exchange Act.
-12-
(d) Notice to the Representatives. During the Prospectus Delivery
Period, the Company will advise the Representatives promptly, and confirm such
advice in writing, (i) when any amendment to the Registration Statement has been
filed or becomes effective; (ii) when any supplement to the Prospectus or any
amendment to the Prospectus has been filed; (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or the receipt of any comments from the Commission
relating to the Registration Statement or any other request by the Commission
for any additional information; (iv) of the issuance by the Commission of any
order suspending the effectiveness of the Registration Statement or preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose; (v) of the
occurrence of any event within the Prospectus Delivery Period as a result of
which the Prospectus as then amended or supplemented would 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 existing when
the Prospectus is delivered to a purchaser, not misleading; and (vi) of the
receipt by the Company of any notice with respect to any suspension of the
qualification of the Shares for offer and sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and the Company
will use its commercial best efforts to prevent the issuance of any such order
suspending the effectiveness of the Registration Statement, preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification of the Shares and, if any such order is issued, will
obtain as soon as possible the withdrawal thereof.
(e) Ongoing Compliance. The Company will comply with the Securities Act
and the Exchange Act, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
Prospectus Delivery Period (i) any event shall occur or condition shall exist as
a result of which, in the judgment of the Company or in the reasonable opinion
of the Underwriters, the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances existing when the Prospectus is
delivered to a purchaser, not misleading or (ii) it is necessary to amend or
supplement the Prospectus to comply with law, the Company will immediately
notify the Underwriters thereof and forthwith prepare and, subject to paragraph
(c) above, file with the Commission and furnish, at the expense of the Company,
to the Underwriters and to such dealers as the Representatives may designate,
such amendments or supplements to the Prospectus as may be necessary so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances existing when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus will comply with law.
(f) Blue Sky Compliance. The Company will use its commercially
reasonable best efforts to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
reasonably request in writing and will continue such qualifications in effect so
long as required for distribution of the Shares; provided that the Company shall
not be required to (i) qualify as a foreign corporation or other entity or as a
dealer in securities in any such jurisdiction where it would not otherwise be
required to so qualify, (ii) file any general consent to service of process in
any such jurisdiction or (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject.
-13-
(g) Earning Statement. The Company will make generally available to its
security holders and the Representatives as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder covering a period of at
least twelve months beginning with the first fiscal quarter of the Company
occurring after the "effective date" (as defined in Rule 158) of the
Registration Statement.
(h) Clear Market. For a period of ninety (90) days after the date of
the public offering of the Shares, the Company will not (i) offer, pledge,
announce the intention to sell, 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 transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock 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, without the prior written
consent of the Representatives, other than (a) any options granted and any
shares of Common Stock of the Company issued upon the exercise of options
granted under employee stock option plans existing on the date of the
Prospectus, (b) shares of restricted Common Stock granted under employee stock
option plans of the Company existing on the date of the Prospectus, (c) shares
of Common Stock to be issued in any business combination to be consummated after
such 90-day period and (d) the Shares to be sold hereunder.
(i) Use of Proceeds. The Company will apply the net proceeds from the
sale of the Shares as described in the Prospectus under the heading "Use of
Proceeds".
(j) No Stabilization. The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(k) Exchange Listing. The Company will use its best commercial efforts
to list, subject to notice of issuance, the Shares on the New York Stock
Exchange (the "Exchange").
(l) Reports. For a period of three years after the date of this
Agreement, the Company will furnish to the Representatives, as soon as they are
available, copies of all reports or other communications (financial or other)
furnished to holders of the Shares, and copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange or automatic quotation system; provided, however, that the Company
shall not be required to furnish to the Representatives any such reports or
communications that have been filed with the Commission and are available on the
Commission's ▇▇▇▇▇ system.
(m) Lock-Up Agreements. The Company will use its reasonable best
efforts to cause each officer and director and certain shareholders of the
Company listed on Schedule 3 hereto to furnish to you, on or prior to the date
of this agreement, the "lock-up" agreements in accordance with Section 5(m)
hereof.
-14-
5. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on the Additional Closing Date, as the case may be as provided
herein is subject to the performance by the Company of its covenants and other
obligations hereunder and to the following additional conditions:
(a) Registration Compliance; No Stop Order. No order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose shall be pending before or threatened by the
Commission; the Prospectus shall have been timely filed with the Commission
under the Securities Act and in accordance with Section 4(a) hereof; and all
requests by the Commission for additional information shall have been complied
with to the reasonable satisfaction of the Representatives.
(b) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct on the date hereof and
on and as of the Closing Date or the Additional Closing Date, as the case may
be; and the Company shall have complied with all agreements and all conditions
on its part to be performed or satisfied hereunder at or prior to the Closing
Date or the Additional Closing Date, as the case may be; and the statements of
the Company and its officers made in any certificates delivered pursuant to this
Agreement shall be true and correct on and as of the Closing Date or the
Additional Closing Date, as the case may be.
(c) No Downgrade. Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date and the Additional Closing Date, (i)
there shall not have occurred any downgrading, nor shall any notice have been
given of any downgrading in the rating accorded the Company or any securities or
preferred stock of or guaranteed by the Company or any of its subsidiaries by
any "nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) under the Securities
Act and (ii) no such organization shall have publicly announced that it has
under surveillance or review, or has changed its outlook with respect to, its
rating of the Company or any securities or preferred stock of, or guaranteed by,
the Company or any of its subsidiaries (other than an announcement with positive
implications of a possible upgrading).
(d) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, no event or condition of a type described in Section
3(e) hereof shall have occurred or shall exist, which event or condition is not
described in the Prospectus (excluding any amendment or supplement thereto) and
the effect of which in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the offering, sale or delivery of
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, on the terms and in the manner contemplated by this Agreement and the
Prospectus.
(e) Officer's Certificate. The Representatives shall have received on
and as of the Closing Date or the Additional Closing Date, as the case may be, a
certificate of the chief financial officer or chief accounting officer of the
Company and one additional senior executive officer of the Company who is
satisfactory to the Representatives (i) confirming that such officers have
carefully reviewed the Registration Statement and the Prospectus and, to the
best knowledge of such officers, the representation set forth in Section 3(b)
hereof is true and correct,
-15-
(ii) confirming that the other representations and warranties of the Company in
this Agreement are true and correct and that the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date or the Additional Closing Date, as
the case may be, and (iii) to the effect set forth in paragraphs (a), (c) and
(d) above.
(f) Comfort Letters. On the date of this Agreement and on the Closing
Date or the Additional Closing Date, as the case may be, (i) Ernst & Young LLP
shall have furnished to the Representatives, at the request of the Company,
letters, dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type customarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus for the periods on
or after January 1, 2002; provided, that the letter delivered on the Closing
Date or the Additional Closing Date, as the case may be shall use a "cut-off"
date no more than three business days prior to such Closing Date or such
Additional Closing Date, as the case may be; and (ii) the Chief Financial
Officer or Controller of the Company shall have furnished letters to the
Representatives, dated the respective dates of delivery thereof and addressed to
the Underwriters, in form and substance reasonably satisfactory to the
Representatives, certifying as to the procedures and findings with respect to
the financial statements and certain financial information prior to January 1,
2002 contained or incorporated by reference in the Registration Statement and
the Prospectus.
(g) Opinion of Counsel for the Company. ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., counsel for
the Company, shall have furnished to the Representatives, at the request of the
Company, their written opinion, dated the Closing Date or the Additional Closing
Date, as the case may be, and addressed to the Underwriters, in form and
substance reasonably satisfactory to the Representatives, to the effect set
forth in Annex A hereto.
(h) Opinion of Counsel for the Underwriters. The Representatives shall
have received on and as of the Closing Date or the Additional Closing Date, as
the case may be, an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP, counsel for the Underwriters,
with respect to such matters as the Representatives may reasonably request, and
such counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters.
(i) Reserve Comfort Letters. The Engineer shall have delivered to the
Underwriter on the date hereof and the Closing Date or the Additional Closing
Date, as the case may be, a letter (the "Reserve Comfort Letter") in form and
substance reasonably satisfactory to the Underwriter and substantially in the
form attached hereto as Annex B, stating, as of the date of such letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified information with respect to the oil and gas reserves
is given or incorporated in the Prospectus as of the date not more than five
days prior to the date of such letter), the conclusions and findings of such
firm with respect to the oil and gas reserves of the Company.
(j) No Legal Impediment to Issuance. No action shall have been taken
and no statute, rule, regulation or order shall have been enacted, adopted or
issued by any federal, state or
-16-
foreign governmental or regulatory authority that would, as of the Closing Date
or the Additional Closing Date, as the case may be, prevent the issuance or sale
of the Shares; and no injunction or order of any federal, state or foreign court
shall have been issued that would, as of the Closing Date or the Additional
Closing Date, as the case may be, prevent the issuance or sale of the Shares.
(k) Good Standing. The Representatives shall have received on and as of
the Closing Date or the Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company and its subsidiaries
in their respective jurisdictions of organization and their good standing as
foreign entities in such other jurisdictions as the Representatives may
reasonably request, in each case (i) in writing or in any standard form of
telecommunication from the appropriate Governmental Authorities of such
jurisdictions and (ii) with respect to the good standing of the subsidiaries and
the good standing as foreign entities, as of a time not more than three (3)
business days prior to the Closing Date or the Additional Closing Date, as the
case may be.
(l) Exchange Listing. The Shares to be delivered on the Closing Date or
Additional Closing Date, as the case may be, shall have been approved for
listing on the Exchange, subject to official notice of issuance.
(m) Lock-up Agreements. The "lock-up" agreements, each in the form
acceptable to the Representatives, between the Representatives and certain
shareholders, officers and directors of the Company listed on Schedule 3,
delivered to the Representatives on or before the date hereof, shall be in full
force and effect on the date hereof and the Closing Date or Additional Closing
Date, as the case may be.
(n) Purchase Agreement. The Purchase Agreement by and among the Company
and the Significant Shareholders shall have been executed by the parties and be
in full force and effect on the date hereof.
(o) Additional Documents. On or prior to the Closing Date or the
Additional Closing Date, as the case may be, the Company and its subsidiaries
shall have furnished to the Representatives such further certificates and
documents as the Representatives may reasonably request.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. Indemnification and Contribution.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its affiliates, directors and
officers and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages and liabilities (including,
without limitation, legal fees and other expenses incurred in connection with
any suit, action or proceeding or any claim asserted and any out-of-pocket
expenses reasonably incurred by any Underwriter, its affiliates, directors and
officers or any person who controls such
-17-
Underwriter in connection with investigating or defending any such loss, claim,
damage or liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not such
Underwriter or person is a party to any action or proceeding, as such fees and
expenses are incurred), joint or several, that arise out of, or are based upon,
(1) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) or any Preliminary Prospectus (or any amendment or
supplement thereto), (2) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (3) any act or failure to act, or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action arising
out of or based upon matters covered by clause (1) or (2) above (provided, that
the Company shall not be liable under this clause (3) to the extent that it is
determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct); provided, however, that the Company
will not be liable in any such case for such losses, claims, damages or
liabilities that arise out of, or are based upon, any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in
paragraph (b) below provided, that with respect to any such untrue statement in
or omission from any Preliminary Prospectus, the indemnity agreement contained
in this paragraph (a) shall not inure to the benefit of any Underwriter to the
extent that any such loss, claim, damage or liability of or with respect to such
Underwriter results from the fact that both (y) to the extent required by
applicable law, a copy of the Prospectus was not sent or given to such person at
or prior to the written confirmation of the sale of such Shares to such person
and (z) the untrue statement in or omission from such Preliminary Prospectus was
corrected in the Prospectus (as then amended or supplemented) unless, in either
case, such failure to deliver the Prospectus was a result of non-compliance by
the Company with the provisions of Sections 4(a) through (e) hereof.
(b) Indemnification of the Company. Each Underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors, its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the indemnity set forth in
paragraph (a) above, but only with respect to any losses, claims, damages or
liabilities that arise out of, or are based upon, any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information relating to such Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in the Registration Statement and the Prospectus (or any amendment or
supplement thereto) or any Preliminary Prospectus, it being understood and
agreed upon that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the third
paragraph under the caption "Underwriting", and
-18-
the information contained in the ninth through eighteenth paragraphs under the
caption "Underwriting".
(c) Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought
or asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnification may
be sought (the "Indemnifying Person") in writing; provided that the failure to
notify the Indemnifying Person shall not relieve it from any liability that it
may have under paragraphs (a) or (b) except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided, further, that the failure to notify the
Indemnifying Person shall not relieve it from any liability that it may have to
an Indemnified Person otherwise than under paragraphs (a) or (b). If any such
proceeding shall be brought or asserted against an Indemnified Person and it
shall have notified the Indemnifying Person thereof, the Indemnifying Person
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others entitled to indemnification
pursuant to this Section 6 that the Indemnifying Person may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding, as incurred. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary; (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person; (iii) the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those
available to the Indemnifying Person; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood and agreed that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be paid or reimbursed as they are incurred. Any
such separate firm for any Underwriter, its affiliates, directors and officers
and any control persons of such Underwriter shall be designated in writing by
the Representatives and any such separate firm for the Company, its directors,
its officers who signed the Registration Statement and any control persons of
the Company shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested that an Indemnifying Person reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by this
paragraph, such Indemnifying Person shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by the Indemnifying Person of such
request, (ii) such Indemnifying Person shall have received notice of the terms
of such settlement at least 30 days prior to such settlement being entered into
and (iii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with
-19-
such request prior to the date of such settlement. No Indemnifying Person shall,
without the written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnification could have been sought
hereunder by such Indemnified Person, unless such settlement (x) includes an
unconditional release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (y) does not include any
statement as to or any admission of fault, culpability or a failure to act by or
on behalf of any Indemnified Person.
(d) Contribution. If the indemnification provided for in paragraphs (a)
and (b) above is unavailable to an Indemnified Person or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received
by the Company from the sale of the Shares and the total underwriting discounts
and commissions received by the Underwriters in connection therewith, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate offering price of the Shares. The relative fault of the Company on the
one hand and the Underwriters on the other 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 or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) Limitation on Liability. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 6, in no event
shall an Underwriter 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 such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to
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contribute pursuant to this Section 6 are several in proportion to their
respective purchase obligations hereunder and not joint.
(f) Non-Exclusive Remedies. The remedies provided for in this Section 6
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Person at law or in equity.
7. Effectiveness of Agreement. This Agreement shall become effective
upon the later of (i) the execution and delivery hereof by the parties hereto
and (ii) receipt by the Company and the Representatives of notice of the
effectiveness of the Registration Statement (or, if applicable, any
post-effective amendment thereto).
8. Termination. Notwithstanding anything contained herein, this
Agreement (or the obligations of the Underwriters with respect to the Option
Shares) may be terminated in the absolute discretion of the Representatives, by
notice to the Company, if after the execution and delivery of this Agreement and
prior to the Closing Date or, in the case of the Option Shares, prior to the
Additional Closing Date: (i) trading generally shall have been suspended or
materially limited on or by any of the New York Stock Exchange, the American
Stock Exchange, the Commission, the National Association of Securities Dealers,
Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade; (ii) trading of any securities issued or guaranteed by
the Company or its subsidiaries shall have been suspended on any exchange, by
the Commission or any other governmental authority or in any over-the-counter
market; (iii) a general moratorium on commercial banking activities shall have
been declared by federal or New York State authorities; (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in economic or
political conditions, including any action by any governmental body or agency in
respect of its monetary or fiscal affairs, or any calamity or crisis, either
within or outside the United States, that, in the judgment of the
Representatives, is material and adverse and makes it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the terms
and in the manner contemplated by this Agreement and the Prospectus; (v) since
the dates as of which information is given in the Prospectus, any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, business, earnings, assets, rights,
management, properties, condition (financial or otherwise) stockholders' equity,
results of operations or prospects of the Company and its subsidiaries taken as
a whole, whether or not arising in the ordinary course of business, has
occurred; (vi) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or other governmental authority
which in the opinion of the Representatives materially and adversely affects or
may materially and adversely affect the business or operations of the Company;
or (vii) any downgrading, or placement on any watch list for possible
downgrading, in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Exchange Act).
9. Defaulting Underwriter. (a) If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter defaults on its
obligation to purchase the Shares that it has agreed to purchase hereunder on
such date, the non-defaulting Underwriters may in their discretion arrange for
the purchase of such Shares by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any
-21-
Underwriter, the non-defaulting Underwriters do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of 36 hours
within which to procure other persons satisfactory to the non-defaulting
Underwriters to purchase such Shares on such terms. If other persons become
obligated or agree to purchase the Shares of a defaulting Underwriter, either
the non-defaulting Underwriters or the Company may postpone the Closing Date or
the Additional Closing Date, as the case may be, for up to five full business
days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the Underwriters may be necessary in the Registration
Statement and the Prospectus or in any other document or arrangement, and the
Company agrees to promptly prepare any amendment or supplement to the
Registration Statement and the Prospectus that effects any such changes. As used
in this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context otherwise requires, any person not listed in
Schedule 1 hereto that, pursuant to this Section 9, purchases Shares that a
defaulting Underwriter agreed but failed to purchase.
(a) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, does not exceed one-eleventh of the aggregate
number of Shares to be purchased on such date, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares that such Underwriter agreed to purchase hereunder on such date plus such
Underwriter's pro rata share (based on the number of Shares that such
Underwriter agreed to purchase on such date) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount
of Shares to be purchased on such date, or if the Company shall not exercise the
right described in paragraph (b) above, then this Agreement or, with respect to
any Additional Closing Date, the obligation of the Underwriters to purchase
Shares on the Additional Closing Date, as the case may be, shall terminate
without liability on the part of the non-defaulting Underwriters. Any
termination of this Agreement pursuant to this Section 9 shall be without
liability on the part of the Company, except that the Company will continue to
be liable for the payment of expenses as set forth in Section 10 hereof and
except that the provisions of Section 6 hereof shall not terminate and shall
remain in effect.
(c) Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company or any non-defaulting Underwriter for
damages caused by its default.
10. Payment of Expenses. (a) Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay or cause to be paid all costs and expenses incident to the
performance of the Company's obligations hereunder, including without
limitation, (i) the costs incident to the authorization, registration, issuance,
sale, preparation and delivery of the Shares and any taxes payable in that
connection; (ii) the costs incident to the preparation, printing and filing
under the Securities Act of the
-22-
Registration Statement, the Preliminary Prospectus and the Prospectus
(including, in each case, all exhibits, amendments and supplements thereto) and
the distribution (including mailing and shipping) thereof; (iii) the costs of
word processing, reproducing and distributing the Transaction Documents; (iv)
the fees and expenses of the Company's counsel and independent accountants; (v)
the fees and expenses incurred in connection with the registration or
qualification and determination of eligibility for investment of the Shares
under the laws of such jurisdictions as the Representatives may designate and
the preparation, printing and distribution of a Blue Sky Memorandum (including
the related fees and expenses of counsel for the Underwriters); (vi) the cost of
preparing stock certificates; (vii) the costs and charges of any transfer agent
and any registrar; (viii) all application fees incurred in connection with any
filing with, and clearance of the offering by, the National Association of
Securities Dealers, Inc.; (ix) all expenses incurred by the Company in
connection with any "road show" presentation to potential investors; and (x) all
expenses and application fees related to the listing of the Shares on the
Exchange.
(a) If (i) this Agreement is terminated pursuant to Sections 8(ii) or
(vii), (ii) the Company for any reason fails or refuses to (x) tender the Shares
for delivery to the Underwriters or (y) comply with the terms or fulfill any of
the conditions of this Agreement, or (z) if for any reason the Company or its
representatives shall be unable to perform its obligations under this Agreement,
the Company agrees to reimburse the Underwriters for all out-of-pocket costs and
expenses (including the fees and expenses of their counsel) reasonably incurred
by the Underwriters in connection with this Agreement and the offering
contemplated hereby.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and any controlling persons
referred to in Section 6 hereof. Nothing in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.
12. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement or any certificate delivered pursuant hereto shall
survive the delivery of and payment for the Shares and shall remain in full
force and effect, regardless of (a) any termination of this Agreement and (b)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company.
13. Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City or the New York Stock Exchange is permitted or required to be
closed for trading; and (c) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act.
14. Miscellaneous. (a) Authority of the Representatives. Any action by
the Underwriters hereunder may be taken by ▇.▇. ▇▇▇▇▇▇ Securities Inc. and
Deutsche Bank
-23-
Securities Inc. on behalf of the Underwriters, and any such action taken by ▇.▇.
▇▇▇▇▇▇ Securities Inc. and Deutsche Bank Securities Inc. shall be binding upon
the Underwriters.
(a) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Underwriters
shall be given to the Representatives c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (fax: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and Deutsche Bank Securities Inc., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (fax: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇ with a copy to: ▇▇▇▇▇▇▇
▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (fax: (713)
▇▇▇-▇▇▇▇), Attention: G. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇. Notices to the Company shall be given
to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (fax: (817)
▇▇▇-▇▇▇▇); Attention: I. ▇▇▇ ▇▇▇▇▇▇▇, with a copy to: ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (fax: (▇▇▇) ▇▇▇-▇▇▇▇),
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(c) Counterparts. This Agreement may be signed in counterparts (which
may include counterparts delivered by any standard form of telecommunication),
each of which shall be an original and all of which together shall constitute
one and the same instrument.
(d) Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
(e) Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature Page to Follow.]
-24-
If the foregoing is in accordance with your understanding, please
indicate your acceptance of this Agreement by signing in the space provided
below.
Very truly yours,
ENCORE ACQUISITION COMPANY
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
President
Accepted: November 13, 2003
For itself and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Authorized Signatory
DEUTSCHE BANK SECURITIES INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Authorized Signatory
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Authorized Signatory
SCHEDULE 1
UNDERWRITERS
Underwriter Number of Shares
------------------------------- ----------------
Deutsche Bank Securities Inc. 2,400,001
------------------------------- ----------------
▇.▇. ▇▇▇▇▇▇ Securities Inc. 2,400,001
------------------------------- ----------------
▇▇▇▇▇▇▇, Sachs & Co. 1,066,666
------------------------------- ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. 1,066,666
------------------------------- ----------------
▇▇▇▇▇▇▇ & Company International 1,066,666
------------------------------- ----------------
TOTAL: 8,000,000
=============================== ================
Schedule 1 - Page 1
SCHEDULE 2
SUBSIDIARIES
Subsidiary Jurisdiction of Formation
------------------------------- -------------------------
Encore Operating, L.P. Texas
------------------------------- -------------------------
EAP Operating, Inc. Delaware
------------------------------- -------------------------
EAP Properties, Inc. Delaware
------------------------------- -------------------------
EAP Energy, Inc. Delaware
------------------------------- -------------------------
EAP Energy Services, L.P. Texas
------------------------------- -------------------------
Encore Operating Louisiana, LLC Delaware
=============================== =========================
Schedule 2 - Page 1
SCHEDULE 3
LOCK-UPS
Warburg, ▇▇▇▇▇▇ Equity Partners L.P.
J.P. ▇▇▇▇▇▇ Partners (SBIC), LLC
I. ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, Jr.
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ III
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
Schedule 3 - Page 1
ANNEX A
FORM OF OPINION OF COUNSEL FOR THE COMPANY
(a) The Registration Statement was declared effective under the
Securities Act on August 25, 2003; the Prospectus Supplement was filed with the
Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act
specified in such opinion on the date specified therein; and no order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or, to the knowledge of such counsel,
threatened by the Commission.
(b) The Registration Statement and the Prospectus (other than the
financial statements, related schedules and oil and gas reserve data therein, as
to which such counsel need express no opinion) complied as of the effective date
thereof and as of the effective date of any amendment thereto, complied as of
the date of the Underwriting Agreement and comply as to form, in each case in
all material respects with the requirements of the Securities Act.
(c) The Company and each of its subsidiaries have been duly organized
and are validly existing and in good standing under the laws of their respective
jurisdictions of organization. The Company and its subsidiaries have all
corporate and partnership power and authority necessary to own or hold their
respective properties and to conduct the businesses as described in the
Prospectus.
(d) To such counsel's knowledge, as of __________, 2003, the Company
has____ shares of Common Stock issued and outstanding; all the outstanding
shares of capital stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable; the capital stock of the Company
and the Shares to be issued hereunder conform in all material respects to the
description thereof contained in the Registration Statement and the Prospectus;
and all the outstanding shares of capital stock or other equity interests of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned by the Company, free and clear
of all liens, encumbrances, equities or claims, except as otherwise described in
the Prospectus.
(e) The Company has the corporate power and authority to execute and
deliver each of the Transaction Documents and to incur and perform all of its
obligations thereunder (including the use of proceeds from the sale of the
Shares as described in the Prospectus); and all action required to be taken for
the due and proper authorization, execution and delivery of each of the
Transaction Documents and the consummation of the transactions contemplated
thereby (including the use of proceeds from the sale of the Shares as described
in the Prospectus) have been duly and validly taken.
(f) The Underwriting Agreement has been duly authorized, and validly
executed and delivered, by the Company.
(g) The Purchase Agreement has been duly authorized, and validly
executed and delivered, by the Company and constitutes a valid and legally
binding agreement of the Company enforceable against the Company in accordance
with its terms, except as enforceability
Annex A - Page 1
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by equitable principles relating to
enforceability.
(h) The description of each Transaction Document contained in the
Registration Statement and Prospectus conforms in all material respects with the
terms of each Transaction Document.
(i) The Shares to be issued and sold by the Company to the Underwriters
hereunder have been duly authorized, and when issued and delivered by the
Company and paid for by the Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable and will not be
subject to any preemptive or similar rights.
(j) The execution, delivery and performance by the Company of each of
the Transaction Documents, the issuance and sale of the Shares being delivered
on the Closing Date or the Additional Closing Date, as the case may be, and the
consummation of the transactions contemplated by the Transaction Documents
(including the use of proceeds from the sale of the Shares as described in the
Prospectus) will not (i) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, any agreement set
forth on Exhibit A to such counsel's opinion (to be limited to material
contracts included in the Company's Form 10-K for the fiscal year ended December
31, 2002 and any filings since such Form 10-K made by the Company with the SEC,
(ii) result in any violation of the provisions of the charter or by-laws or
similar organizational documents of the Company or any of its subsidiaries or
(iii) result in the violation of any law or statute or any judgment, order or
regulation of any court or governmental or regulatory authority except, in the
case of clauses (i) and (iii) above, for such conflicts, breaches or violations
that would not, individually or in the aggregate, have a Material Adverse
Effect.
(k) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental or regulatory authority of
the United States of America, the State of Delaware (solely with respect to the
Delaware General Corporation Law) or the State of Texas is required for the
execution, delivery and performance by the Company of each of the Transaction
Documents, the issuance and sale of the Shares being delivered on the Closing
Date or the Additional Closing Date, as the case may be, and the consummation of
the transactions contemplated by the Transaction Documents, except as have been
obtained under the Securities Act and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under applicable
state securities laws in connection with the purchase and distribution of the
Shares by the Underwriters.
(l) To the knowledge of such counsel, except as described in the
Prospectus, there are no legal, governmental or regulatory investigations,
actions, suits or proceedings pending to which the Company or any of its
subsidiaries is or may be a party or to which any property of the Company or any
of its subsidiaries is or may be the subject which, individually or in the
aggregate, if determined adversely to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect; and to the
knowledge of such counsel, no such investigations, actions, suits or proceedings
are threatened or contemplated by any governmental or regulatory authority or
threatened by others.
Annex A - Page 2
(m) The statements in the Prospectus under the heading "Description of
Capital Stock" and in the Registration Statement in Item 15, insofar as they
purport to describe the provisions of the laws and documents referred to
therein, fairly summarize in all material respects the laws and documents
described therein.
(n) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" within the meaning of the
Investment Company Act.
(o) The documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to the Closing
Date or the Additional Closing Date, as the case may be, (other than the
financial statements, related schedules and oil and gas reserve data therein, as
to which such counsel need express no opinion), when they became effective or
were filed with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission thereunder.
(p) To such counsel's knowledge, except as have been waived, there are
no persons with registration or similar rights to have any securities of the
Company registered pursuant to the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and representatives of the Company and with
representatives of its independent accountants and counsel at which the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel assume no responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus (except as expressly provided above), no facts have
come to the attention of such counsel to lead such counsel to believe that the
Registration Statement (other than (i) the financial statements or schedules
included or incorporated by reference therein, including the notes thereto and
the auditors' reports thereon, (ii) the estimated oil and natural gas reserve
evaluations and related calculations of ▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd., independent
petroleum engineers, (iii) the other information of a financial or reserve
nature included or incorporated by reference therein, and (iv) the exhibits
thereto, as to which such counsel need not comment), at the time it became
effective contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (other than (i) the
financial statements or schedules included or incorporated by reference therein,
including the notes thereto and the auditors' reports thereon, (ii) the
estimated oil and natural gas reserve evaluations and related calculations of
▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd., independent petroleum engineers, (iii) the other
information of a financial or reserve nature included or incorporated by
reference therein, and (iv) the exhibits thereto, as to which such counsel need
not comment) as of its date or as of the Closing Date contained or contains any
untrue statement of a material fact or omitted 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.
In rendering such opinion, such counsel may rely as to matters of fact
on certificates of responsible officers of the Company and public officials that
are furnished to the Underwriters.
Annex A - Page 3
The opinion of ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. described above shall be rendered to
the Underwriters at the request of the Company and shall so state therein.
Annex A - Page 4
ANNEX B
FORM OF RESERVE COMFORT LETTER
November [13], 2003
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Deutsche Bank Securities Inc.
as Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
c/o Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Encore Acquisition Company
Dear Ladies and Gentlemen:
This letter is written at the request of Encore Acquisition Company, a
Delaware corporation (the "Company"), to you pursuant to Section 5(i) of that
certain Underwriting Agreement dated of even date herewith (the "Underwriting
Agreement") by and among the Company and you in connection with a public
offering (the "Offering") of shares of common stock of the Company. Reference is
made to the Registration Statement on Form S-3 (No. 333-106943) filed by the
Company with the Securities and Exchange Commission, as amended to the date
hereof (the "Registration Statement"), the related Preliminary Prospectus dated
November [10], 2003 (the "Preliminary Prospectus") and the final Prospectus
dated November [13], 2003 (the "Prospectus") attached hereto as Annex A, and our
Reserve Report dated as of _________________, in respect of the reserves of the
Company as of December 31, 2002, a copy of which is attached hereto as Annex B
(the "Reserve Report"), which formed the basis for certain reserve information
included or incorporated by reference into the Registration Statement and the
Prospectus.
In connection with the Offering, we hereby inform you of the following:
1. We are independent petroleum engineers with respect to the Company
and do not own any interest in the oil and gas properties covered by the Reserve
Report. In connection with the Registration Statement and the Reserve Report, we
are not employed on a contingent basis. Neither the employment nor the
compensation received by ▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd. was contingent on the values
assigned to the properties covered by our Reserve Report. At the time of
preparation of the Reserve Report, we did not have, and at the date hereof we do
not have, any
Annex B - Page 1
financial interest in the Company. At such time we were not, and at the date
hereof, we are not connected with the Company as a promoter, underwriter,
director, officer or employee.
2. The Reserve Report to the Company attached hereto as Annex B is a
true, correct and complete copy of the Reserve Report as provided to the Company
on _________________. We are not aware of any additional information that we
believe is necessary to be disclosed in the Reserve Report in order to prevent
the information set forth therein from being misleading as of the date of the
reserve information therein (December 31, 2002). Further information regarding
the classification and definitions of the reserves shown in the Reserve Report
is included in such letter.
3. As of the date hereof and after our review of the Company's
properties to which proved reserves are attributable, nothing has come to our
attention which would cause us to revise downward by any material amount any
statement made or opinion expressed by us in the Reserve Report, with respect to
our estimates of the oil and gas reserves and future net revenues attributable
to the interest of the Company in such properties.
4. We hereby consent to the use of our name in the Prospectus and to
the incorporation by reference of our estimates of proved reserves and future
net cash flows contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
Very truly yours,
▇▇▇▇▇▇ AND ▇▇▇▇▇, LTD.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Annex B - Page 2
[FORM OF RESERVE BRING-DOWN COMFORT LETTER]
November [18], 2003
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Deutsche Bank Securities Inc.
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
c/o Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter, which is written at the request of Encore Acquisition
Company, a Delaware corporation (the "Company"), is being delivered to you
pursuant to Section 5(i) of that certain Underwriting Agreement dated November
[13], 2003 (the "Underwriting Agreement") by and among the Company and you,
relating to the offering (the "Offering") of shares of common stock of the
Company covered by a Registration Statement on Form S-3 (No. 333-106943), as
amended, filed by the Company under the Securities Act of 1933, as amended.
In connection with this offering, we hereby confirm that the
information and representations set forth in our letter dated November [13],
2003 remain the same as if such letter was required to be dated and delivered on
the date hereof.
Very truly yours,
▇▇▇▇▇▇ and ▇▇▇▇▇, Ltd.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Annex B - Page 3