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EXHIBIT 1.1
SOLICITING DEALER AGREEMENT
Xxxxxxxxx Energy 97 Drilling Program
, 1997
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Gentlemen:
Xxxxxxxxx Development Corporation, a Delaware corporation ("MD"), is or
proposes to be the sole managing general partner (in such capacity the
"Managing Partner") of a limited partnership (the "Partnership") formed
pursuant to the Delaware Revised Uniform Limited Partnership Act (the "Delaware
Act"). MD intends to name the Partnership as follows: Xxxxxxxxx Energy
Partners 97-A, L.P. The Partnership will participate in a program, governed by
a Drilling Program Agreement (the "Program Agreement") among Xxxxxxxxx Oil
Company, a Delaware corporation ("MOC"), MD and the Partnership, the primary
purpose of which will be to drill Developmental Xxxxx (as such term is defined
in the Prospectus referred to below).
On behalf of the Partnership and MD, a Registration Statement on Form
S-1 (Registration No. ) dated ____________________, 1997, relating to
the offer and sale of the Interests (hereinafter defined) was filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). On , 1997, MD filed with the
Commission on behalf of the Partnership Amendment No. 1 to the Registration
Statement. The Registration Statement was declared effective by the Commission
on , 1997. MD, the Partnership and the Interests are described
in the Prospectus dated , 1997 (the "Prospectus") that forms a part
of the Registration Statement. As used in this Soliciting Dealer Agreement
(this "Agreement"), the terms "Prospectus" and "Registration Statement" refer
solely to the Prospectus and Registration Statement, as amended, described
above, except that (i) from and after the date on which any post-effective
amendment to the Registration Statement is declared effective by the
Commission, the term "Registration Statement" shall refer to the Registration
Statement as amended by that post-effective amendment, and the term
"Prospectus" shall refer to the Prospectus then forming a part of the
Registration Statement, and (ii) if the Prospectus filed by MD pursuant to Rule
424(b) or (c) promulgated by the Commission under the Act differs from the
Prospectus on file with the Commission at the time the Registration Statement
or any post-effective amendment thereto shall have become effective, the term
"Prospectus" shall refer to the Prospectus filed pursuant thereto from and
after the date on which it was filed. Terms defined in the Prospectus and not
otherwise defined herein will have the meanings set forth in the Prospectus.
MD desires to raise a minimum of $1,000,000 and a maximum of $10,000,000
in capital for the Partnership by the sale of up to 1,000 ($1,000,000) limited
partner interests (the "Limited Partner Interests") and up to 9,000
($9,000,000) general partner interests (the "General Partner Interests") in the
Partnership (the Limited Partner Interests and the General Partner Interests
are collectively referred to as the "Interests"). The Interests will be
offered in $1,000 increments, with a minimum purchase of five Interests
($5,000).
Xxxxxxxxx Securities, Inc., a Texas corporation (the "Dealer Manager")
has entered into a Dealer Manager Agreement with the Managing Partner under
which the Dealer Manager is appointed the exclusive agent of the Managing
Partner and of the Partnership to form a group of National Association of
Securities Dealers, Inc. member firms who will solicit subscribers for the
purchase of Interests.
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The following are the terms on which the Managing Partner, on behalf of
the Partnership, and the Dealer Manager appoint you and you agree to such
appointment to solicit subscribers for the purchase of Interests:
Section 1. Appointment as Soliciting Dealer. On the basis of the
representations, warranties and covenants contained in this Agreement, but
subject to the terms and conditions set forth herein, you are hereby appointed
to serve as a soliciting dealer ("Soliciting Dealer") during the Offering
Period (as defined below) for Interests for the purpose of finding subscribers
for the Interests through a public offering, at the price of $1,000 per
Interest, with a minimum subscription of five Interests ($5,000), as described
in the Prospectus. The "Offering Period" (as such term is used in this
Agreement) will commence on or about the date on which the Registration
Statement is declared effective and will end no later than December 31, 1997.
MD has the right in its sole and absolute discretion to terminate the offering
of Interests and end the Offering Period at any time. You hereby accept
appointment as a Soliciting Dealer and agree on the terms and conditions set
forth in this Agreement to use your reasonable efforts to solicit subscriptions
for the Interests during the Offering Period and until the earlier of (i) the
termination of the Offering Period or (ii) the Closing (as hereinafter defined)
with respect to the Partnership. Neither your acceptance of that appointment
nor this Agreement shall constitute you and MD or the Partnership as an
association, partnership, unincorporated business or other separate entity. If
an offering for Interests in the Partnership is commenced and subscriptions
funds of $1,000,000 or more are not received by the termination of the Offering
Period with respect to Interests in the Partnership, all subscription funds
received by the termination of the Offering Period with respect to Interests in
the Partnership shall be returned in full to the subscribers, together with any
interest earned thereon, if any (as provided in the Prospectus), and this
Agreement as to the Partnership will terminate without obligation on your part
or on the part of MD, except that (a) you will promptly, upon notice, transmit
to MD any sales commissions and due diligence fees received by you pursuant to
Section 6(b) hereof, and (b) the indemnification and contribution provisions of
Section 9 hereof shall continue after such termination of this Agreement. In
the event that you violate the terms, conditions, agreements or warranties
herein, the Managing Partner or the Dealer Manager, in their sole and absolute
discretion, may terminate this Agreement.
Section 2. Representations and Warranties of MD and the Dealer Manager.
MD, in its individual capacity and in its capacity as Managing Partner, and the
Dealer Manager, jointly and severally, hereby represent and warrant to you
that:
(a) In the name and on behalf of the Partnership, MD has prepared and
filed with the Commission the Registration Statement (including the Prospectus)
for the registration of the offering and sale of the Interests under the Act.
The Registration Statement has become and is effective under the Act. Copies
of the Registration Statement and the Prospectus have been or will be delivered
to you.
(b) On the Closing Date (as hereinafter defined) for the sale of
Interests, the Partnership will be a limited partnership duly formed and
validly existing under the laws of the State of Delaware and will be duly
qualified or registered as a foreign limited partnership or otherwise qualified
as a limited partnership in each jurisdiction in which the nature of the
activities conducted by it or the nature of the assets owned by it make such
qualification necessary (except where the failure to so qualify or register
would not have a material adverse effect on the Partnership or the rights or
liabilities of its Investor Partners). In addition, the Partnership shall have
full and adequate partnership power and partnership authority to enter into and
perform this Agreement and the Program Agreement and to own its properties and
to conduct its business as proposed in the Prospectus.
(c) MD is, and at all times through the Closing Date will be, a
corporation, validly existing and in good standing under the laws of the State
of Delaware with full and adequate corporate power and corporate authority to
enter
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into and perform this Agreement and the Agreement of Partnership and to own its
properties and to conduct its business as presently conducted and as proposed
in the Prospectus to be conducted.
(d) Each subscriber for Limited Partner Interests will become a
Limited Partner of the Partnership entitled to all the rights of a Limited
Partner under the Agreement of Partnership for the Partnership and the Delaware
Act upon (i) payment of the consideration for those Limited Partner Interests
specified in that subscriber's Subscription Agreement and (ii) acceptance by
the Managing Partner of that subscriber as a Limited Partner. Each subscriber
for General Partnership Interests will become a General Partner of the
Partnership entitled to all the rights of a General Partner under the Agreement
of Partnership for the Partnership and the Delaware Act upon (i) payment of the
consideration for those General Partner Interests specified in that
subscriber's Subscription Agreement and (ii) acceptance by the Managing Partner
of that subscriber as a General Partner. The Interests, when sold and paid for
as contemplated by the Prospectus, will represent validly authorized and duly
issued Interests and those Interests will conform in all material respects to
the statements relating thereto contained in the Prospectus, including the Form
of Agreement of Partnership attached as Exhibit A thereto.
(e) This Agreement has been duly and validly authorized by MD and the
Dealer Manager. MD and the Dealer Manager have duly executed and delivered
this Agreement, which constitutes a valid and binding agreement of MD and the
Dealer Manager enforceable in accordance with its terms (except to the extent
that the enforceability of the indemnification provisions of Section 9 hereof
may be limited under federal securities laws or to the extent the
enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the right of creditors
generally).
(f) The Commission has not issued any order preventing or suspending
the use of the Prospectus.
(g) From the time the Registration Statement initially became
effective through the Closing Date, the Registration Statement and the
Prospectus did and will comply in all material respects with the provisions of
the Act, and neither the Registration Statement and the Prospectus nor any
Sales Literature (as hereinafter defined) contains or will contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the representations and
warranties contained in this subsection (g) shall not apply to statements in,
or omissions from, the Registration Statement, the Prospectus or the Sales
Literature based upon and in conformity with information furnished to MD or the
Partnership by you in writing specifically for use in the Registration
Statement, the Prospectus or Sales Literature.
(h) Based upon the opinion of Xxxxxx & Xxxxxx L.L.P., counsel for MD,
and subject to the assumptions and representations expressed therein, under
existing federal income tax laws and regulations the Partnership, upon its
formation, will be classified as a partnership for federal income tax purposes.
The Partnership, at the Closing, will be classified as a partnership for
federal income tax purposes, and at all times subsequent hereto, MD will use
its best efforts to maintain the status of the Partnership as a partnership for
federal income tax purposes.
(i) Except as disclosed in the Prospectus, there is no litigation or
governmental proceeding pending or, to the best knowledge of MD, threatened
that involves the offering of the Interests or any of the properties or
businesses of MD that would, if adversely decided, materially and adversely
affect (financially or otherwise) the operation of the business of the
Partnership, MD or the offering.
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(j) MD is not in violation of the Agreements of Partnership or in
material default in the performance of any obligation, agreement or condition
contained in any agreement by which the Partnership is bound. The execution
and delivery of this Agreement and the Agreements of Partnership, the
fulfillment of the terms set forth herein and therein and the consummation of
the transactions contemplated herein and therein and in the Prospectus will not
conflict with or constitute a breach of or material default under the
Agreements of Partnership or under the certificate of incorporation or bylaws
of MD or under any other agreement, indenture or instrument by which the
Partnership or MD is bound or, to the best knowledge of MD, any law, rule,
regulation, order or decree of any court or any governmental body or
administrative agency applicable to MD or the Partnership.
(k) The financial information (including without limitation the
balance sheets and any accompanying notes and schedules) presented in the
Prospectus concerning MD presents fairly MD's financial position as of the
dates thereof in accordance with generally accepted accounting principles, and
there has been, and through the Closing Date shall be, no material adverse
change in its financial condition since the date of that information.
(l) There has been no material adverse change in the condition,
business or properties of MD, financial or otherwise, from that on the latest
dates as of which such condition, business or properties are set forth in the
Prospectus, except as referred to therein, and such properties and business
substantially conform and shall at the Closing Date with respect to the
Partnership substantially conform to the descriptions thereof contained in the
Prospectus.
(m) MD will timely apply, on behalf of the Partnership, to the
Internal Revenue Service for a tax shelter registration number and, if such a
number is received, will furnish such number to the Investor Partners of the
Partnership within a reasonable time after their admission to the Partnership
or within a reasonable time after the Partnership has received such number,
whichever occurs later.
Section 3. Covenants and Representations of Soliciting Dealer. You
covenant with and represent to MD that:
(a) You are, and at all times through the last Closing Date will be,
a corporation, validly existing and in good standing as a corporation under the
laws of the jurisdiction set forth on the signature page hereof, with full and
adequate corporate power and corporate authority to enter into and perform this
Agreement.
(b) This Agreement has been duly and validly authorized by you. You
have duly executed and delivered this Agreement, which constitutes a valid and
binding agreement of you enforceable in accordance with its terms (except to
the extent that the enforceability of the indemnification provisions of Section
9 hereof may be limited under federal securities law or to the extent the
enforceability of this Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally).
(c) You will not offer to sell Interests to, solicit offers to buy
Interests from, or transmit Subscription Agreements to, any person on behalf of
MD that you have reasonable grounds to believe (based on information obtained
from such person or otherwise known to you) does not meet the age, net worth,
annual income or other standards applicable to that person as set forth in the
Subscription Agreement.
(d) You will deliver a copy of the Prospectus, containing such
legends as directed by MD, to each subscriber to whom you sell the Interests at
or before the completion of any sale of Interests to such subscriber (which
sale shall be deemed, for the purposes of this Agreement to occur on the date
on which that subscriber delivers subscription funds to the escrow agent), or
earlier if required by the blue sky or securities laws of any state. You have
not and will not give any information or make any representation in connection
with the offer or sale of Interests other
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than as contained in the Prospectus, and will not publish, circulate or
otherwise distribute without MD's approval any solicitation material other than
the Prospectus and other sales material ("Sales Literature") provided to you by
MD specifically for distribution to subscribers with the Prospectus. Any such
Sales Literature, if distributed, must have been preceded or must be
accompanied by the Prospectus. You agree not to discuss any specific oil and
gas prospect or to refer to any such oil and gas prospect in any analysis or
report on the Interests prepared by you or on your behalf.
(e) You will make offers to sell Interests to, sell to or solicit
offers to subscribe for Interests from persons in only those states or other
jurisdictions where MD represents to you in writing that such Interests may be
offered and sold and you agree to make reasonable efforts to comply with all
applicable laws, rules and regulations of those states and jurisdictions in
which you offer or sell Interests.
(f) You are and on the last Closing Date will be (i) a securities
broker-dealer registered with the Securities and Exchange Commission and any
jurisdiction where broker-dealer registration is required in order to offer and
sell the Interests and (ii) a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD").
(g) You agree to make reasonable efforts to comply with all rules of
the NASD applicable to you in connection with the offering of Interests
including, without limitation, the following provisions of Article III to the
Rules of Fair Practice:
2730. SECURITIES TAKEN IN TRADE
(a) A member engaged in a fixed price offering, who purchases
or arranges the purchase of securities taken in trade, shall purchase
the securities at a fair market price at the time of purchase or shall
act as agent in the sale of such securities and charge a normal
commission therefor.
(b) When used in this section--
(1) the term "taken in trade" means the purchase by a member
as principal, or as agent for the account of another, of a security from
a customer pursuant to an agreement or understanding that the customer
purchase securities from the member which are part of a fixed price
offering.
(2) the term "fair market price" means a price not higher than
the price at which the securities would be purchased from the customer
or from a similarly situated customer in the ordinary course of business
by a dealer in such securities in transactions of similar size and
having similar characteristics but not involving a security taken in
trade.
(3) the term "normal commission" means an amount of commission
which the member would normally charge to that customer or a similarly
situated customer in the ordinary course of business in transactions of
similar size and having similar characteristics but not involving a
security taken in trade.
(c) For purposes of this Section a member shall be
(1) deemed, with respect to securities other than common
stocks, to have taken such securities in trade at a fair market price
when the price paid is not higher than the highest independent
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bid for the securities at the time of purchase, if such bid quotations
for the securities are readily available.
(2) presumed, with respect to common stocks, to have taken
such common stocks in trade at a fair market price when the price paid
is not higher than the highest independent bid for the securities at the
time of purchase, if such bid quotations for the securities are readily
available.
(3) presumed to have taken a security in trade at a price
higher than a fair market price when the price paid is higher than the
lowest independent offer for the securities at the time of purchase, if
such offer quotations for the securities are readily available.
(d) A member, in connection with every transaction subject to
this Section, shall with respect to
(1) common stocks, which are traded on a national securities
exchange or for which quotations are entered in an automated quotation
system, obtain the necessary bid and offer quotations from the national
securities exchange or from the automated quotation system; and
(2) other securities and common stocks not included in
subparagraph (1) of this subsection (d) obtain directly or with the
assistance of an independent agent bid and offer quotations from two or
more independent dealers relating to the securities to be taken in trade
or, if such quotations are not readily available, exercise its best
efforts to obtain such quotations with respect to securities having
similar characteristics and of similar quality as those to be taken in
trade.
(e) A member who purchases a security taken in trade shall
keep or cause to be kept adequate records to demonstrate compliance with
this Section and shall preserve the records for at least 24 months after
the transaction. If an independent agent is used for the purpose of
obtaining quotations, the member must request the agent to identify the
dealers from whom the quotations were obtained and the time and date
they were obtained or request the agent to keep and maintain for at
least 24 months a record containing such information.
2740. SELLING CONCESSIONS
In connection with the sale of securities which are part of a
fixed price offering:
(a) A member may not grant or receive selling concessions,
discounts, or other allowances except as consideration for services
rendered in distribution and may not grant such concessions, discounts
or other allowances to anyone other than a broker or dealer actually
engaged in the investment banking or securities business; provided,
however, that nothing in this Section shall prevent any member from (1)
selling any such securities to any person, or account managed by any
person, to whom it has provided or will provide bona fide research, if
the stated public offering price for such securities is paid by the
purchaser; or (2) selling any such securities owned by him to any person
at any net price which may be fixed by him unless prevented therefrom by
agreement.
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(b) The term "bona fide research," when used in this Section,
means advice, rendered either directly or through publications or
writings, as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of
securities or purchasers or sellers of securities, or analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy, and performance of accounts; provided,
however, that investment management or investment discretionary services
are not bona fide research.
(c) A member who grants a selling concession, discount or
other allowance to another person shall obtain a written agreement from
that person that he will comply with the provisions of this Section, and
a member who grants such selling concession, discount or other allowance
to a nonmember broker or dealer in a foreign country shall also obtain
from such broker or dealer a written agreement to comply, as though such
broker or dealer were a member, with the provisions of Section 8 and 36
of this Article and to comply with Section 25 of this Article as that
Section applies to a nonmember broker/dealer in a foreign country.
(d) A member who receives an order from any person designating
another broker or dealer to receive credit for the sale shall, within 30
days after the end of each calendar quarter, file reports with the
Association containing the following information with respect to each
fixed price offering which terminated during that calendar quarter: the
name of the person making the designation; the identity of the brokers
or dealers designated; the identity and amount of securities for which
each broker or dealer was designated; the date of the commencement and
termination of the offering and such other information as the
Association shall deem pertinent.
(e) A member who is designated by its customer for the sale of
securities shall keep, and maintain for a period of 24 months, records
in such form and manner to show the following information: name of
customer making the designation; the identity and amount of securities
for which the member was designated; the identity of the manager or
managers of the offering, if any; the date of the commencement of the
offering and such other information as the Association shall deem
pertinent.
2420. DEALING WITH NON-MEMBERS
(a) No member shall deal with any non-member broker or dealer
except at the same prices, for the same commissions or fees, and on the
same terms and conditions as are by such member accorded to the general
public.
(b) Without limiting the generality of the foregoing, no
member shall:
(1) in any transaction with any non-member broker or
dealer, allow or grant to such non-member broker or dealer any
selling concession, discount or other allowance allowed by such
member to a member of a registered securities association and not
allowed to a member of the general public;
(2) join with any non-member broker or dealer in any
syndicate or group contemplating the distribution to the public
of any issue of securities or any part thereof; or
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(3) sell any security to or buy any security from any
non-member broker or dealer except at the same price at which at
the time of such transaction such member would buy or sell such
security, as the case may be, from or to a person who is a member
of the general public not engaged in the investment banking or
securities business.
(c) Transaction with foreign non-members. The provisions of
paragraphs (a) and (b) of this rule shall not apply to any non-member
broker or dealer in a foreign country who is not eligible for membership
in a registered securities association, but in any transaction with any
such foreign non-member broker or dealer, where a selling concession,
discount, or other allowance is allowed, a member shall as a condition
of such transaction secure from such foreign broker or dealer an
agreement that, in making any sales to purchasers within the United
States of securities acquired as a result of such transactions, he will
conform to the provisions of paragraphs (a) and (b) of this rule to the
same extent as though he were a member of the Corporation.
(d) "Non-member broker or dealer". For the purpose of this
rule, the term "non-member broker or dealer" shall include any broker or
dealer who makes use of the mails or of any means or instrumentality of
interstate commerce to effect any transaction in, or to induce the
purchase or sale of, any security, otherwise than on a national
securities exchange, who is not a member of any securities association,
registered with the Commission pursuant to Section 15A of the Act,
except a broker or dealer who deals exclusively in commercial paper,
bankers' acceptances or commercial bills.
(e) Nothing in this rule shall be so construed or applied as
to prevent any member of the Corporation from granting to any other
member of any registered securities association any dealer's discount,
allowance, commission, or special terms.
2810. DIRECT PARTICIPATION PROGRAMS, (B) REQUIREMENTS (2) SUITABILITY
(B) In recommending to a participant the purchase, sale or exchange of an
interest in a direct participation program, a member or person associated with
a member shall:
(i) have reasonable grounds to believe, on the basis of
information obtained from the participant concerning his
investment objectives, other investments, financial situation and
needs, and any other information known by the member or
associated person, that:
a. the participant is or will be in a financial
position appropriate to enable him to realize to a
significant extent the benefits described in the
prospectus, including the tax benefits where they are a
significant aspect of the program:
b. the participant has a fair market net worth
sufficient to sustain the risks inherent in the program,
including loss of investment and lack of liquidity; and
c. the program is otherwise suitable for the
participant; and
(ii) maintain in the files of the member documents
disclosing the basis upon which the determination of suitability
was reached as to each participant.
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(C) Notwithstanding the provisions of subsections (A) and (B)
hereof, no member shall execute any transaction in a direct
participation program in a discretionary account without prior written
approval of the transaction by the customer.
2750. TRANSACTIONS WITH RELATED PERSONS
(a) Except as otherwise provided in Subsection (d) of this
Section, no member engaged in a fixed price offering of securities shall
sell the securities to, or place the securities with, any person or
account which is a related person of the member unless such related
person is itself subject to this Section or is a non-member foreign
broker or dealer who has entered into the agreements required by
Subsection 24(c) of this Article.
(b) For purposes of this Section 36, a "related person" of a
member includes any person or account which directly or indirectly owns,
is owned by or is under common ownership with the member.
(c) A person owns another person or account for purposes of
this Section if the person directly or indirectly:
(1) has the right to participate to the extent of more
than 25 percent in the profits of the other person; or
(2) owns beneficially more than 25 percent of the
outstanding voting securities of the person.
(d) The prohibition contained in Subsection (a) does not apply
to the sale of securities to, or the placement of securities in, a
trading or investment account of a member or a related person of a
member after termination of the fixed price offering if the member or
the related person of the member has made a bona fide public offering of
the securities. A member or a related person of a member is presumed
not to have made a bona fide public offering for the purpose of this
subsection if the securities being offered immediately trade in the
secondary market at a price or prices which are at or above the public
offering price.
(h) You shall immediately forward all Subscription Agreements
received by you, together with all checks received in payment of the purchase
price for Interests, in accordance with Section 4(b).
(i) If you have reviewed representative oil and gas properties which
have been designated by or held in the inventory of MD or its affiliates, you
will not discuss any of such oil and gas properties in connection with the sale
of Interests or otherwise indicate any facts about such properties except
those, if any, discussed in the Prospectus.
(j) Specifically, you will comply with the duties imposed by Rules
15c2-4 and 15c2-8 as promulgated by the Securities and Exchange Commission
pursuant to Section 15 of the Securities Exchange Act of 1934, as amended. You
will promptly forward all subscription checks before noon of the next business
day after their receipt for deposit in the designated Partnership escrow
account. In the event you receive a check which is not payable to the escrow
agent,
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you shall promptly return such check directly to the subscriber not later than
the end of the next business day following its receipt.
(k) Prior to recommending an investment in or offering or selling the
Interest to a prospective purchaser you shall have completely read the
Prospectus and related materials and have reasonable grounds to conclude that:
(1) the prospective purchaser is or will be in a financial position to realize
the benefits described in the Prospectus of an investment in the Interests; (2)
the prospective purchaser has met the suitability requirements described in the
Prospectus and has a fair market net worth sufficient to sustain the risks
inherent in an investment in the Interests specifically, including, the loss of
the entire investment and lack of liquidity; and (3) the investment is
otherwise suitable for the prospective investor.
(l) You will maintain in your files for a period of six (6) years
from the close of any Offering Period documents which disclose the basis upon
which you determined that the prospective investor satisfied the suitability
requirements and was otherwise suitable.
(m) Notwithstanding the provisions of subsection (k) hereof, you will
not execute any transaction with respect to Interests in the Partnership on
behalf of a discretionary account without prior approval of the transactions by
the customer.
(n) In the event that you have been notified by MD that the
Prospectus becomes materially deficient, you will suspend sales until such time
as the Prospectus is appropriately amended or supplemented. You will deliver
the amended Prospectus or any supplements thereto to all prospective purchasers
and to purchasers who acquired Interests prior to the date you suspended sales.
(o) You have conducted your own independent due diligence inquiry and
have concluded that all material facts are adequately and accurately disclosed
and, prior to executing a purchase order in the Interests, will inform the
prospective purchaser of all pertinent facts relating to the liquidity of the
Interests during the life of the Partnership.
(p) Your representations, warranties and covenants as contained in
this Section 3 will continue in effect throughout the Offering Period.
Section 4. Subscriptions and Closing.
(a) You acknowledge and agree that MD has reserved the right to
reject or reduce any subscription and that subscriptions for Interests will be
accepted by MD only from investors who in the judgment of MD meet the
appropriate suitability standards set forth in the Prospectus and the
Subscription Agreement.
(b) All Subscription Agreements and all checks received in payment of
the purchase price for Interests received by you shall be subject to, and MD
and you hereby agree that you each shall act in accordance with, the following
provisions:
(i) Upon receipt of each Subscription Agreement and check, you
shall, by noon of the business day following your receipt thereof,
forward to NationsBank, Texas, N.A., Tyler, Texas or other escrow agent
designated by MD (the "Escrow Agent") (a) a copy of that Subscription
Agreement, retaining in your possession
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the original executed Subscription Agreement, and (b) that check for
deposit in a separate escrow account with the Escrow Agent, to be held
therein in accordance with the terms of the Escrow Agreement between MD
and the Escrow Agent and to be released only in accordance with the
Escrow Agreement; and
(ii) MD shall, by noon of the second business day following its
receipt of that copy of the Subscription Agreement, advise you by
telegram, telecopy or other similar means of telecommunications or by
telephone (confirmed in writing), if MD initially accepts or rejects the
subscription evidenced by that Subscription Agreement because that
subscriber is considered not suitable for Interests, and if that
subscription has been rejected by MD, MD shall, promptly after advising
you of that rejection, direct the Escrow Agent to return to you the
subscriber's check, and you shall return the originally executed
Subscription Agreement and that check to the subscriber.
(c) MD will notify you of the closing of the offering of Interests in
the Partnership and the date as of which the Partnership is to be funded with
subscription proceeds held under the Escrow Agreement. A closing (the
"Closing") will be scheduled to be held at the offices of MD, 0000 X. Xxxxxxxx,
Xxxxx, Xxxxx 00000, as soon as practicable after the date on which you shall
have been notified of the closing of the offering of Interests in the
Partnership, or on such date and at such place as MD may determine (the
"Closing Date").
(d) The right of the Partnership to use funds deposited in the
Partnership account for purposes other than the payment of commissions and fees
shall be subject to the accuracy of and the compliance by MD with its
representations, warranties and covenants set forth herein, to its performance
of its obligations hereunder and to the satisfaction at the Closing with
respect to the Partnership of each of the following further conditions:
(i) You shall have received a copy of the opinion of Xxxxxx &
Xxxxxx L.L.P., counsel to MD and the Partnership, as to certain federal
income tax matters discussed under "Tax Aspects" in the Prospectus,
which opinion shall be reasonably satisfactory to you and your counsel
as of the Closing Date.
(ii) You shall have received a blue sky memorandum prepared by
Xxxxxx & Xxxxxx L.L.P. with respect to the Partnership, to the effect
that the Interests have been duly registered or qualified for sale under
the securities or blue sky laws of the states in which, in accordance
with such memorandum, offers and sales of the Interests may be made to
investors (being those states with respect to which you and other
Soliciting Dealers requested that MD use its reasonable efforts to
register or qualify the Interests for offering and sale under the
securities or blue sky laws of such states pursuant to Section 5(e)
hereof).
(iii) All proceedings and documents in connection with the
transactions contemplated by the Prospectus and this Agreement shall be
reasonably satisfactory in form and substance to you and your counsel,
and MD and the Partnership shall use their reasonable efforts to ensure
that you and your counsel shall have received such other documents in
connection with such transactions as you or they may reasonably request.
(iv) You and your counsel shall have received a letter or
letters from Xxxxxx & Xxxxxx L.L.P. in form and scope reasonably
satisfactory to you and your counsel as to the due organization of the
Partnership under the law of Delaware, the due admission of the Limited
Partners or General Partners to the Partnership, the due organization of
MD under Delaware law, the qualification of the Partnership and MD to
conduct business in Texas as a foreign limited partnership and
corporation, respectively, the due execution of this Agreement by the
Partnership and MD and the due execution of the Agreement of Partnership
of the Partnership by MD.
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Section 5. Covenants of MD. MD covenants with you that:
(a) MD will deliver to you, at MD's sole expense, such copies of the
Prospectus and related Subscription Agreements and Sales Literature as you may
reasonably request.
(b) If any event that occurs before the Closing Date and that relates
to or affects the business or condition (financial or other) of MD or the
Partnership makes it necessary to amend or supplement the Prospectus or the
Registration Statement in order that the Prospectus or the Registration
Statement will not contain 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 light of the circumstances existing at the time it is delivered
to a subscriber, MD will (i) notify you of the occurrence of such event, (ii)
prepare, file, transmit and use its best efforts to cause to become effective
(to the extent appropriate) any such required amendments or supplements to the
Prospectus or the Registration Statement, (iii) advise you, promptly after MD
receives notice thereof, of the time when any post-effective amendment to the
Registration Statement has become effective or of the time when any amendment
or supplement to the Prospectus has been filed and (iv) promptly prepare and
furnish to you a reasonable number of copies of the amendments of, or
supplements to, the Prospectus or the Registration Statement.
(c) MD will notify you immediately and confirm the notice in writing
of the issuance by the Commission or by any state securities administrator of
any stop order suspending the effectiveness of any registration or
qualification of the Interests for sale or enjoining the sale of the Interests
or of the initiation of any proceedings for that purpose. MD will make every
reasonable effort to prevent the issuance of any such stop order and, if any
such stop order shall at any time be issued, to obtain the lifting thereof at
the earliest possible moment.
(d) As soon as practicable after the receipt of any Subscription
Agreements, MD will approve or reject such subscriptions and notify you of the
same.
(e) In addition to those jurisdictions in which the Blue Sky
Memorandum indicates that you may offer (or solicit offers) for Interests, MD
will use its reasonable efforts to register or qualify the Interests for
offering and sale under the securities or blue sky laws of such additional
jurisdictions as you may request, will furnish all such information and
documents as may be reasonably necessary for such purpose and will notify you
in writing as to the effective date of such registrations or qualifications as
soon as practicable after the receipt or confirmation thereof; provided that
you shall have specified and made such request in writing to MD and the Dealer
Manager with respect to each additional jurisdiction in which you intend to
offer any of the Interests for sale, or solicit any offers to subscribe for or
buy any of the Interests, or otherwise negotiate with any person in respect of
any of the Interests, and MD and the Dealer Manager shall have no duty,
responsibility, liability or obligation to you under this subsection (e) or any
other provision hereof with respect to any other jurisdiction. MD will
undertake to file all reports required to be filed subsequent to completion of
the offering of the Interests and otherwise to continue to comply with the
securities or blue sky laws of each such jurisdiction.
Section 6. Payment of Expenses and Fees.
(a) Except as specifically provided elsewhere in this Agreement, you,
the Dealer Manager, MD and the Partnership will pay their own expenses incident
to the transactions contemplated by this Agreement, including fees of their
counsel.
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(b) Prior to the time that $1,000,000 or more of subscription funds
for the Partnership are received and accepted, MD may, but is not obligated to,
advance from MD's own funds the sales commissions and due diligence fees which
would otherwise be payable in connection with subscription funds received and
accepted prior to such time; provided that such advance may only be paid with
respect to subscriptions that have been accepted by MD. Any such advancement
shall be made initially to the Dealer Manager and the Dealer Manager shall
immediately reallow to you such portion of the advancement as represents sales
commissions and due diligence fees which would otherwise be payable to you. In
the event that either (i) subscription funds of $1,000,000 or more are not
received by the termination of the Offering Period with respect to Interests in
the Partnership or (ii) MD otherwise elects not to close the offering of the
Interests in the Partnership, you will promptly upon notice transmit to MD
funds in the amount of the sales commissions and due diligence fees advanced to
you by means of such reallowance.
(c) Upon the receipt and acceptance of $1,000,000 in subscriptions
for the Partnership, MD may, but is not obligated to, advance from its own
funds prior to the Closing of the offering of Interests in the Partnership
sales commissions and due diligence fees relating to subscriptions solicited by
you; provided that such advance may only be paid with respect to subscriptions
that have been accepted by MD and for which the subscription funds have cleared
at the office of the Escrow Agent. Any such advancement shall be made
initially to the Dealer Manager and the Dealer Manager shall immediately
reallow to you such advancement.
(d) In the event that MD makes an advance of sales commissions and
due diligence fees pursuant to Section 6(b) or (c) above, you hereby agree that
(i) prior to the Closing, MD retains the right in its sole discretion to refund
to any subscriber solicited by you the full amount of the subscription funds
transmitted by that subscriber and (ii) in the event that MD refunds
subscription funds to a subscriber solicited by you, you will promptly upon
receipt of notice of that refund transmit to MD funds in the amount of the
sales commissions and due diligence fees advanced to you by means of such
reallowance to the extent that such relate to your acceptance of an order for
Interests from such subscriber.
(e) If the Closing for the sale of Interests in the Partnership
occurs, as compensation for your services under this Agreement MD will pay from
its own funds at that Closing, to the Dealer Manager and the Dealer Manager
shall immediately reallow to you (i) cash sales commissions based on eight
percent (8%) of the sales price of Interests sold by you and (ii) you may also
be reimbursed up to one-half percent ( 1/2%) of the sales price for Interests
sold by you for actual expenses incurred in affirmatively discharging your due
diligence responsibilities pursuant to Rule 2810 of the NASD Conduct Rules and
its subsections, less any sales commissions and due diligence fees previously
reallowed to you prior to that Closing under Section 6(b) or (c) above, except
that you will receive no such sales commissions or due diligence fees for
Interests sold to (i) officers, directors or employees of MD or affiliates
thereof, (ii) affiliates of the Managing Partner or (iii) any of your officers,
directors, employees or registered representatives. No sales commissions or due
diligence fees will be paid on subscriptions returned for any reason to
subscribers prior to that Closing.
Section 7. Conditions to Obligations of Soliciting Dealer. Your
obligations under this Agreement are subject to the following:
(a) the accuracy of and compliance with the representations and
warranties of MD and the Dealer Manager made in Section 2 hereof and the
performance by MD, individually and in its capacity as Managing Partner, of all
material obligations under this Agreement; and
(b) the absence, on the Closing Date, of any stop order issued under
the Act suspending the use of the Prospectus or the sale of the Interests or of
the initiation or the threatened initiation of any proceedings therefor.
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If any of the conditions specified in this Section 7 shall not have been
fulfilled, or cannot be fulfilled on or prior to the Closing Date with respect
to the Partnership, this Agreement and all of your obligations under it, other
than those contained in Section 9 hereof, may be terminated by you by notifying
MD of such termination in writing or by telegram at or prior to the Closing
with respect to the Partnership, and any such termination shall be without
liability of any party to any other party except as otherwise provided in
Section 9 hereof.
Section 8. Conditions to Obligations of MD and the Dealer Manager. The
obligations of MD and the Dealer Manager under this Agreement are subject to
the following:
(a) the accuracy of and compliance with your representations and
warranties made in Section 3 hereof and the performance by you of all material
obligations under this Agreement;
(b) the absence, on the Closing Date with respect to the Partnership,
of any stop order issued under the Act suspending the use of the Prospectus or
the sale of the Interests or of the initiation or the threatened initiation of
any proceedings therefor; and
(c) if the Partnership elects in its discretion to offer rescission
to any subscriber because (i) any of the conditions described in this Agreement
shall not have been fulfilled or (ii) other circumstances arise subsequent to
the date hereof that in the judgment of MD require that such an offer be made,
in either case because of any action or inaction taken or failed to be taken by
you in connection with your offering or sale of the Interests, you agree to
return any sales commissions and due diligence fees received by you with
respect to any purchaser who in fact rescinds in response to such offer,
promptly upon written notice of that rescission from the Partnership.
If any of the conditions specified in this Section 8 shall not have been
fulfilled, or cannot be fulfilled on or prior to the Closing Date with respect
to the Partnership, this Agreement and all obligations of the Partnership and
MD under it, other than those contained in Section 9 hereof, may be terminated
by MD by notifying you of that termination in writing or by telegram at or
prior to the Closing and any such termination shall be without liability of any
party to any other party except as otherwise provided in Section 9 hereof.
Section 9. Indemnification.
(a) MD will indemnify and hold you harmless against any losses,
claims, damages or liabilities, joint or several, to which you may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement of any material fact contained in the Registration
Statement, the Prospectus or any Sales Literature or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading (other than any untrue statement or omission made in reliance upon
and in conformity with information furnished to MD or the Partnership by or on
behalf of you, your officers, directors or controlling persons or at your or
their request specifically for use in the preparation of the Registration
Statement, the Prospectus or any Sales Literature or any amendment thereof or
supplement thereto); provided that the foregoing indemnity is subject to the
condition that, insofar as it relates to any untrue statement or omission made
in the Prospectus but eliminated or remedied in an amendment thereof or
supplement thereto available to you prior to delivery of written confirmation
of sale, such indemnity shall not inure to the benefit of any person from whom
the person asserting any such loss, claim, damage or liability purchased the
Interests that are the subject thereof (or to the benefit of any person who
controls any such person), if a copy of the amendment or supplement to the
Prospectus was not sent or given to that person with or prior to the written
confirmation of the sale of those Interests to that person or (ii) a breach by
MD or the
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Partnership of any of its respective representations, warranties, agreements or
covenants contained in this Agreement; and MD will reimburse you for all legal
or other expenses (including reasonable expenses of internal and outside
counsel) reasonably incurred by you in connection with defending any such
action or claim. The agreement of indemnity in this Section 9(a) and in
Section 9(b) below shall be in addition to any liability that MD or the
Partnership may otherwise have and shall extend upon the same terms and
conditions to each person, if any, who controls you and shall apply whether or
not any negligent act or omission by you is alleged or proven; provided,
however, that neither MD nor the Partnership shall be responsible under this
Agreement for any losses, damages or liabilities to the extent they are found
in a final judgment of a court of competent jurisdiction to have resulted
solely from your gross negligence or willful misconduct in performing services
hereunder.
(b) The Partnership shall indemnify you for any losses, claims,
damages or liabilities relating to the Partnership and to which you may become
subject due to an alleged violation of federal or state securities laws and
which arise out of or are based upon the items set forth in Sections 9(a)(i)
and (ii) above (and are subject to the same conditions and limitations set
forth in 9(a)(i) and (ii) above) if (i) there has been a successful
adjudication on the merits of each count involving alleged securities laws
violations as to you, (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to you or (iii) a court of
competent jurisdiction approves a settlement of the claims against you. In
connection with any claim for indemnification for federal or state securities
law violations under this Section 9(b), you shall place before such court the
positions of the Securities and Exchange Commission, the Securities Commission
of the State of Texas and any other applicable regulatory authority with
respect to such indemnification for securities law violations.
(c) You agree to indemnify and hold harmless the Dealer Manager, MD
and the Partnership against any losses, claims, damages or liabilities, joint
or several, to which any of them may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement of
a material fact made by you with respect to your offering of the Interests,
(ii) any untrue statement of a material fact contained in the Registration
Statement, the Prospectus or any Sales Literature or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, but only to the extent that such untrue statement or omission was
made in reliance upon and in conformity with information furnished to MD or the
Partnership by or on behalf of you, your officers, directors or controlling
persons or at your or their request for use in the preparation of the
Registration Statement, the Prospectus or any Sales Literature or an amendment
thereof or supplement thereto or (iii) a breach by you of any of your
representations, warranties, covenants or agreements contained in this
Agreement; and you will reimburse the Dealer Manager, MD and the Partnership
for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such action or claim. The
agreement of indemnity contained in this subsection (c) shall be in addition to
any liability which you may otherwise have and shall extend, upon the same
terms and conditions, to each partner of the Partnership and to each officer,
director and other person, if any, who controls either the Dealer Manager or
MD.
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(d) Within seven days after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
that indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under that subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under that subsection. In case any such
action shall be brought against any indemnified party, and the indemnified
party shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and to the extent that
it shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and
retention of such counsel, the indemnifying party shall not be liable to such
indemnified party under such part for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation unless (i) the employment by the
indemnified party of separate counsel shall have been authorized in writing in
advance by an indemnifying party in connection with the defense of such action,
(ii) the indemnifying parties shall not have employed counsel to have charge of
the defense of such action, (iii) such indemnified party shall have reasonably
concluded that there may be one or more defenses available to it which are
different from or additional to those available to one or more of the
indemnifying parties, or (iv) such indemnified party shall have concluded that
there is any material conflict of interest such that representation of the
indemnifying party and the indemnified party would not be in the best interests
of the indemnified party. Notwithstanding anything to the contrary in this
Section 9, the indemnifying party shall not be liable for any settlement of a
claim or action without its written consent.
(e) To provide for just and equitable contribution in any action in
which a claim for indemnification is made pursuant to this Section 9, but when
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last appeal) that indemnification may not be enforced in that
case notwithstanding that this Section 9 provides for indemnification in that
case, all the parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that you are responsible for the portion
represented by the percentage that the sales commissions and due diligence fees
received by you bears to the gross proceeds of the offering of the Interests,
and so that the Partnership (to the extent permitted by subsection (b) of this
Section 9) the Dealer Manager and MD are responsible for the remaining portion;
provided, however, that no person found guilty (by the entry of a final
judgment or decree by a court of competent jurisdiction) of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not similarly found guilty of
such fraudulent misrepresentation. This subsection (e) shall not be operative
as to you to the extent that the Partnership, the Dealer Manager or MD or any
person who controls the Partnership, the Dealer Manager or MD within the
meaning of the Act is entitled to receive or has received indemnification under
this Section 9.
Section 10. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates delivered pursuant to this Agreement
will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of you, the Dealer Manager or MD, and will
survive the Closing.
Section 11. Notices. All communications hereunder shall be in writing
and, if sent to you, will be mailed, delivered or telegraphed and confirmed to
you at the address set forth on the signature page hereof, or if sent to Dealer
Manager, MD or the Partnership will be mailed, delivered or telegraphed and
confirmed to the Dealer Manager, MD or the Partnership at:
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Xxxxxxxxx Securities, Inc.
Xxxxxxxxx Development Corporation
0000 X. Xxxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: A. Xxxxxxx Xxxxx
Section 12. Parties. This Agreement will inure to the benefit of and
be binding upon you, the Dealer Manager, MD, the Partnership and your and their
respective successors, heirs and representatives. This Agreement and its
conditions and provisions are intended to be and are for the sole and exclusive
benefit of the parties to it and their respective successors, heirs and
representatives and not for the benefit of any other person, firm or
corporation unless otherwise expressly stated.
Section 13. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Texas.
Section 14. Modifications. No provision of this Agreement may be
changed or terminated except by a writing signed by the party or parties to be
charged therewith.
Section 15. Waiver. Any party to this Agreement may waive compliance
by any other party with any of the terms, provisions and conditions set forth
in this Agreement; provided, however, that any such waiver must be in a writing
specifically setting forth the provisions of this Agreement waived thereby.
Section 16. Entire Agreement. This Agreement contains the entire
agreement among the parties to it and is intended to supersede any and all
prior agreements among those parties relating to the same subject matter.
Section 17. Invalidity. In the event any provision of this Agreement
shall be held to be invalid in any circumstance, that invalidity shall not
affect any other provision of this Agreement.
Section 18. Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
Section 19. Assignment. No party may assign its rights or obligations
under this Agreement without the prior written consent of each other party
hereto, except that MD may assign its rights and obligations under this
Agreement in connection with a merger, consolidation, reorganization or other
similar transaction.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
you, the Dealer Manager, MD and the Partnership, all in accordance with its
terms.
Sincerely,
XXXXXXXXX DEVELOPMENT CORPORATION
By:
------------------------------
Its:
------------------------------
XXXXXXXXX ENERGY PARTNERS 97-A, L.P.
DRILLING PROGRAM
By: Xxxxxxxxx Development Corporation
Managing General Partner
By:
-----------------------
Its:
-----------------------
XXXXXXXXX SECURITIES, INC.
By:
------------------------------
Its:
------------------------------
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Confirmed, accepted and agreed to as of
the date first above written.
----------------------------------------
a corporation incorporated under the laws
of the State of
------------------------
By:
---------------------------------
Name:
--------------------------
Title:
--------------------------
Address for Notice:
---------------------------------
---------------------------------
---------------------------------
Copy to:
---------------------------------
---------------------------------
---------------------------------
