Exhibit 1.1
EXCO RESOURCES, INC.
Shares
of Common Stock
Underwriting Agreement
,
2006
J.P. Morgan
Securities Inc.
Bear, Stearns & Co. Inc.
Goldman, Sachs & Co.
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
EXCO
Resources, Inc., a Texas corporation (the "Company"), proposes
to issue and sell to the several Underwriters listed in
Schedule 1 hereto (the "Underwriters"), for whom you are
acting as representatives (the "Representatives"), an aggregate
of shares
of common stock, par value $0.001 per share, of the Company (the
"Underwritten Shares") and, at the option of the Underwriters, up
to an
additional shares
of common stock of the Company (the "Option Shares"). The
Underwritten Shares and the Option Shares are herein referred to as
the "Shares". The shares of common stock of the Company to be
outstanding after giving effect to the sale of the Shares are
herein referred to as the "Stock".
Immediately
prior to the closing of the sale of the Underwritten Shares, EXCO
Holdings, Inc. ("Holdings") will merge with and into the
Company with the Company as the surviving corporation (the
"Merger"), pursuant to and on the terms and conditions contained in
the Agreement and Plan of Merger, dated as
of ,
200 ,
between Holdings and the Company (the "Merger Agreement").
Immediately following such closing, TXOK Acquisition, Inc.
("TXOK") will redeem (the "Redemption") all of the issued and
outstanding shares of Series A Convertible Preferred Stock
issued by it, upon which TXOK will become a wholly-owned subsidiary
of the Company. The Merger, the Redemption, the sale of the
Underwritten Shares, and the application of the proceeds therefrom
are referred to as the "Transactions."
The
Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as
follows:
1.
Registration Statement . The Company has prepared and filed
with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the
"Securities Act"), a registration statement (File
No. )
including a prospectus, relating to the Shares. Such registration
statement, as amended at the time it becomes effective, including
the information, if any, deemed pursuant to Rule 430A or 430C
under the Securities Act to be part of the registration statement
at the time of its effectiveness ("Rule 430 Information"), is
referred to herein as the "Registration Statement"; and as used
herein, the term "Preliminary Prospectus" means each prospectus
included in such registration statement (and any amendments
thereto) before it becomes effective, any prospectus filed with the
Commission pursuant to Rule 424(a) under the Securities
Act and the prospectus included in the Registration Statement at
the time of its effectiveness that omits Rule 430 Information,
and the term "Prospectus" means the prospectus in the form first
used (or made available upon the request of purchasers pursuant to
Rule 173 under the Securities Act) in connection with
confirmation of sales of the Shares. If the Company has filed an
abbreviated registration statement pursuant to
Rule 462(b)
under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein
to the term "Registration Statement" shall be deemed to include
such Rule 462 Registration Statement. Capitalized terms used
but not defined herein shall have the meanings given to such terms
in the Registration Statement and the Prospectus.
At [A.M.]
[P.M.] (Eastern time) on the date of this Agreement (the "Time of
Sale"), the Company had prepared the following information
(collectively with the information referred to in the next
succeeding sentence, the "Time of Sale Information"): a Preliminary
Prospectus
dated ,
2006, and each "free-writing prospectus" (as defined pursuant to
Rule 405 under the Securities Act) listed on Annex B hereto.
[In addition, you have informed us that the Underwriters have or
will orally provide the pricing information set out on Annex B to
prospective purchasers prior to confirming sales.] If, subsequent
to the date of this Agreement, the Company and the Underwriters
have determined that such Time of Sale Information included an
untrue statement of a material fact or omitted a statement of
material fact necessary to make the information therein, in the
light of the circumstances under which it was made, not misleading
and have agreed to provide an opportunity to purchasers of the
Shares to terminate their old purchase contracts and enter into new
purchase contracts, then "Time of Sale Information" will refer to
the information available to purchasers at the time of entry into
the first such new purchase contract.
2.
Purchase of the Shares by the Underwriters . (a) The
Company agrees to issue and sell the Shares to the several
Underwriters as provided in this Agreement, and each Underwriter,
on the basis of the representations, warranties and agreements set
forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the
respective number of Underwritten Shares set forth opposite such
Underwriter's name in Schedule 1 hereto at a price per share
(the "Purchase Price") of
$ .
The public offering price of the Shares is not in excess of the
price recommended by A.G. Edwards & Sons, Inc.,
acting as a "qualified independent underwriter" within the meaning
of Rule 2720 of the Rules of Conduct of the National
Association of Securities Dealers, Inc.
In
addition, the Company agrees to issue and sell the Option Shares to
the several Underwriters as provided in this Agreement, and the
Underwriters, on the basis of the representations, warranties and
agreements set forth herein and subject to the conditions set forth
herein, shall have the option to purchase, severally and not
jointly, from the Company the Option Shares at the Purchase
Price.
If
any Option Shares are to be purchased, the number of Option Shares
to be purchased by each Underwriter shall be the number of Option
Shares which bears the same ratio to the aggregate number of Option
Shares being purchased as the number of Underwritten Shares set
forth opposite the name of such Underwriter in Schedule 1
hereto (or such number increased as set forth in Section 10
hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject,
however, to such adjustments to eliminate any fractional Shares as
the Representatives in their sole discretion shall make.
The
Underwriters may exercise the option to purchase the Option Shares
at any time in whole, or from time to time in part, on or before
the thirtieth day following the date of this Agreement, by written
notice from the Representatives to the Company. Such notice shall
set forth the aggregate number of Option Shares as to which the
option is being exercised and the date and time when the Option
Shares are to be delivered and paid for which may be the same date
and time as the Closing Date (as hereinafter defined) but shall not
be earlier than the Closing Date nor later than the tenth full
business day (as hereinafter defined) after the date of such notice
(unless such time and date are postponed in accordance with the
provisions of Section 10 hereof). Any such notice shall be
given at least two Business Days prior to the date and time of
delivery specified therein.
(b) The
Company understands that the Underwriters intend to make a public
offering of the Shares as soon after the effectiveness of this
Agreement as in the judgment of the Representatives is
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advisable, and initially to offer
the Shares on the terms set forth in the Prospectus. The Company
acknowledges and agrees that the Underwriters may offer and sell
Shares to or through any affiliate of an Underwriter and that any
such affiliate may offer and sell Shares purchased by it to or
through any Underwriter.
(c) It
is understood that approximately [ ] Shares
(the "Directed Shares") will initially be reserved by the several
Underwriters for offer and sale upon the terms and conditions set
forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities
Dealers, Inc. (the "NASD") to directors, officers and
employees of the Company who have heretofore delivered to Bear,
Stearns & Co. Inc. ("Bear Stearns") offers or
indications of interest to purchase Shares in form satisfactory to
Bear Stearns (such program, the "Directed Share Program") and that
any allocation of such Shares among such persons will be made in
accordance with timely directions received by Bear Stearns from the
Company; provided that, except as expressly provided under
Section 7(b) of this Agreement, under no circumstances
will Bear Stearns or any Underwriter be liable to the Company or to
any such person for any action taken or omitted in good faith in
connection with such Directed Share Program. It is further
understood that any Shares which are not orally confirmed for
purchase by such persons by 8 A.M. on the first trading day
after the date of this Agreement will be offered by the
Underwriters to the public upon the terms and conditions set forth
in the Prospectus.
(d) Payment
for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the
Representatives, in the case of the Underwritten Shares, at the
offices of Simpson Thacher & Bartlett LLP at
10:00 A.M. New York City time
on ,
2006, or at such other time or place on the same or such other
date, not later than the fifth business day thereafter, as the
Representatives and the Company may agree upon in writing or, in
the case of the Option Shares, on the date and at the time and
place specified by the Representatives in the written notice of the
Underwriters' election to purchase such Option Shares. The time and
date of such payment for the Underwritten Shares is referred to
herein as the "Closing Date" and the time and date for such payment
for the Option Shares, if other than the Closing Date, are herein
referred to as the "Additional Closing Date".
Payment
for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against
delivery to the Representatives for the respective accounts of the
several Underwriters of the Shares to be purchased on such date in
definitive form registered in such names and in such denominations
as the Representatives shall request in writing not later than two
full business days prior to the Closing Date or the Additional
Closing Date, as the case may be, with any transfer taxes payable
in connection with the sale of the Shares duly paid by the Company.
The certificates for the Shares will be made available for
inspection and packaging by the Representatives at the office of
J.P. Morgan Securities Inc. set forth above not later than
1:00 P.M., New York City time, on the business day prior to
the Closing Date or the Additional Closing Date, as the case may
be.
(e) The
Company acknowledges and agrees that the Underwriters are acting
solely in the capacity of an arm's length contractual counterparty
to the Company with respect to the offering of Shares contemplated
hereby (including in connection with determining the terms of the
offering) and not as a financial advisor or a fiduciary to, or an
agent of, the Company or any other person. Additionally, neither
the Representatives nor any other Underwriter is advising the
Company or any other person as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction. The Company
shall consult with its own advisors concerning such matters and
shall be responsible for making its own independent investigation
and appraisal of the transactions contemplated hereby, and the
Underwriters shall have no responsibility or liability to the
Company with respect thereto. Any review by the Underwriters of the
Company, the transactions contemplated hereby or other matters
relating to such transactions will be performed solely for the
benefit of the Underwriters and shall not be on behalf of the
Company.
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3.
Representations and Warranties of the Company . The Company
represents and warrants to each Underwriter that:
(a)
Preliminary Prospectus. No order preventing or suspending
the use of any Preliminary Prospectus has been issued by the
Commission, and each Preliminary Prospectus, at the time of filing
thereof, complied in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided that the Company makes no representation and
warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use in any Preliminary
Prospectus.
(b)
Time of Sale Information . The Time of Sale Information, at
the Time of Sale did not, and at the Closing Date and at the
Additional Closing Date, as the case may be, will not, contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in
such Time of Sale Information. No statement of material fact
included in the Prospectus has been omitted from the Time of Sale
Information and no statement of material fact included in the Time
of Sale Information that is required to be included in the
Prospectus has been omitted therefrom.
(c)
Issuer Free Writing Prospectus . Other than the Preliminary
Prospectus and the Prospectus, the Company (including its agents
and representatives, other than the Underwriters in their capacity
as such) has not made, used, prepared, authorized, approved or
referred to and will not make, use, prepare, authorize, approve or
refer to any "written communication" (as defined in Rule 405
under the Securities Act) that constitutes an offer to sell or
solicitation of an offer to buy the Shares (each such communication
by the Company or its agents and representatives (other than a
communication referred to in clause (i) below) an "Issuer
Free Writing Prospectus") other than (i) any document not
constituting a prospectus pursuant to
Section 2(a)(10)(a) of the Securities Act or
Rule 134 under the Securities Act or (ii) the documents
listed on Annex B hereto and other written communications approved
in writing in advance by the Representatives. Each such Issuer Free
Writing Prospectus complied in all material respects with the
Securities Act, has been filed in accordance with the Securities
Act (to the extent required thereby) and, when taken together with
the Preliminary Prospectus accompanying, or delivered prior to
delivery of, such Issuer Free Writing Prospectus, did not, and at
the Closing Date and at the Additional Closing Date, as the case
may be, will not, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided that the Company
makes no representation and warranty with respect to any statements
or omissions made in each such Issuer Free Writing Prospectus in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use in any Issuer Free
Writing Prospectus.
(d)
Registration Statement and Prospectus. The Registration
Statement has been declared effective by the Commission. No order
suspending the effectiveness of the Registration Statement has been
issued by the Commission and no proceeding for that purpose or
pursuant to Section 8A of the Securities Act against the
Company or related to the offering has been initiated or threatened
by the Commission; as of the applicable effective date of the
Registration Statement and any amendment thereto, the Registration
Statement complied and will comply in all material
4
respects
with the Securities Act, and did not and will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein not misleading; and as of the date of the
Prospectus and any amendment or supplement thereto and as of the
Closing Date and as of the Additional Closing Date, as the case may
be, the Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in
the Registration Statement and the Prospectus and any amendment or
supplement thereto.
(e)
Financial Statements. The financial statements and the
related notes thereto of EXCO Holdings II, Inc., Holdings,
ONEOK Energy Resources Company, TXOK, North Coast Energy, Inc.
and their respective consolidated subsidiaries included in the
Registration Statement, the Time of Sale Information and the
Prospectus comply in all material respects with the applicable
requirements of the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Exchange Act"), as
applicable, and present fairly the financial position of EXCO
Holdings II, Inc., Holdings, ONEOK Energy Resources Company,
TXOK, North Coast Energy, Inc. and their respective
subsidiaries as of the dates indicated and the results of their
operations and the changes in their cash flows for the periods
specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby, and the
supporting schedules included in the Registration Statement present
fairly the information required to be stated therein; the other
financial information included in the Registration Statement, the
Time of Sale Information and the Prospectus have been derived from
the accounting records of EXCO Holdings II, Inc., Holdings,
ONEOK Energy Resources Company, TXOK, North Coast
Energy, Inc., the Company and their respective subsidiaries
and presents fairly the information shown thereby; and the pro
forma financial information and the related notes thereto
included in the Registration Statement, the Time of Sale
Information and the Prospectus have been prepared in accordance
with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the assumptions underlying such
pro forma financial information are reasonable and are set
forth in the Registration Statement, the Time of Sale Information
and the Prospectus.
(f)
No Material Adverse Change. Since the date of the most
recent financial statements of Holdings included in the
Registration Statement, the Time of Sale Information and the
Prospectus, (i) there has not been any change in the capital
stock or long-term debt of Holdings, TXOK or any of their
respective subsidiaries, or any dividend or distribution of any
kind declared, set aside for payment, paid or made by the Company,
Holdings or TXOK on any class of capital stock, or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the business, properties,
management, financial position, stockholders' equity, results of
operations or prospects of Holdings, TXOK and their respective
subsidiaries taken as a whole; (ii) neither Holdings, TXOK nor
any of their respective subsidiaries has entered into any
transaction or agreement that is material to Holdings, TXOK and
their respective subsidiaries taken as a whole or incurred any
liability or obligation, direct or contingent, that is material to
Holdings, TXOK and their respective subsidiaries taken as a whole;
and (iii) neither Holdings, TXOK nor any of their respective
subsidiaries has sustained any material loss or interference with
its business from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labor disturbance or
dispute or any action, order or decree of any court or arbitrator
or
5
governmental or regulatory authority, except in
each case as otherwise disclosed in the Registration Statement, the
Time of Sale Information and the Prospectus.
(g)
Organization and Good Standing. The Company has been duly
incorporated and is an existing corporation in good standing under
the laws of Texas, and Holdings has been duly incorporated and is
an existing corporation in good standing under the laws of
Delaware; each of the Company and Holdings has power and authority
(corporate and other) to own its properties and conduct its
business as described in the Registration Statement, the Time of
Sale Information and the Prospectus; and each of the Company and
Holdings is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or otherwise),
properties or results of operations, after giving effect to the
Transactions, of the Company and the Company's subsidiaries taken
as a whole (a "Material Adverse Effect"). The Company does not own
or control, directly or indirectly, any corporation, association or
other entity other than the subsidiaries listed in
Exhibit 21.1 to the Registration Statement; Holdings does not
own or control, directly or indirectly, any corporation,
association or other entity other than the Company. Each subsidiary
of the Company, TXOK and each subsidiary of TXOK has been duly
incorporated or formed and is an existing corporation, limited
liability company or partnership, as the case may be, in good
standing under the laws of the jurisdiction of its incorporation or
formation, with corporate, limited liability company or partnership
power and authority, as the case may be, to own its properties and
conduct its business as described in the Registration Statement,
the Time of Sale Information and the Prospectus; and each
subsidiary of the Company, TXOK and each subsidiary of TXOK is duly
qualified to do business as a foreign corporation or entity in good
standing in all other jurisdictions in which its ownership or lease
of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse
Effect; and all of the issued and outstanding capital stock or
equity interest of each subsidiary of the Company, TXOK and each
subsidiary of TXOK has been duly authorized and validly issued and
is fully paid and nonassessable.
(h)
Capitalization. Holdings has an authorized capitalization as
set forth in the Registration Statement, the Time of Sale
Information and the Prospectus under the heading "Capitalization";
all the outstanding shares of capital stock of the Company and
Holdings have been duly and validly authorized and issued and are
fully paid and non-assessable and are not subject to any
pre-emptive or similar rights; except as described in or expressly
contemplated by the Registration Statement, the Time of Sale
Information and the Prospectus, there are no outstanding rights
(including, without limitation, pre-emptive rights), warrants or
options to acquire, or instruments convertible into or exchangeable
for, any shares of capital stock or other equity interest in the
Company, Holdings or any of their respective subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of
any kind relating to the issuance of any capital stock of the
Company, Holdings or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options;
the capital stock of Holdings conforms, and the capital stock of
the Company on the Closing Date and the Additional Closing Date
will conform, in all material respects to the description thereof
contained in the Registration Statement, the Time of Sale
Information and the Prospectus; and all the outstanding shares of
capital stock or other equity interests of TXOK and of each
subsidiary of Holdings and TXOK are owned directly or indirectly by
Holdings or TXOK, free and clear of any lien, charge, encumbrance,
security interest, restriction on voting or transfer or any other
claim of any third party, except for such liens, charges,
encumbrances, security interests, restrictions or claims
(i) under the Third Amended and Restated Credit Agreement
among EXCO Resources, Inc., EXCO Operating, LP, North Coast
Energy, Inc. and North Coast Energy Eastern, Inc., as
Borrowers, and Bank One, NA, as
6
Administrative Agent for itself and the Lenders
defined therein, dated January 27, 2004, as amended,
(ii) under the indenture, dated as of January 20, 2004,
among the Company, certain guarantors and Wilmington Trust Company,
as Trustee, (iii) under the Credit Agreement among EXCO
Holdings Inc., as Borrower, JPMorgan Chase Bank, N.A., as
Administrative Agent, and the Lenders defined therein, dated as of
October 3, 2005; (iv) under the Credit Agreement for the
Senior Secured Revolving Credit Facility among TXOK
Acquisition, Inc., as Borrower, certain of its subsidiaries as
Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, and
the Lenders defined therein, dated September 27, 2005; or
(v) under the Credit Agreement for the Senior Secured Term
Credit Facility among TXOK Acquisition, Inc., as Borrower,
certain of its subsidiaries as Guarantors, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the Lenders defined therein,
dated September 27, 2005, and except (with respect to the date
hereof) for the Series A Convertible Preferred Stock of
TXOK.
(i)
Due Authorization. The Company has full right, power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder; each of the Company and Holdings has full
right, power and authority to execute and deliver the Merger
Agreement (together with this Agreement, the "Transaction
Documents") and to perform its obligations thereunder; and all
action required to be taken for the due and proper authorization,
execution and delivery of each of the Transaction Documents and the
consummation of the transactions contemplated thereby (including
the Redemption) has been duly and validly taken.
(j)
Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(k)
The Shares. The Shares to be issued and sold by the Company
hereunder have been duly authorized by the Company and, when issued
and delivered and paid for as provided herein, will be duly and
validly issued and will be fully paid and nonassessable and will
conform to the descriptions thereof in the Time of Sale Information
and the Prospectus; and the issuance of the Shares is not subject
to any preemptive or similar rights.
(l)
Other Transaction Documents. The Merger Agreement has been
duly authorized, executed and delivered by each of the Company and
Holdings. The Merger Agreement is a valid and legally binding
agreement enforceable against the Company and Holdings in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws affecting
enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
(m)
Descriptions of the Transaction Documents. Each Transaction
Document conforms in all material respects to the description
thereof contained in the Registration Statement, the Time of Sale
Information and the Prospectus.
(n)
No Violation or Default. None of Holdings, TXOK, or any of
their respective subsidiaries is (i) in violation of its
charter or by-laws or similar organizational documents;
(ii) in default, and no event has occurred that, with notice
or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument to which Holdings, TXOK or any of
their subsidiaries is a party or by which Holdings, TXOK or any of
their subsidiaries is bound or to which any of the property or
assets of Holdings, TXOK or any of their respective subsidiaries is
subject; or (iii) in violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except, in the case of
clauses (ii) and (iii) above, for any such default or
violation that would not, individually or in the aggregate, have a
Material Adverse Effect.
(o)
No Conflicts. The execution, delivery and performance by the
Company (and, in the case of the Merger Agreement, by Holdings) of
each of the Transaction Documents, the issuance and
7
sale of
the Shares and compliance by the Company (and, in the case of the
Merger Agreement, by Holdings) with the terms of, and the
consummation of the transactions (including the Redemption)
contemplated by, the Transaction Documents will not
(i) conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Holdings, TXOK or any of
their respective subsidiaries pursuant to, any indenture, loan
agreement, mortgage, lease or other agreement or instrument to
which Holdings, TXOK or any of their respective subsidiaries is a
party or by which Holdings, TXOK or any of their subsidiaries is
bound or to which any of the property or assets of Holdings, TXOK
or any of their subsidiaries is subject, (ii) result in any
violation of the provisions of the charter or by-laws or similar
organizational documents of Holdings, TXOK or any of their
subsidiaries or (iii) result in the violation of any law or
statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority except, in the
case of clauses (i) and (iii) above, for such conflicts,
breaches or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
(p)
No Consents Required. No consent, approval, authorization,
order, registration or qualification of or with any court or
arbitrator or governmental or regulatory authority is required for
the execution, delivery and performance by the Company (and, in the
case of the Merger Agreement, by Holdings) of each of the
Transaction Documents, the issuance and sale of the Shares and
compliance by the Company (and, in the case of the Merger
Agreement, by Holdings) with the terms of, and the consummation of
the transactions (including the Redemption) contemplated by, the
Transaction Documents, except for the registration of the Shares
under the Securities Act, such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under
applicable state securities laws in connection with the purchase
and distribution of the Shares by the Underwriters, and any
consent, approval, authorization, order, registration,
qualification or other action that either has been, or prior to the
Closing Date will be, obtained or made or which, if not made, would
not, individually or in the aggregate, have a Material Adverse
Effect.
(q)
Legal Proceedings. Except as disclosed in the Registration
Statement, the Time of Sale Information and the Prospectus, there
are no pending actions, suits or proceedings against or affecting
Holdings, TXOK or any of their respective subsidiaries or
properties that, if determined adversely to Holdings, TXOK or any
or their respective subsidiaries, would, individually or in the
aggregate, have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company or Holdings to perform
their obligations under the Transaction Documents or the ability of
TXOK to consummate the Redemption; and, to the knowledge of the
Company, no such actions, suits or proceedings are threatened or
contemplated; and (i) there are no current or pending legal,
governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the
Registration Statement that are not so described in the
Registration Statement, the Time of Sale Information and the
Prospectus and (ii) there are no statutes, regulations or
contracts or other documents that are required under the Securities
Act to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus that are
not so filed as exhibits to the Registration Statement or described
in the Registration Statement, the Time of Sale Information and the
Prospectus.
(r)
Independent Accountants. PricewaterhouseCoopers LLP, who has
certified certain financial statements of the Company and its
subsidiaries, of Holdings and its subsidiaries, and of EXCO
Holdings II, Inc., is an independent registered public
accounting firm with respect to the Company and its subsidiaries,
Holdings and its subsidiaries, and EXCO Holdings II, Inc.,
within the applicable rules and regulations adopted by the
Commission and the Public Accounting Oversight Board (United
States) ("PCAOB") and as required by the Securities Act. KPMG LLP,
who has
8
certified certain financial statements of ONEOK
Energy Resources Company and its subsidiaries, is an independent
registered public accounting firm with respect to ONEOK Energy
Resources Company and its subsidiaries, within the applicable rules
and regulations adopted by the Commission and the PCAOB and as
required by the Securities Act. Ernst & Young LLP, who has
certified certain financial statements of the Company and its
subsidiaries, was an independent registered public accounting firm
with respect to the Company and its subsidiaries, within the
applicable rules and regulations adopted by the Commission and the
PCAOB and as required by the Securities Act for the year ended
December 31, 2002. Hausser + Taylor LLC, who has
certified certain financial statements of North Coast
Energy, Inc. and its subsidiaries, was an independent
registered public accounting firm with respect to North Coast
Energy, Inc. and its subsidiaries, within the applicable rules
and regulations adopted by the Commission and the PCAOB and as
required by the Securities Act for the years ended
December 31, 2002 and 2003.
(s)
Title to Real and Personal Property. Except as
disclosed in the Registration Statement, the Time of Sale
Information and the Prospectus, Holdings, TXOK and their respective
subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made
or to be made thereof by them; and except as disclosed in the
Registration Statement, the Time of Sale Information and the
Prospectus, Holdings, TXOK and their respective subsidiaries hold
any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the
use made or to be made thereof by them.
(t)
Title to Intellectual Property. Each of Holdings, TXOK
and their respective subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"intellectual property rights") necessary to conduct the business
now operated by them, or presently employed by them, other than
intellectual property rights the failure of which to possess would
not have a Material Adverse Effect, and have not received any
notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to Holdings, TXOK or any of their respective
subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect.
(u)
No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among Holdings, TXOK or any of their
subsidiaries, on the one hand, and the directors, officers,
stockholders, customers or suppliers of Holdings, TXOK or any of
their subsidiaries, on the other, that is required by the
Securities Act to be described in the Registration Statement, the
Time of Sale Information and the Prospectus and that is not so
described in such documents and in the Time of Sale
Information.
(v)
Investment Company Act. The Company is not and, after giving
effect to the Merger, the offering and sale of the Shares and the
application of the proceeds thereof as described in the
Registration Statement, the Time of Sale Information and the
Prospectus (including towards the Redemption), will not be required
to register as an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations of
the Commission thereunder (collectively, "Investment Company
Act").
(w)
Public Utility Holding Company Act. None of Holdings, TXOK
or any of their subsidiaries is a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(x)
Taxes. Holdings, TXOK and their subsidiaries have paid all
federal, state, local and foreign taxes and filed all tax returns
required to be paid or filed through the date hereof;
and
9
except
as otherwise disclosed in the Registration Statement, the Time of
Sale Information and the Prospectus, there is no tax deficiency
that has been, or could reasonably be expected to be, asserted
against Holdings, TXOK or any of their subsidiaries or any of their
respective properties or assets.
(y)
Licenses and Permits. Each of Holdings, TXOK and their
respective subsidiaries possess adequate certificates, authorities
or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to Holdings, TXOK or any of their respective
subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect.
(z)
No Labor Disputes. No labor disturbance by or dispute with
employees of Holdings, TXOK or any of their respective subsidiaries
exists or, to the best knowledge of the Company, is imminent that
is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect, and the Company is not aware of any
existing or imminent labor disturbance by, or dispute with, the
employees of any of Holdings', TXOK's or their subsidiaries'
principal suppliers, contractors or customers, except as would not
have a Material Adverse Effect.
(aa)
Compliance With Environmental Laws. Except as disclosed in
the Registration Statement and the Prospectus, none of Holdings,
TXOK nor any of their respective subsidiaries is in violation of
any statute, rule, regulation, requirement, decision or order of
any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would, individually or in the
aggregate, have a Material Adverse Effect; the Company is not aware
of any pending investigation which might lead to such a claim; and
there are no costs or liabilities associated with environmental
laws of or relating to Holdings, TXOK or any of their respective
subsidiaries except those that would not, individually or in the
aggregate, have a Material Adverse Effect.
(bb)
Compliance With ERISA. Each employee benefit plan, within
the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that is
maintained, administered or contributed to by Holdings, TXOK or any
of their affiliates for employees or former employees of Holdings,
TXOK or their affiliates has been maintained in compliance with its
terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"); no
prohibited transaction, within the meaning of Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect
to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan that
is subject to the funding rules of Section 412 of the Code or
Section 302 of ERISA, no "accumulated funding deficiency" as
defined in Section 412 of the Code has been incurred, whether
or not waived, and the fair market value of the assets of each such
plan (excluding for these purposes accrued but unpaid
contributions) exceeds the present value of all benefits accrued
under such plan determined using reasonable actuarial
assumptions.
(cc)
Disclosure Controls . Except as disclosed in the
Registration Statement, the Time of Sale Information and the
Prospectus, Holdings, TXOK and their subsidiaries maintain an
effective system of "disclosure controls and procedures" (as
defined in Rule 13a-15(e) of the Exchange Act) that is
designed to ensure that information required to be disclosed by the
Company in reports
10
that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms, including controls and procedures
designed to ensure that such information is accumulated and
communicated to the Company's management as appropriate to allow
timely decisions regarding required disclosure. Holdings, TXOK and
their subsidiaries have carried out evaluations of the
effectiveness of their disclosure controls and procedures as
required by Rule 13a-15 of the Exchange Act.
(dd)
Accounting Controls. Holdings, TXOK and their subsidiaries
maintain systems of "internal control over financial reporting" (as
defined in Rule 13a-15(f) of the Exchange Act) that
comply with the requirements of the Exchange Act and have been
designed by, or under the supervision of, their respective
principal executive and principal financial officers, or persons
performing similar functions, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles,
including, but not limited to internal accounting controls
sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except
as disclosed in the Registration Statement, the Time of Sale
Information and the Prospectus, there are no material weaknesses in
the internal control of Holdings, TXOK or any of their respective
subsidiaries.
(ee)
Insurance. Holdings, TXOK and their subsidiaries have
insurance covering their respective properties, operations,
personnel and businesses, including business interruption
insurance, which insurance is in amounts and insures against such
losses and risks as are adequate to protect Holdings, TXOK and
their subsidiaries and their respective businesses; and none of
Holdings, TXOK or any of their subsidiaries has (i) received
notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be
made in order to continue such insurance or (ii) any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage at reasonable cost from similar insurers as may be
necessary to continue its business.
(ff)
No Unlawful Payments. None of Holdings, TXOK nor any of
their subsidiaries or, to the best knowledge of the Company, any
director, officer, agent, employee or other person associated with
or acting on behalf of Holdings, TXOK or any of their respective
subsidiaries has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or
is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(gg)
Compliance with Money Laundering Laws . The operations of
Holdings, TXOK and their subsidiaries are and have been conducted
at all times in compliance with applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively,
the "Money Laundering Laws") and no action, suit or proceeding by
or before any court or governmental agency, authority or body or
any arbitrator involving Holdings, TXOK or any of their respective
subsidiaries with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Company, threatened.
11
(hh)
Compliance with OFAC . None of Holdings, TXOK or any of
their respective subsidiaries, any of its subsidiaries or, to the
knowledge of the Company, any director, officer, agent, employee or
Affiliate of Holdings, TXOK or any of their respective subsidiaries
is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury ("OFAC"); and the Company will not directly or indirectly
use the proceeds of the offering of the Shares hereunder, or lend,
contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
(ii)
No Restrictions on Subsidiaries . None of TXOK or any
subsidiary of the Company or TXOK is currently prohibited, directly
or indirectly, under any agreement or other instrument to which it
is a party or is subject, from paying any dividends to Holdings (in
the case of TXOK), the Company (in the case of a subsidiary of the
Company) or TXOK (in the case of a subsidiary of TXOK) (such
company, the "parent"), from making any other distribution on its
capital stock, from repaying to the Company, Holdings or its parent
any loans or advances to it from the Company, Holdings or its
parent or from transferring any of its properties or assets to
Holdings, TXOK or any other subsidiary of Holdings or
TXOK.
(jj)
No Broker's Fees. None of Holdings, TXOK or any of their
respective subsidiaries is a party to any contract, agreement or
understanding with any person (other than this Agreement) that
would give rise to a valid claim against Holdings, TXOK or any of
their subsidiaries or any Underwriter for a brokerage commission,
finder's fee or like payment in connection with the offering and
sale of the Shares.
(kk)
No Registration Rights . Except as disclosed in the
Registration Statement, the Time of Sale Information and the
Prospectus, no person has the right to require Holdings, TXOK or
any of their subsidiaries to register any securities for sale under
the Securities Act by reason of the filing of the Registration
Statement with the Commission or the issuance and sale of the
Shares.
(ll)
No Stabilization. The Company and Holdings have not taken,
directly or indirectly, any action designed to or that could
reasonably be expected to cause or result in any stabilization or
manipulation of the price of the Shares.
(mm)
Business With Cuba. The Company and Holdings have complied
with all provisions of Section 517.075, Florida Statutes
(Chapter 92-198, Laws of Florida) relating to doing business with
the Government of Cuba or with any person or affiliate located in
Cuba.
(nn)
Margin Rules . Neither the issuance, sale and delivery of
the Shares nor the application of the proceeds thereof by the
Company as described in the Registration Statement, the Time of
Sale Information and the Prospectus will violate Regulation T,
U or X of the Board of Governors of the Federal Reserve System or
any other regulation of such Board of Governors.
(oo)
Forward-Looking Statements. No forward-looking statement
(within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act) contained in the Registration
Statement, the Time of Sale Information and the Prospectus has been
made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith.
