Execution Copy
================================================================================
MIDCOAST ENERGY RESOURCES, INC.
(A NEVADA CORPORATION)
3,460,000 SHARES OF COMMON STOCK
--------------------------------------
PURCHASE AGREEMENT
--------------------------------------
Dated: May 24, 1999
================================================================================
TABLE OF CONTENTS
PAGE
SECTION 1. Representations and Warranties................................... 5
(a) Representations and Warranties by the Company.................... 5
(i) Compliance with Registration Requirements............... 6
(ii) Incorporated Documents.................................. 6
(iii) Independent Accountants................................. 7
(iv) Financial Statements.................................... 7
(v) No Material Adverse Change in Business.................. 7
(vi) Good Standing of the Company............................ 8
(vii) Good Standing of Subsidiaries........................... 8
(viii) Capitalization.......................................... 8
(ix) Authorization of this Agreement......................... 9
(x) Authorization and Description of the Securities......... 9
(xi) Absence of Defaults and Conflicts....................... 9
(xii) Absence of Labor Dispute................................10
(xiii) Absence of Proceedings..................................10
(xiv) Accuracy of Exhibits....................................10
(xv) Absence of Further Requirements........................10
(xvi) Possession of Intellectual Property.....................10
(xvii) Possession of Licenses and Permits......................11
(xviii) Title to Property.......................................11
(xix) Environmental Laws......................................11
(xx) Public Utility Holding Company Act......................12
(xxi) Commodity Exchange Act..................................12
(xxii) Investment Company Act..................................12
(xxiii) Registration Rights.....................................12
(xxiv) Internal Accounting Controls............................13
(xxv) Insurance...............................................13
(xxvi) No Stabilization........................................13
(xxvii) Derivatives Business....................................13
(xxviii) Unlawful Contributions..................................13
(xxix) Tax Returns.............................................13
(xxx) Distribution of Offering Material.......................14
(b) Representations and Warranties by the Selling Shareholders.......14
(i) Accurate Disclosure.....................................14
(ii) Authorization of Agreements.............................14
(iii) Good and Valid Title....................................15
(iv) Due Execution of Power of Attorney and
Custody Agreement.....................................15
(v) Absence of Manipulation.................................15
(vi) Absence of Further Requirements.........................15
(vii) Restriction on Sale of Securities.......................15
(viii) Certificates Suitable for Transfer......................16
i
(ix) No Association with NASD................................16
(c) Officer's Certificates...........................................17
SECTION 2. Sale and Delivery to Underwriters; Closing.......................17
(a) Initial Securities...............................................17
(b) Option Securities................................................17
(c) Payment..........................................................18
(d) Denominations; Registration......................................18
SECTION 3. Covenants of the Company.........................................18
(a) Compliance with Securities Regulations and Commission Requests...18
(b) Filing of Amendments.............................................19
(c) Delivery of Registration Statements..............................19
(d) Delivery of Prospectuses.........................................19
(e) Continued Compliance with Securities Laws........................20
(f) Blue Sky Qualifications..........................................20
(g) Earnings Statement...............................................20
(h) Use of Proceeds..................................................20
(i) Restriction on Sale of Securities................................20
(j) Reporting Requirements...........................................21
SECTION 4. Payment of Expenses..............................................21
(a) Expenses.........................................................21
(b) Expenses of the Selling Shareholders.............................22
(c) Termination of Agreement.........................................22
(d) Allocation of Agreement..........................................22
SECTION 5. Conditions of Underwriters' Obligations..........................22
(a) Effectiveness of Registration Statement..........................22
(b) Opinions of Counsel for Company and the Selling Shareholders.....22
(c) Opinion of Counsel for Underwriters..............................23
(d) Officers' Certificate............................................23
(e) Certificate of Selling Shareholders..............................23
(f) Accountant's Comfort Letter......................................23
(g) Bring-Down Comfort Letter........................................24
(h) Approval of Listing..............................................24
(i) Lock-up Agreements...............................................24
(j) Conditions to Purchase of Option Securities......................24
(i) Officers' Certificate....................................24
(ii) Opinions of Counsel for Company and the
Selling Shareholders.....................................24
(iii) Opinion of Counsel for Underwriters......................24
(iv) Bring-Down Comfort Letter................................24
(k) Additional Documents.............................................25
(l) Termination of this Agreement....................................25
SECTION 6. Indemnification..................................................25
(a) Indemnification of Underwriters..................................25
ii
(b) Indemnification of Company, Directors and Officers and
Selling Shareholders...........................................26
(c) Actions against Parties; Notification............................27
(d) Settlement without Consent if Failure to Reimburse...............28
(e) Other Agreements with Respect to Indemnification.................28
SECTION 7. Contribution.....................................................28
SECTION 8. Representations, Warranties and Agreements to Survive Delivery...30
SECTION 9. Termination of Agreement.........................................30
(a) Termination; General.............................................30
(b) Liabilities......................................................30
SECTION 10. Default by One or More of the Underwriters.......................30
SECTION 11. Default by One or More of the Selling Shareholders or
the Company....................................................31
SECTION 12. Notices..........................................................32
SECTION 13. Parties..........................................................32
SECTION 14. Governing Law....................................................32
SECTION 15. Effect of Headings...............................................33
iii
MIDCOAST ENERGY RESOURCES, INC.
(a Nevada corporation)
3,460,000 Shares of Common Stock
(Par Value $.01 per Share)
PURCHASE AGREEMENT
May 24, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
CIBC WORLD MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
c/o Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Midcoast Energy Resources, Inc., a Nevada corporation (the "Company"),
and the persons listed in Schedule B hereto (the "Selling Shareholders"),
confirm their respective agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇"), CIBC World Markets Corp.,
Prudential Securities Incorporated and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇, CIBC World Markets Corp., and Prudential
Securities Incorporated are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the sale by the Company and the Selling
Shareholders, acting severally and not jointly, and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.01 per share, of the Company ("Common
Stock") set forth in Schedules A and B hereto and (ii) the grant by the Company
to the Underwriters, acting severally and not jointly, of the option described
in Section 2(b) hereof to purchase all or any part of 519,000 additional shares
of Common Stock to cover over-allotments, if any. The aforesaid 3,460,000
shares of Common Stock (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the 519,000 shares of Common Stock subject
to the option described in Section 2(b) hereof (the "Option Securities") are
hereinafter called, collectively, the "Securities."
The Company and the Selling Shareholders understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
4
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-70371) for the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), and the offering thereof from time to time in accordance with Rule
415 of the rules and regulations of the Commission under the 1933 Act (the "1933
Act Regulations"). Such registration statement has been declared effective by
the Commission, the Company has filed such post-effective amendments thereto as
may be required, and each such post-effective amendment has been declared
effective by the Commission. Such registration statement (as so amended, if
applicable), including the information, if any, deemed to be a part thereof
pursuant to Rule 430A(b) of the 1933 Act Regulations (the"Rule 430A
Information") are referred to herein as the "Registration Statement"; and the
final prospectus and the final prospectus supplement relating to the offering of
the Securities, in the forms first furnished to the Underwriters by the Company
for use in connection with the offering of the Securities, are collectively
referred to herein as the "Prospectus"; provided, however, that all references
to the "Registration Statement" and the "Prospectus" shall also be deemed to
include all documents incorporated therein by reference pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). A "preliminary
prospectus" shall be deemed to refer to (i) any prospectus used before the
Registration Statement became effective and (ii) any prospectus that omitted, as
applicable, the Rule 430A Information or other information to be included upon
pricing in a form of prospectus filed with the Commission pursuant to Rule
424(b) of the 1933 Act Regulations and was used after such effectiveness and
prior to the initial delivery of the Prospectus to the Underwriters by the
Company. For purposes of this Agreement, all references to the Registration
Statement, Prospectus or preliminary prospectus or to any amendment or
supplement to any of the foregoing shall be deemed to include any copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules and
other information which are "contained," "included" or "stated" (or other
references of like import) in the Registration Statement, Prospectus or
preliminary prospectus shall be deemed to mean and include all such financial
statements and schedules and other information which are incorporated by
reference in the Registration Statement, Prospectus or preliminary prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement, Prospectus or preliminary prospectus
shall be deemed to include the filing of any document under the 1934 Act which
is incorporated by reference in the Registration Statement, prospectus or
preliminary prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter, as of the date hereof and as of the
Closing Time referred to in Section 2(c) hereof, and as of the each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Underwriter as follows:
5
(i) Compliance with Registration Requirements. The Company meets
the requirements for use of Form S-3 under the 1933 Act. The Registration
Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted
or are pending or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement and any post-
effective amendments thereto (including the filing of the Company's most
recent Annual Report on Form 10-K with the Commission (the "Annual Report
on Form 10-K")) became effective and at the Closing Time (as hereinafter
defined) (and, if any Option Securities are purchased, at the Date of
Delivery (as hereinafter defined)), the Registration Statement and any
amendments thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. At the date of the Prospectus and
at the Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), neither the Prospectus nor any amendments and
supplements thereto included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing,
the representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through ▇▇▇▇▇▇▇
▇▇▇▇▇ or by any Selling Shareholder expressly for use in the Registration
Statement or the Prospectus.
Each preliminary prospectus and prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations, and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with the offering of Securities will, at the time of such
delivery, be identical to any electronically transmitted copies thereof
filed with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted
by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed
to be incorporated by reference in the Registration Statement and the
Prospectus, when they became effective or at the time they were or
hereafter are filed with the Commission, complied with and will comply in
all material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 Act Regulations")
and, when read together with the other information in the Prospectus, at
the date of the Prospectus and at the Closing Time, did not and will not
contain an untrue statement of
6
a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and any supporting schedules thereto included in the
Registration Statement and the Prospectus are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The historical consolidated financial
statements of the Company included in the Registration Statement and the
Prospectus, together with the related schedules and notes, present fairly
in all material respects the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statements of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified except, in the case of
unaudited consolidated financial statements, for normal year end audit
adjustments that have not been made and footnote disclosure necessary for
GAAP (as defined below) purposes that may not have been presented. The
historical financial statements of each of the AlaTenn Subsidiaries and the
El Paso Field Services Company - Anadarko Gas Gathering System included in
the Registration Statement and the Prospectus pursuant to Rule 3-05 of
Regulation S-X promulgated by the Commission ("Regulation S-X"), together
with the related notes, present fairly in all material respects the
financial position of the AlaTenn Subsidiaries (on a combined basis) and
the El Paso Field Services Company - Anadarko Gas Gathering System at the
respective dates indicated and for the periods specified except, in the
case of unaudited consolidated financial statements, for normal year end
audit adjustments that have not been made and footnote disclosure necessary
for GAAP (as defined below) purposes that may not have been presented. Such
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The schedules supporting the historical
financial statements of the Company and its consolidated subsidiaries, if
any, included in the Registration Statement and the Prospectus present
fairly and in all material respects in accordance with GAAP the information
required to be stated therein. The selected financial data and the summary
financial information relating to the historical financial statements of
the Company and its consolidated subsidiaries included in the Prospectus
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included in
the Registration Statement.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the
7
ordinary course of business, which are material with respect to the Company
and its subsidiaries considered as one enterprise, and (C) except for
regular quarterly dividends on the Common Stock in amounts per share that
are disclosed in the Prospectus, there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its
capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Nevada and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under, or as contemplated under, this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in good
standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant subsidiary"
of the Company (as such term is defined in Rule 1-02 of Regulation S-X
promulgated under the ▇▇▇▇ ▇▇▇) is listed in Exhibit D of this Agreement
(each, a "Subsidiary" and, collectively, the "Subsidiaries") and has been
duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not result in
a Material Adverse Effect. Except as otherwise stated in the Registration
Statement and the Prospectus, all of the issued and outstanding capital
stock of each Subsidiary has been duly authorized and is validly issued,
fully paid and non-assessable and, except for directors' qualifying shares,
is owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. None of the outstanding shares of capital stock of any Subsidiary
was issued in violation of preemptive or other similar rights of any
security holder of such Subsidiary. The only other subsidiaries of the
Company are certain other subsidiaries which, if considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or options
referred to in the Prospectus and except for stock repurchases in the
amount of not more than 27,000 shares). The shares of issued and
outstanding capital stock, including the Securities to be purchased by the
8
Underwriters from the Selling Shareholders, have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock, including the Securities to be
purchased by the Underwriters from the Selling Shareholders, was issued in
violation of the preemptive or other similar rights of any securityholder
of the Company.
(ix) Authorization of this Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization and Description of the Securities. The
Securities to be purchased by the Underwriters from the Company have been
duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable; the Common Stock conforms
to all statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal liability
by reason of being such a holder; and the issuance of the Securities is not
subject to the preemptive or other similar rights of any securityholder of
the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any subsidiary is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment
9
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any Subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder;
the aggregate of all pending legal or governmental proceedings to which the
Company or any subsidiary is a party or of which any of their respective
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency,
domestic or foreign, is necessary or required for the due authorization,
execution and delivery by the Company of this Agreement or for the
performance by the Company of the transactions contemplated under the
Prospectus, this Agreement, except such as have been already made,
obtained or rendered, as applicable or as may be required under the 1933
Act, or the 1933 Act Regulations and foreign or state securities or blue
sky laws.
(xvi) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual
10
Property") necessary to carry on the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice or
is otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xvii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them except for such
Governmental Licenses which the failure to possess would not, singly 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 so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and its subsidiaries have
good and indefeasible title to all real property owned by the Company and
its subsidiaries and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such as
(a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectus, are in full force and effect,
and neither the Company nor any subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the rights of
the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xix) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect,
11
(A) neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release
or threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, except where the failure to have such permits,
authorizations or approvals or to be in compliance therewith would not,
singly or in the aggregate, have a Material Adverse Effect, (C) there are
no pending or to the Company's knowledge, threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) to the Company's knowledge, there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xx) Public Utility Holding Company Act. The Company is not
subject to, or is exempt from, regulation as a "holding company" a
"subsidiary company" of a "holding company", an "affiliate" of a "holding
company" or an "affiliate" of a "subsidiary company" of a "holding
company", in each case as such terms are defined in the Public Utility
Holding Company Act, as amended.
(xxi) Commodity Exchange Act. The Securities upon issuance, will
be excluded or exempted under, or beyond the purview of, the Commodity
Exchange Act, as amended (the "Commodity Exchange Act"), and the rules and
regulations of the Commodity Futures Trading Commission under the Commodity
Exchange Act the "Commodity Exchange Act Regulations").
(xxii) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxiii) Registration Rights. Except as disclosed in the Prospectus,
there are no persons with registration rights or other similar rights to
have any securities registered
12
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(xxiv) Internal Accounting Controls. The Company and its
subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization and
(D) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(xxv) Insurance. The Company and its subsidiaries carry or are
entitled to the benefits of insurance, with financially sound and reputable
insurers, in such amounts and covering such risks as is generally
maintained by companies of established repute engaged in the same or
similar business, and all such insurance is in full force and effect.
(xxvi) No Stabilization. Neither the Company nor, to the Company's
knowledge, any of its officers, directors or controlling persons has taken,
directly or indirectly, any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(xxvii) Derivatives Business. The internal controls and policies
used in connection with the natural gas derivatives business of the Company
and each subsidiary are reasonable and to the best knowledge of the
Company, adequate in light of the business conducted.
(xxviii) Unlawful Contributions. Neither the Company nor any of
its subsidiaries, nor, to the Company's knowledge, any director, officer,
agent, employee or other person, acting on behalf of the Company or any of
its subsidiaries, has used any corporate funds during the last five years
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any illegal bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(xxix) Tax Returns. The Company has filed all foreign, federal,
state and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a Material Adverse Effect on the Company and its
subsidiaries) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as
13
described in or contemplated by the Prospectus (or, if the Prospectus is
not in existence, the most recent preliminary prospectus).
(xxx) Distribution of Offering Material. The Company has not
distributed and, prior to the later of (i) the Closing Date and (ii) the
completion of the distribution of the Securities, will not distribute any
offering material in connection with the offering and sale of the
Securities other than the Registration Statement or any amendment thereto,
any preliminary prospectus or the Prospectus or any amendment or supplement
thereto, or other materials, if any, permitted by the Act.
(b) Representations and Warranties by the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to each Underwriter as of
the date hereof and as of the Closing Time, and agrees with each Underwriter, as
follows:
(i) Accurate Disclosure. Such Selling Shareholder has reviewed
and is familiar with the Registration Statement and the Prospectus and, to
the knowledge of such Selling Shareholder, neither the Prospectus nor any
amendments or supplements thereto include any untrue statement of a
material fact relating to such Selling Shareholder or omits to state a
material fact relating to such Selling Shareholder necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; such Selling Shareholder is not prompted to
sell the Securities to be sold by such Selling Shareholder hereunder by any
information concerning the Company or any subsidiary of the Company which
is not set forth in the Prospectus.
(ii) Authorization of Agreements. Such Selling Shareholder has the
full right, power and authority to enter into this Agreement and a Power of
Attorney and Custody Agreement (the "Power of Attorney and Custody
Agreement") and to sell, transfer and deliver the Securities to be sold by
such Selling Shareholder hereunder. The execution and delivery of this
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities to be sold by such Selling Shareholder and the
consummation of the transactions contemplated herein and compliance by such
Selling Shareholder with his obligations hereunder have been duly
authorized by such Selling Shareholder and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, in each case, in any
material respect, or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities to be sold by such Selling
Shareholder or any property or assets of such Selling Shareholder pursuant
to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other agreement or instrument to which
such Selling Shareholder is a party or by which such Selling Shareholder
may be bound, or to which any of the property or assets of such Selling
Shareholder is subject, nor will such action result in any material
violation of the provisions of any applicable treaty, law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Shareholder or any of his properties.
14
(iii) Good and Valid Title. Such Selling Shareholder has and will
at the Closing Time have good and valid title to the Securities to be sold
by such Selling Shareholder hereunder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of
any kind, other than pursuant to this Agreement; and upon delivery of such
Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any adverse
claim, each of the Underwriters will receive good and marketable title to
the Securities purchased by it from such Selling Shareholder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement.
Such Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with ▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as attorneys-
in-fact (the "Attorneys-in-Fact") and as custodians (the "Custodians");
each Custodian is authorized to deliver the Securities to be sold by such
Selling Shareholder hereunder and to accept payment therefor; and each
Attorney-in-Fact is authorized to execute and deliver this Agreement and
the certificate referred to in Section 5(e) on behalf of such Selling
Shareholder, to sell, assign and transfer to the Underwriters the
Securities to be sold by such Selling Shareholder hereunder, to determine
the purchase price to be paid by the Underwriters to such Selling
Shareholder, as provided in Section 2(a) hereof, to authorize the delivery
of the Securities to be sold by such Selling Shareholder hereunder, to
accept payment therefor, and otherwise to act on behalf of such Selling
Shareholder in connection with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.
(vi) Absence of Further Requirements. No filing with, or consent,
approval, authorization, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by such Selling Shareholder of
his obligations hereunder or in the Power of Attorney and Custody
Agreement, or in connection with the sale and delivery of the Securities
hereunder or the consummation of the transactions contemplated by this
Agreement, except such as may have previously been made or obtained or as
may be required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
(vii) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, such Selling Shareholder will not,
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ on behalf of the
Underwriters, (i) offer, pledge, sell, sell short, 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,
15
any share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or file any registration statement under
the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, the economic consequence of ownership of
the Common Stock, whether any such swap or 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. The foregoing sentence shall not
apply to the Securities to be sold hereunder.
(viii) Certificates Suitable for Transfer. Certificates for all of
the Securities to be sold by such Selling Shareholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with irrevocable
conditional instructions to deliver such Securities to the Underwriters
pursuant to this Agreement.
(ix) No Association with NASD. Neither such Selling Stockholder
nor any of his affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, or has any other association with (within the meaning of Article I,
Section 1(m) of the By-laws of the National Association of Securities
Dealers, Inc.), any member firm of the National Association of Securities
Dealers, Inc.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇ prior to or at the Closing Time
a properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
Each of the Selling Shareholders specifically agrees that the
Securities to be held in custody for such Selling Shareholder under the Power of
Attorney and Custody Agreement will be subject to the interests of the
Underwriters hereunder, and that the arrangements made by such Selling
Shareholder for such custody, and the appointment by such Selling Shareholder of
the Attorney-in-Fact by the power of attorney contained in the Power of Attorney
and Custody Agreement, are to that extent irrevocable. Each Selling Stockholder
specifically agrees that his obligations hereunder shall not be terminated by
operation of law, whether by the death or incapacity of such Selling
Shareholder. If such Selling Shareholder or any such executor or trustee should
die or become incapacitated, or if any other such event should occur, before the
delivery of the Securities hereunder, certificates representing the Securities
shall be delivered by or on behalf of such Selling Shareholder in accordance
with the terms and conditions of this Agreement and of the Power of Attorney and
Custody Agreement, and actions taken by the Attorney-in-Fact pursuant to the
powers of attorney in the Power of Attorney and Custody Agreement shall be as
valid as if such death, incapacity or other event had not occurred, regardless
of whether or not the Custodian, the Attorney-in-Fact, or any of them, shall
have received notice of such death, incapacity or other event.
16
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters pursuant to the terms of this Agreement shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby; and any certificate signed by or on behalf of the
Selling Shareholders as such and delivered to the Representatives or to counsel
for the Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Shareholder to the Underwriters as
to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Shareholder, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Shareholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or such Selling Shareholder, as the case may be, which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 519,000 shares of Common Stock,
as set forth in Schedule B, at the price per share set forth in Schedule C, less
an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial Securities upon notice by the Representatives to
the Company setting forth the number of Option Securities as to which the
several Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Securities (if other than the Closing
Time). Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the Option Securities, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set forth
in Schedule A opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as the
Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares.
17
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of ▇▇▇▇▇▇▇
& ▇▇▇▇▇ L.L.P. or at such other place as shall be agreed upon by the
Representatives and the Company and the Selling Shareholders, at 8:30 a.m.
(Central time) on the third (fourth, if the pricing occurs after 4:30 p.m.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representatives and the Company and the Selling Shareholders (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
Payment shall be made to the Company and the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Shareholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
two full business days before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 a.m. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter participating in the offering of Securities, as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
of the 1933 Act Regulations and will notify the Representatives immediately, and
confirm the notice in writing, of (i) the effectiveness of any post-effective
amendment to the Registration Statement or the filing of any
18
supplement or amendment to the Prospectus, (ii) any request by the Commission
for any amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, and (iii) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424 of the 1933 Act Regulations and will take
such steps as it deems necessary to ascertain promptly whether the Prospectus
transmitted for filing under Rule 424 was received for filing by the Commission
and, in the event that it was not, it will promptly file the Prospectus. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The
Registration Statement and each amendment thereto furnished to the Underwriters
will be identical to any electronically transmitted copies thereof filed with
the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter may reasonably request, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus as such Underwriter may reasonably request.
The Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to any electronically transmitted copies thereof
filed with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
19
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and in the Registration Statement and the
Prospectus. If at any time when the Prospectus is required by the 1933 Act or
the 1934 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters or for the Company, to amend the
Registration Statement in order that the Registration Statement will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or to amend or supplement the Prospectus in order that the Prospectus will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus comply with
such requirements, and the Company will furnish to the Underwriters, without
charge, such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable
commercial efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the Representatives may
designate and to maintain such qualifications in effect for a period of not less
than one year from the date of this Agreement; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so qualified,
the Company will file such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the date of this Agreement.
(g) Earnings Statement. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders an earnings statement for the purposes of, and to provide
the benefits contemplated by, the last paragraph of Section 11(a) of the 1933
Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
(i) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ on behalf of
20
the Underwriters, (i) directly or indirectly, offer, pledge, sell, sell short,
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 any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing (other than on
Form S-4 in connection with the acquisition of a business, Form S-8 or any
successor form) or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
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. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder, (B) any
shares of Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus, (C) any shares of Common Stock issued or options
to purchase Common Stock granted pursuant to existing employee benefit plans of
the Company referred to in the Prospectus, (D) any shares of Common Stock issued
pursuant to any non-employee director stock plan or dividend reinvestment plan,
or (E) the issuance of unregistered shares of Common Stock in connection with
the Company's acquisition of a business provided that the transferee of such
shares shall be subject to a contractual transfer restriction similar to this
paragraph.
(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the Securities, any certificates for the
Securities to the Underwriters, including any transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Securities to
the Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors or agents (including transfer agents and
registrars), (v) the qualification of the Securities under state securities laws
in accordance with the provisions of Section 3(f) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of any Blue Sky
Survey, and any amendment thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, and the Prospectus and
any amendments or supplements thereto, and (vii) the fees and expenses incurred
in connection with the listing of the Securities on the American Stock Exchange
("AMEX"). Subject to the provisions of Section 4(c), the Underwriters agree to
pay, whether or not the transactions
21
contemplated hereby are consummated or this Agreement is terminated, all costs
and expenses incident to the performance of the obligations of the Underwriters
under this Agreement not payable by the Company pursuant to the preceding
sentence, including, without limitation, the fees and disbursements of counsel
for the Underwriters.
(b) Expenses of the Selling Shareholders. The Selling Shareholders,
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to the
Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, and (ii) the fees and disbursements of
their respective counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(d) Allocation of Agreement. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Securities pursuant this Agreement
are subject to the accuracy of the representations and warranties of the Company
and the Selling Shareholders contained in Section 1 hereof or in certificates of
any officer of the Company or on behalf of any Selling Shareholder delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. No stop order suspending
the effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or be
pending or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
information relating to the description of the Securities, the specific method
of distribution and similar matters shall have been filed with the Commission in
accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any
required post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule 430A).
(b) Opinions of Counsel for Company and the Selling Shareholders. At
Closing Time, the Representatives shall have received the favorable opinion,
dated as of Closing Time, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the Company and
the Selling Shareholders, in form and substance reasonably satisfactory to
counsel for the Underwriters, together with signed or reproduced copies
22
of such letter for each of the other Underwriters to the effect set forth in
Exhibits A and B hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (i), (ii), (v), (vi) (solely as
to preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Company), (viii) through (x), inclusive, (xii), (xiv)
(solely as to the information in the Prospectus under "Description of Capital
Stock--Common Stock") and the penultimate paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York, Texas and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Representatives.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the Chief Executive
Officer, President or a Vice President of the Company and of the chief financial
officer or chief accounting officer of the Company, dated as of Closing Time, to
the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) are true and correct with the
same force and effect as though expressly made at and as of the Closing Time,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part required under this Agreement to be performed or satisfied at or
prior to the Closing Time in all material respects, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted, are pending or, to the
best of such officer's knowledge, are threatened by the Commission.
(e) Certificate of Selling Shareholders. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect that
(i) the representations and warranties of each Selling Shareholder contained in
Section 1(b) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) each Selling
Shareholder has complied in all material respects with all agreements and all
conditions on his part to be performed under this Agreement at or prior to
Closing Time.
(f) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from ▇▇▇▇ + Associates LLP a
letter dated such date, in form and substance reasonably satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial
23
statements and certain financial information contained in the Registration
Statement and the Prospectus.
(g) Bring-Down Comfort Letter. At Closing Time, the Representatives
shall have received from ▇▇▇▇ + Associates LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (f) of this Section 5, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(h) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the AMEX, subject only to official notice of
listing.
(i) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule D hereto.
(j) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Shareholders contained herein and the statements
in any certificates furnished by the Company, any subsidiary of the Company and
the Selling Shareholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the Chief Executive Officer, President or a Vice President of
the Company and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the Closing Time
pursuant to Section 5(e) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinions of Counsel for Company and the Selling Shareholders.
The favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the Company,
in form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable opinion
of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) Bring-Down Comfort Letter. A letter from ▇▇▇▇ + Associates
LLP, in form and substance satisfactory to the Representatives and dated
such Date of Delivery, substantially in the same form and substance as the
letter furnished to the Representatives pursuant to Section 5(g) hereof,
except that the "specified date" in the letter furnished
24
pursuant to this paragraph shall be a date not more than five days prior to
such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters.
(l) Termination of this Agreement. If any condition specified in this
Section 5 shall not have been fulfilled when and as required to be fulfilled,
this Agreement or, in the case of any condition to the purchase of Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company at
any time at or prior to the Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. (1) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
deemed to be a part thereof, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
25
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) subject to Section 6(c), against any and all expense
whatsoever, as incurred (including the reasonable fees and disbursements of
counsel chosen by the Representatives), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information deemed
to be a part thereof, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(2) Each of the Selling Shareholders, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a)(1) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto, including any Rule 424(b) Information and the Rule
430A Information deemed to be a part thereof, if applicable), or any preliminary
prospectus or the Prospectuses (or any amendment or supplement thereto) in
reliance upon and in conformity with information related to such Outside Selling
Shareholder furnished to the Company by such Outside Selling Shareholder
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 424(b) Information and the Rule 430A Information deemed to be
a part thereof, if applicable, or any preliminary prospectus or the Prospectuses
(or any amendment or supplement thereto); provided, however, that the liability
of such Outside Selling Shareholder under this subsection (a)(2) shall be
limited to an amount equal to the net proceeds (after deducting the
Underwriters' discount but before deducting expenses) received by such Outside
Selling Shareholder pursuant to the sale of its Securities hereunder.
(b) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and
each Selling Shareholder and each person, if any, who controls any Selling
Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a)(1) of this Section, as
26
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information deemed to be a part
thereof, if applicable, or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In case any such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded (based on advice of counsel in writing) that there may
be one or more legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the indemnifying
party, the indemnifying party shall not have the right to direct the defense of
such action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the expenses of more than
one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the
Representatives in the case of paragraph (a) of this Section 6, representing the
indemnified parties under such paragraph (a) who are parties to such action or
actions) or (ii) the indemnifying party does not promptly retain counsel
reasonably satisfactory to the indemnified party or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the consent of the indemnifying party . No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
27
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Settlement without Consent if Failure to Reimburse. Subject to
Section 6(c), if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(1)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party 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 party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, labilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders, on the one hand, and the Underwriters, on the other hand,
from the offering of the Securities pursuant to this Agreement 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) above but also the relative fault of the Company and the
Selling Shareholders, on the one hand, and of the Underwriters, on the other
hand, in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling Shareholders,
on the one hand, and the Underwriters, on the other hand, in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
such Securities (before deducting expenses) received by the Company and the
Selling Shareholders and the total underwriting discount received by the
Underwriters, in each case as set forth on the cover of the Prospectus, bear to
the aggregate initial public offering price of such Securities as set forth on
such cover.
28
The relative fault of the Company and the Selling Shareholders, on the one
hand, and the Underwriters, on the other hand, shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Shareholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 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 which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any 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 ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
such Selling Shareholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
Any party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or parties
under this Section 7, notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties from whom
contribution may be sought shall not relieve the party or parties from whom
contribution may be
29
sought from any other obligation it or they may have hereunder or otherwise than
under this Section 7.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or the Selling
Shareholders submitted pursuant hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company or the
Selling Shareholders, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to the Closing Time, if (i) there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
there has occurred any material adverse change in the financial markets in the
United States, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) trading in any securities of the
Company has been suspended or materially limited by the Commission or by the
American Stock Exchange, or if trading generally on the New York Stock Exchange
or the American Stock Exchange or in the Nasdaq National Market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by either of said
exchanges or by such system or by order of the Commission, the NASD or any other
governmental authority, or (iv) a banking moratorium has been declared by either
Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section , such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or
30
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of Securities to be purchased on such date, each
of the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of Securities to be purchased on such date this
Agreement or, with respect to any Date of Delivery which occurs after the
Closing Time, the Company shall have one additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representatives to purchase the
Defaulted Securities upon the terms set forth in this Agreement and if the
Company is unable, or elects not, to find such substitute underwriters
within said one business day period, the obligation of the Underwriters to
purchase and of the Company to sell the Option Securities to be purchased
and sold on such Date of Delivery, shall terminate without liability on the
part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default. A substitute underwriter
shall become an Underwriter for all purposes of this Agreement.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and the
Selling Shareholders shall have the right to postpone the Closing Time for a
period not exceeding seven days in order to effect any required changes in the
Registration Statement or the Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling Shareholders or the
Company.
(a) If a Selling Shareholder shall fail at Closing Time or at a Date of
Delivery to sell and deliver the number of Securities which such Selling
Shareholder or Selling Shareholders are obligated to sell hereunder, and the
remaining Selling Shareholders do not exercise the right hereby granted to
increase, pro rata or otherwise, the number of Securities to be sold by them
hereunder to the total number to be sold by all Selling Shareholders as set
forth in Schedule B hereto, then the Underwriters may, at option of the
Representatives, by notice from the Representatives to the
31
Company and the non-defaulting Selling Shareholders, either (a) terminate this
Agreement without any liability on the fault of any non-defaulting party except
that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and
effect or (b) elect to purchase the Securities which the non-defaulting Selling
Shareholders and the Company have agreed to sell hereunder. No action taken
pursuant to this Section 11 shall relieve any Selling Shareholder so defaulting
from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as referred to in this
Section 11, each of the Representatives, the Company and the non-defaulting
Selling Shareholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
(b) If the Company shall fail at Closing Time or at the Date of Delivery
to sell the number of Securities that it is obligated to sell hereunder, then
this Agreement shall terminate without any liability on the part of any
nondefaulting party; provided, however, that the provisions of Sections 1, 4, 6,
7 and 8 shall remain in full force and effect. No action taken pursuant to this
Section shall relieve the Company from liability, if any, in respect of such
default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to ▇▇▇▇▇▇▇ ▇▇▇▇▇ at World Financial Center, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention of ▇▇▇ ▇. ▇▇▇▇▇, ▇▇.; notices to
the Company shall be directed to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇ ▇. ▇▇▇▇▇▇▇, President; and notices to any
of the Selling Shareholders shall be directed to ▇▇▇ ▇. ▇▇▇▇▇▇▇, Custodian, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
SECTION 13. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters, the Company and the Selling Shareholders and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, the Company and the Selling Shareholders and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
32
SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
* * * * *
33
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
President
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
Attorney-in-Fact for the
Selling Shareholders
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, FENNER& ▇▇▇▇▇ INCORPORATED
CIBC WORLD MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Authorized Signatory
For themselves and as Representatives
of the several Underwriters named in Schedule A hereto.
34
SCHEDULE A
NUMBER OF
NAME OF UNDERWRITER INITIAL SECURITIES
------------------- ------------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated................................................. 1,012,000
CIBC World Markets Corp.............................................. 1,012,000
Prudential Securities Incorporated................................... 1,012,000
Banc of America Securities LLC....................................... 72,000
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc............................................. 72,000
Chatsworth Securities LLC............................................ 40,000
▇▇▇▇▇▇▇ and Company Securities, Inc.................................. 40,000
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a division of ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated...... 40,000
▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, Inc.......................................... 40,000
▇▇▇▇▇▇▇▇▇ & Company, Inc............................................. 40,000
Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc......................................... 40,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc............................................ 40,000
---------
Total................................................................ 3,460,000
35
SCHEDULE B
NUMBER OF INITIAL MAXIMUM NUMBER OF OPTION
SECURITIES TO BE SOLD SECURITIES TO BE SOLD
--------------------- ------------------------
The Company 3,370,000 519,000
The Selling Shareholders:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 40,000 -0-
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 50,000 -0-
--------- --------
Total......................... 3,460,000 519,000
========= ========
36
SCHEDULE C
MIDCOAST ENERGY RESOURCES, INC.
3,460,000 SHARES OF COMMON STOCK
(PAR VALUE $.01 PER SHARE)
1. The initial public offering price per share of the Securities shall be
$16.3125.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $15.4325, being an amount equal to the initial
public offering price set forth above less $0.88 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
37
SCHEDULE D
LIST OF PERSONS AND ENTITIES
SUBJECT TO LOCK-UP AGREEMENTS
(In addition, Selling Stockholders are subject to Section 1(b)(7)
of this Agreement)
▇.▇. ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, Jr.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
Magic Gas Corp.
▇▇▇▇▇▇ Natural Gas, Inc.
38
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus and except for
27,000 shares that have been repurchased by the Company since March 31, 1999 as
treasury shares); the shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the Underwriters from the
Selling Shareholders, have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar rights of
any securityholder of the Company.
(v) The Securities to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement and, when issued and delivered by the Company pursuant to
the Purchase Agreement against payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and non-assessable and
no holder of the Securities is or will be subject to personal liability by
reason of being such a holder.
(vi) The issuance and sale of the Securities by the Company and the sale
of the Securities by the Selling Shareholders is not subject to the preemptive
or other similar rights of any securityholder of the Company.
A-1
(vii) Each Subsidiary has been duly incorporated or organized and is
validly existing in good standing under the laws of the jurisdiction of its
formation, has power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly qualified as
a foreign entity to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and, to the best
of our knowledge, is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement has been declared effective under the
1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and, to
the best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted or are pending or threatened by the
Commission.
(x) The Registration Statement, the Rule 430A Information, as
applicable, the Prospectus, and each amendment or supplement to the Registration
Statement and Prospectus, as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion) complied as to form
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(xi) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the American Stock Exchange.
(xii) To the best of our knowledge, except as disclosed in the Prospectus,
there is not pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or any subsidiary is a party, or to which
the property of the Company or any subsidiary is subject, before or brought by
any court or governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiii) The information in the Prospectus under "Description of Capital
Stock--Common Stock" and in the supplement constituting part of the Prospectus
under "Business--Regulatory Matters" and in the Registration Statement under
Item 15, to the extent that it constitutes matters of
A-2
law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
(xiv) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xv) To the best of our knowledge, neither the Company nor any subsidiary
is in violation of its charter or by-laws and no default by the Company or any
subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement where the consequences of such default might reasonably
be expected to result in a Material Adverse Effect.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we express no
opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance,
sale or delivery of the Securities.
(xvii) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xi) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which the Company or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary, or
any applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court,
A-3
domestic or foreign, having jurisdiction over the Company or any subsidiary or
any of their respective properties, assets or operations.
(xviii) To the best of our knowledge, except as disclosed in the
Prospectus, there are no persons with registration rights or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the 1933 Act.
Although we are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus or Registration Statement (except as specified in the foregoing
opinion), nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information (if applicable), (except for financial statements and schedules and
other financial data included therein or omitted therefrom, as to which we need
make no statement), at the time such Registration Statement or any such
amendment became effective, contained an 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 or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included therein or omitted therefrom, as to which we
need make no statement), at the time the Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the laws of Nevada, upon the opinion of ▇▇▇▇▇▇▇▇
and Wedge, special counsel to the Company (which opinion shall be dated and
furnished to the Representatives at the Closing Time, shall be satisfactory in
form and substance to counsel for the Underwriters and shall expressly state
that the Underwriters may rely on such opinion as if it were addressed to them),
provided that ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. shall state in their opinion that they
believe that they and the Underwriters are justified in relying upon such
opinion, (B), as to matters of fact (but not as to legal conclusions), to the
extent they deem proper, on certificates of responsible officers of the Company
and public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991). In rendering
such opinion, matters expressly stated as within the "knowledge" of counsel
shall be limited to matters within the knowledge of the attorneys of such
counsel's firm who have rendered substantive attention to matters for the
Company and its subsidiaries.
A-4
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign, (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Shareholders for the performance by each
Selling Shareholder of its obligations under the Purchase Agreement or in the
Power of Attorney and Custody Agreement, or in connection with the offer, sale
or delivery of the Securities.
(ii) Each Power of Attorney and Custody Agreement has been duly executed
and delivered by the respective Selling Shareholders named therein and
constitutes the legal, valid and binding agreement of such Selling Shareholder.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Shareholder.
(iv) The Attorney-in-Fact has been duly authorized by the Selling
Shareholders to deliver the Securities on behalf of the Selling Shareholders in
accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Selling
Shareholders with its obligations under the Purchase Agreement have been duly
authorized by all necessary action on the part of the Selling Shareholders and
do not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Securities or any property or assets of the Selling Shareholders
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or agreement to which any
Selling Shareholder is a party or by which he may be bound, or to which any of
the property or assets of the Selling Shareholders may be subject nor will such
action result in any violation of the provisions of the charter or by-laws of
the Selling Shareholders, if applicable, or any law, administrative regulation,
judgment or order of any governmental agency or body or any administrative or
court decree having jurisdiction over such Selling Shareholder or any of its
properties.
(vi) To the best of our knowledge, each Selling Shareholder has good and
valid title to the Securities to be sold by such Selling Shareholder pursuant to
the Purchase Agreement, free and
B-1
clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind, and has full right, power and authority to sell,
transfer and deliver such Securities pursuant to the Purchase Agreement. By
delivery of a certificate or certificates therefor such Selling Shareholder will
transfer to the Underwriters who have purchased such Securities pursuant to the
Purchase Agreement (without notice of any defect in the title of such Selling
Shareholder and who are otherwise bona fide purchasers for purposes of the
Uniform Commercial Code) valid and marketable title to such Securities, free and
clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind.
B-2
EXHIBIT C
FORM OF LOCK-UP AGREEMENT
May 24, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated,
CIBC WORLD MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
as Representative(s) of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Proposed Public Offering by Midcoast Energy Resources, Inc.
Dear Sirs:
The undersigned, a stockholder, officer and/or director of Midcoast Energy
Resources, Inc., Nevada corporation (the "Company"), understands that ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇
▇▇▇▇▇") and CIBC World markets Corp. and Prudential Securities Incorporated
proposes to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company and the Selling Shareholders providing for the public offering of shares
(the "Securities") of the Company's common stock, par value $.01 per share (the
"Common Stock"). In recognition of the benefit that such an offering will
confer upon the undersigned as a stockholder, officer and/or director of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of 180
days from the date of the Purchase Agreement, the undersigned will not, without
the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, directly or indirectly, (i) offer,
pledge, sell, sell short, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of the
Company's Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any
C-1
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
Very truly yours,
Signature:
-------------------------
Print Name:
------------------------
C-2
EXHIBIT D
SIGNIFICANT SUBSIDIARIES OF MIDCOAST ENERGY RESOURCES, INC.
Midcoast Interstate Transmission, Inc.
Tennessee River Intrastate Gas Co., Inc.
Mid Louisiana Gas Co.
Mid Louisiana Gas Transmission Co.
Midcoast Gas Services, Inc.
Midcoast Marketing, Inc.
D-1