<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1995
REGISTRATION STATEMENT NUMBER 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TOM BROWN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
95-1949781
(I.R.S. Employer Identification No.)
P.O. BOX 2608
500 EMPIRE PLAZA BUILDING
MIDLAND, TEXAS 79701
(915) 682-9715
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
DONALD L. EVANS
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
500 EMPIRE PLAZA BUILDING
MIDLAND, TEXAS 79701
(915) 682-9715
(Name, address, including zip code and telephone
number, including area code, of agent for service)
------------------------
With Copies To:
ROBERT H. WHILDEN, JR.
VINSON & ELKINS L.L.P.
1001 FANNIN, SUITE 2300
HOUSTON, TEXAS 77002-6760
THOMAS P. MASON
ANDREWS & KURTH L.L.P.
4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value per
share(3)............................... 4,600,000 $13.94 $64,124,000 $22,112
- ---------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 600,000 shares to cover the Underwriters' over-allotment option.
(2) Estimated pursuant to Rule 457(c) solely for the purposes of calculating the
registration fee in connection with the shares of Common Stock registered
hereby, based on the average of the high and low sales price of the shares
of Common Stock reported on The Nasdaq National Market on October 2, 1995.
(3) Including associated preferred stock purchase rights. Prior to the
occurrence of certain events, the preferred stock purchase rights will not
be evidenced or traded separately from the Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED OCTOBER 5, 1995
4,000,000 SHARES
TOM BROWN, INC.
[TOM BROWN LOGO] COMMON STOCK
($.10 PAR VALUE)
All 4,000,000 shares (the "Shares") of Common Stock, $.10 par value
("Common Stock"), are being sold by Tom Brown, Inc., a Delaware corporation (the
"Company").
The Common Stock is traded on The Nasdaq National Market under the symbol
"TMBR." On October 4, 1995, the last sale price of the Common Stock as reported
on the composite tape for issues listed on The Nasdaq National Market was
$14.125 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $240,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 600,000 shares of Common Stock at the Price to Public,
less the Underwriting Discounts and Commissions shown above, solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that the Common Stock will be available for delivery on or about
, 1995 at the offices of Schroder Wertheim & Co. Incorporated, New
York, New York.
SCHRODER WERTHEIM & CO.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PETRIE PARKMAN & CO.
SALOMON BROTHERS INC
, 1995
<PAGE> 3
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <S> <C>
Prospectus Summary.................. 3 Management.......................... 20
Risk Factors........................ 9 Description of Capital Stock........ 22
Use of Proceeds..................... 11 Underwriting........................ 24
Capitalization...................... 12 Legal Matters....................... 25
Price Range of Common Stock......... 13 Experts............................. 25
Dividends........................... 13 Available Information............... 25
Selected Consolidated Financial Incorporation of Certain Documents.. 26
Data.............................. 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 15
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934. SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
TOM BROWN, INC.
CORE AREAS OF ACTIVITY
[MAP]
Immediately following the Table of Contents appearing on Page 2 of the
Prospectus is a two-page color foldout of four separate maps depicting the
Company's core areas of activity in the Wind River Basin of Wyoming and the Val
Verde Basin of Texas. The maps include state and county designations, subsurface
oil and gas formations, the Company's Wind River Gathering System, oil and gas
basins and prospects delineated by contrasting color, the Company's headquarters
designated by a star, the Company's exploration option acreage, producing
acreage and undeveloped acreage by contrasting color and a color-coded legend is
included for each core area of activity.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated by reference in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.
THE COMPANY
GENERAL
Tom Brown, Inc. (together with its subsidiaries, the "Company") is
primarily engaged in the exploration for, and the development, production and
sale of, natural gas and oil in the United States. The Company's principal
exploration, development and production activities are conducted in the Wind
River Basin of central Wyoming, the Val Verde Basin of west Texas and the
Permian Basin of west Texas and southeastern New Mexico. These areas accounted
for approximately 92% of the Company's proved reserves as of December 31, 1994.
In addition, the Company is engaged in the gathering, processing and marketing
of natural gas. As of December 31, 1994, the Company's natural gas reserves were
approximately 180 billion cubic feet ("Bcf") and its oil reserves were
approximately 4.5 million barrels ("MMBbls").
The Company was incorporated in Nevada in 1931 and was reincorporated in
Delaware in April, 1987. The executive offices of the Company are located at 508
W. Wall St., 500 Empire Plaza, Midland, Texas 79701, and its telephone number is
(915) 682-9715.
BUSINESS STRATEGY
Since 1985, the Company's principal business strategy has been to obtain
and develop long-lived reserves (having a reserve life in excess of the industry
average of 10 years) in areas where the Company has knowledge and operations
expertise. Accordingly, the Company has primarily invested in natural gas-prone
basins which the Company believes will provide the opportunity to accumulate
significant reserves at attractive prices.
The principal benefits of the Company's strategy include the ability to:
- Increase reserves at lower-than-average costs;
- Acquire large tracts of contiguous acreage with high working
interests;
- Develop economies of scale in its operations; and
- Control development and marketing decisions relating to its
properties.
In pursuing its strategic goals, the Company focuses on the following
objectives:
Maintaining a strong balance sheet. The Company emphasizes maintaining a
strong balance sheet in order to enhance its operating and financial
flexibility. The Company will use proceeds from this offering to repay all of
its outstanding long-term debt.
Achieving critical mass in core areas. The Company has assembled
additional acreage since 1986 in natural gas-prone basins, primarily in the Wind
River Basin, where the Company can utilize its geological and technical
expertise and its control of operations for the further development and
expansion of these areas. The Company has approximately 49,000 gross developed
acres and has leases or options to lease approximately 728,000 gross undeveloped
acres in the Wind River Basin.
Increasing reserves. The Company replaced 544% of its production during
the period from January 1, 1992 through December 31, 1994. During this period,
the Company's proved reserves increased by approximately 93% to 207 billion
cubic feet of natural gas equivalents ("Bcfe").
Increasing production. The Company increased its average daily production
of natural gas and oil to 36.1 million cubic feet of natural gas equivalents
("MMcfe") for the six month period ended June 30, 1995, an increase of
approximately 98% as compared with the year ended December 31, 1992.
3
<PAGE> 6
Maintaining low finding and development costs. The Company achieved an
average finding and development cost of $0.30 per thousand cubic feet of natural
gas equivalents ("Mcfe") during the period from January 1, 1992 through December
31, 1994.
Enhancing gas marketing. Since 1991, the Company has strengthened its
ability to control and market its production by accumulating natural gas
gathering assets and increasing marketing efforts in its core areas of activity.
Increasing geographic focus. The Company has continued to divest its
properties that are not located in the Company's core areas of activity.
Making strategic acquisitions. The Company plans to continue to
selectively pursue acquisitions of gas and oil properties in its core areas of
activity and, in connection therewith, the Company from time to time will be
involved in evaluations of or discussions with potential acquisition candidates.
The consideration for any such acquisition might involve the payment of cash
and/or the issuance of equity or debt securities; however, the Company presently
has no agreements or commitments with respect to any such acquisition. See
"Recent Events -- Presidio."
Notwithstanding the Company's historical ability to implement the above
strategy, there can be no assurance that the Company will be able to continue to
successfully implement its strategy in the future.
AREAS OF ACTIVITY
Wind River Basin. The Wind River Basin is the major focus of the Company's
current and anticipated exploration and development activities and accounted for
approximately 65% of the Company's proved reserves as of December 31, 1994. The
Company's primary properties in this Basin are in the Muddy Ridge, Pavillion and
Frenchie Draw Fields, each of which the Company operates. Production in these
fields is primarily from the Fort Union and Mesa Verde formations at depths
ranging from 3,500 to 13,000 feet. Other prospective zones in these fields
include the deeper Cody, Frontier and Madison formations at depths ranging from
16,000 to 21,000 feet.
As of December 31, 1994, the Company's proved reserves in the Wind River
Basin were 132.5 Bcf of natural gas and 444 MBbls (thousands of barrels) of oil.
As of August 31, 1995, the Company operated 85 wells and had approximately
20,600 net developed and 457,300 net undeveloped acres in this Basin. The
following table reflects, as to each of the three fields, the Company's average
working interest, net proved reserves as of December 31, 1994, and the number of
gross producing wells and net daily production therefrom as of August 31, 1995.
These production rates reflect the Company's voluntary production curtailments
of approximately 25% in the Muddy Ridge and Pavillion Fields due to prevailing
weak natural gas prices.
<TABLE>
<CAPTION>
NET PROVED RESERVES
AVERAGE AS OF NET DAILY
WORKING DECEMBER 31, 1994 NUMBER OF GROSS PRODUCTION
FIELD INTEREST (BCFE) PRODUCING WELLS (MMCFE)
- ------------------------------------ --------- ------------------- --------------- --------------
<S> <C> <C> <C> <C>
Muddy Ridge......................... 60% 38.2 15 6.7
Pavillion........................... 45% 77.6 24 8.6
Frenchie Draw....................... 40% 19.3 12 3.4
------ -- -----
135.1 51 18.7
</TABLE>
During 1994 and the first six months of 1995, the Company's capital
expenditures in this Basin, excluding amounts paid to acquire unproved
properties, were approximately $8.0 million and $3.0 million, respectively. In
addition to three development wells drilled and completed in the current year,
the Company intends to drill one exploratory well on its Pavillion North
prospect prior to December 31, 1995. The Company currently plans to spend
approximately $5.0 million during 1996 to drill 12 wells (five development and
seven exploratory) in the Wind River Basin.
4
<PAGE> 7
The Company has approximately 49,000 gross developed acres and has leases
or options to lease approximately 728,000 gross undeveloped acres in the Wind
River Basin. The Company has developed two significant exploration plays on this
acreage, both of which it plans to test within the next year. One of these plays
is located in the western part of this acreage and the Company intends to test a
number of prospects which it believes may contain oil in the Tensleep and
Phosphoria formations at depths of 2,000 to 10,000 feet. The Company has also
identified a number of prospects in the central part of this acreage which it
believes may contain gas in the same formations which are productive in the
Muddy Ridge and Pavillion Fields. In addition, the Company is in the process of
identifying additional exploration prospects on this same acreage.
Val Verde Basin. The Val Verde Basin accounted for approximately 18% of
the Company's proved reserves as of December 31, 1994. Since its entry into the
Val Verde Basin in 1993, the Company has participated in the drilling of 33
wells in the area. The Company holds a 50% working interest in approximately
51,500 gross acres in this Basin. As of August 31, 1995, the Company held an
interest in 20 wells which were producing in excess of 37 million cubic feet of
natural gas ("MMcf") per day and 1,200 barrels ("Bbls") of oil per day.
Production is from the Wolfcamp, Thrusted Penn Sand and Thrusted Strawn
formations at depths ranging from 5,000 to 12,000 feet. As of December 31, 1994,
the Company's proved reserves in the Val Verde Basin were 26.4 Bcf of natural
gas and 1.8 MMBbls of oil. For the year ended December 31, 1994, the Company
added oil reserves of approximately 1.4 MMBbls and natural gas reserves of
approximately 18 Bcf through discoveries of proved reserves in this Basin.
During 1994 and the first six months of 1995, the Company's capital expenditures
in this Basin, excluding amounts paid to acquire unproved properties, were
approximately $11 million and $10 million, respectively. The Company
participated in the drilling of 16 wells during the current year, 10 of which
were completed and two of which are being completed. The Company intends to
participate in the drilling of up to three additional development wells prior to
December 31, 1995. The Company currently plans to spend approximately $9.0
million during 1996 to drill 15 development wells in the Val Verde Basin.
Permian Basin. The Permian Basin contains the most significant oil
reserves of the Company and accounted for approximately 9% of the Company's
proved reserves as of December 31, 1994. The Company's primary properties in the
Permian Basin are located in the Spraberry Field. As of August 31, 1995, the
Company operated 129 wells and had approximately 27,900 net developed and 1,100
net undeveloped acres in this Basin. As of December 31, 1994, the Company's
proved reserves in this Basin were 7.2 Bcf of natural gas and 2.0 MMBbls of oil.
GAS GATHERING AND MARKETING
The Company's wholly-owned subsidiary, Retex Gathering Company, Inc.
("Retex"), is engaged in the gathering, processing and marketing of natural gas
produced by the Company and third parties. The primary activities of Retex are
conducted in the Wind River Basin through a joint venture with a subsidiary of
KN Energy, Inc. The Company has a 40.5% net interest in the joint venture.
Following its formation in 1993, the joint venture purchased 110 miles of
existing gas gathering lines and related field facilities in this Basin (the
"Wind River Gathering System"), strengthening the Company's ability to control
its production in the area. Since the joint venture's acquisition of the Wind
River Gathering System in 1993, additional compression and gathering facilities
have been installed which have increased the throughput capacity serving the
Muddy Ridge and Pavillion Fields to approximately 60 MMcf of natural gas per
day.
5
<PAGE> 8
RECENT EVENTS
Presidio. In May 1995, the Company announced that it was interested in
acquiring Presidio Oil Company ("Presidio"), a public company engaged in the
exploration for, and development and production of, oil and natural gas
primarily in the Rocky Mountain area. The Company also announced that, based on
publicly available information and various assumptions relating to Presidio's
oil and gas reserves and subject to further review of Presidio's operations and
oil and gas properties and subject to other contingencies, it was willing to pay
up to $200 million to acquire Presidio. As a strategic part of its efforts to
acquire Presidio and for investment purposes, in June 1995 the Company purchased
approximately $56 million of the $100 million outstanding principal amount of
Presidio's Senior Gas Indexed Notes due 2002 ("GINs") for approximately $51
million. The purchase of the GINs was funded by borrowing $51 million. Presidio
was unable to meet the interest payment on the GINs due on May 15, 1995 and was
therefore in default under the terms of the GINs. In August 1995, Presidio
announced that it was commencing an auction process in order to find a buyer for
its assets or outstanding capital stock. Following such announcement, the
Company entered into a confidentiality agreement with Presidio and conducted a
review of Presidio's operations and oil and gas properties. Thereafter, the
Company submitted a proposal to acquire Presidio for a combination of cash and
securities having an aggregate value less than the maximum amount the Company
previously announced it may be willing to pay to acquire Presidio. Presidio is
currently evaluating the Company's proposal as well as other proposals that the
Company believes Presidio received in connection with its auction process. The
Company's proposed acquisition of Presidio is subject to a number of significant
contingencies, and the Company cannot predict whether it will be successful in
its efforts to acquire Presidio or, if successful, the actual amount or form of
consideration that the Company would pay in connection therewith or the timing
of any such event. See "Risk Factors -- Investment in Presidio."
Credit Agreement. In September 1995, the Company and three banks entered
into a Credit Agreement (the "Credit Agreement") providing for a three-year, $65
million unsecured revolving credit facility ("Credit Facility"). The Company
borrowed $51 million under the Credit Facility to repay all of the indebtedness
incurred in connection with the purchase of the GINs. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."
Sale of Arkoma Assets. As part of its strategy to focus on its core
geographic areas, in September 1995 the Company sold its properties in the
Arkoma Basin in western Arkansas for $9.0 million. As a result of this sale, the
Company realized an after-tax book gain of $3.0 million. During the first six
months of 1995, net daily production from these properties averaged 3.9 MMcf.
Proceeds from the sale of these properties were used to repay a portion of the
Company's outstanding indebtedness under the Credit Facility.
6
<PAGE> 9
SUMMARY PRODUCTION, PRICE AND COST DATA
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Production:
Natural gas (MMcf)............................................ 4,393 7,157 7,347 3,924 5,330
Oil (MBbls)................................................... 377 317 276 143 200
Total (MMcfe)............................................. 6,655 9,059 9,003 4,782 6,530
Average daily production (MMcfe).............................. 18.2 24.8 24.7 26.4 36.1
Average sales prices:
Natural gas (per thousands of cubic feet) (per Mcf)........... $ 1.81 $ 1.76 $ 1.62 $ 1.74 $ 1.25
Oil (per Bbl)................................................. 19.19 16.91 15.73 15.36 17.18
Average costs (per Mcfe):
Production costs(1)........................................... $ 1.06 $ 0.77 $ 0.67 $ 0.67 $ 0.51
Finding and development costs(2).............................. 0.21 0.30 0.35
COSTS INCURRED (IN THOUSANDS):
Property acquisitions........................................... $ 5,209 $ 2,372 $ 1,754 $ 11 $ 34
Development..................................................... 1,866 5,818 17,797 7,632 13,545
Exploration..................................................... 190 1,825 3,177 1,233 2,816
------- -------- -------- ------- --------
Total..................................................... $ 7,265 $ 10,015 $ 22,728 $ 8,876 $ 16,395
======= ======== ======== ======= ========
</TABLE>
- ---------------
(1) Includes lease operating expenses and production taxes.
(2) Determined by (a) property acquisition, exploration and development costs,
divided by (b) reserve purchases, additions and net revisions.
SUMMARY RESERVE INFORMATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
NATURAL GAS AND OIL PROPERTIES:
Net Proved Reserves:
Natural gas (MMcf)....................................................... 104,955 130,995 180,306
Oil (MBbls).............................................................. 3,803 3,300 4,522
-------- ------- -------
Total (MMcfe)........................................................ 127,773 150,795 207,438
Natural gas reserves as a percentage of proved reserves.................... 82% 87% 87%
Proved developed reserves (MMcfe).......................................... 90,551 100,295 131,323
Proved reserves to production ratio........................................ 19:1 17:1 23:1
Present value of future net revenues before income taxes discounted at 10%
($ thousands)............................................................ $ 73,666 $ 105,752 $ 124,942
</TABLE>
7
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information set forth below should be
read in conjunction with the financial statements of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus or incorporated by reference
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $18,597 $28,708 $29,071 $17,276 $18,590
Production costs(1)..................... 7,065 6,973 5,999 3,210 3,328
General and administrative
expense.............................. 2,599 3,047 3,339 1,675 1,968
Option plan compensation expense........ 1,250 2,879 207 121 58
Depreciation, depletion and
amortization......................... 6,626 7,280 7,288 3,508 4,706
Writedown of properties................. -- -- -- -- 8,368
Interest expense........................ 465 319 20 22 27
Income (loss) before income
taxes................................ (2,703) (1,979) 102 1,464 (9,015)
Income tax (expense) benefit............ (284) (339) (262) (159) 13,818
Net income (loss)....................... (2,987) (2,318) (160) 1,305 4,803
Net income (loss) per common
share................................ (.40) (.19) (.01) .08 .29
Weighted average number of common
shares outstanding................... 7,515 11,898 15,464 15,448 16,312(2)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 6,415 $ 17,709
Working capital..................................................... 7,846 19,140
Total assets........................................................ 166,607 171,901
Long-term debt...................................................... 51,000 --
Stockholders' equity................................................ 107,801 164,095
</TABLE>
- ---------------
(1) Includes lease operating expenses and production taxes.
(2) Includes common stock equivalents as applicable.
(3) As adjusted to reflect (a) the offering of shares of Common Stock hereby and
the application of the estimated net proceeds therefrom to retire all
outstanding indebtedness under the Credit Facility and (b) the sale in
September 1995 of all of the Company's interests in the Arkoma Basin and the
application of the proceeds therefrom to repay a portion of the outstanding
indebtedness under the Credit Facility.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 4,000,000 shares
Common Stock outstanding after the
Offering................................... 19,571,529 shares
Use of Proceeds.............................. To retire all outstanding indebtedness under
the Credit Facility and for general corporate
purposes
Nasdaq National Market Symbol................ TMBR
</TABLE>
8
<PAGE> 11
RISK FACTORS
Prospective purchasers of the shares of Common Stock offered hereby should
carefully consider, together with other information in this Prospectus, the
following factors that affect the Company.
VOLATILITY OF GAS AND OIL PRICES
The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for natural gas and oil. Natural
gas and oil prices can be extremely volatile and in recent years have been
depressed by excess total domestic and imported supplies. Prices are also
affected by actions of state and local agencies, the United States and foreign
governments and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate future prices of
natural gas and oil. Any substantial or extended decline in the price of natural
gas would have a material adverse effect on the Company's financial condition
and results of operations, including reduced cash flow and borrowing capacity.
All of these factors are beyond the control of the Company. When natural gas
prices are deemed by the Company to be too low, the Company may curtail
production from certain wells, which restricts the Company's cash flow; the
Company currently is curtailing approximately 25% of its production from the
Muddy Ridge and Pavillion Fields in the Wind River Basin. Sales of natural gas
and oil are seasonal in nature, leading to substantial differences in cash flow
at various times throughout the year. The marketability of the Company's
production depends in part upon the availability, proximity and capacity of
natural gas gathering systems, pipelines and processing facilities. Federal and
state regulation of natural gas and oil production and transportation, general
economic conditions, changes in supply and changes in demand all could adversely
affect the Company's ability to produce and market its natural gas and oil. If
market factors were to change dramatically, the financial impact on the Company
could be substantial. The availability of markets and the volatility of product
prices are beyond the control of the Company and thus represent a significant
risk.
GENERAL RISKS OF NATURAL GAS AND OIL OPERATIONS
The Company competes in areas of natural gas and oil exploration,
development and transportation with other companies, many of which have
substantially larger financial and other resources. The natural gas and oil
business also involves a variety of risks, including the risks of operating
hazards such as fires, explosions, cratering, blow-outs and encountering
formations with abnormal pressures, the occurrence of any of which could result
in losses to the Company. The operations of the Company's natural gas gathering
systems will involve certain risks, including explosions and environmental
hazards caused by pipeline leaks and ruptures. Drilling for natural gas and oil
involves a high degree of risk, and is marked by unprofitable efforts, not only
from dry holes but from wells that, though productive, do not produce natural
gas and oil in sufficient quantities to return a profit on the amounts expended.
The Company maintains insurance against some, but not all, of these risks in
amounts that management believes to be reasonable in accordance with customary
industry practices. The occurrence of a significant event, however, that is not
fully insured could have a material adverse effect on the Company's financial
position.
INVESTMENT IN PRESIDIO
In June 1995, the Company purchased $56 million principal amount of the
outstanding GINs for approximately $51 million. The carrying value of this
investment, which was financed through bank indebtedness, constituted
approximately 31% of the Company's total assets as of June 30, 1995. Although
management believes its investment in the GINs is a strategic part of its
efforts to gain control of Presidio, there can be no assurances as to when, if
ever, such control will be attained. A failure to gain control could result in
the Company not recovering its initial investment in the GINs. In addition, the
value of the Company's investment in the GINs may be adversely affected by the
results of operations and financial condition of Presidio, which is dependent in
large part on the prices Presidio realizes for its oil and gas production, as
well as the ultimate outcome of Presidio's efforts to restructure its
outstanding indebtedness or to be acquired by another party and the timing
thereof. There is not currently an active trading market for the GINs, and the
Company may experience difficulty in selling the GINs if it desires to do so at
some future time.
9
<PAGE> 12
The GINs have been categorized as available for sale in accordance with
Statement of Financial Accounting Standards No. 115 for financial reporting
purposes, and the Company's investment in the GINs was valued at historical cost
on the Company's balance sheet at June 30, 1995. The Company will be required to
adjust the carrying value of its investment in the GINs at the end of each
quarter based on the fair market value, if determinable, of the GINs at such
time and, in connection therewith, the Company will record a credit or charge to
stockholders' equity for such period based on any adjustment to such carrying
value. The fair market value of the GINs at the end of any period will be
determined by reference to available market trading prices or, if market trading
prices are not readily available, by the reasonable judgment of the Company.
NET LOSSES
For the years ended December 31, 1992, 1993 and 1994, the Company recorded
net losses of $3.0 million, $2.3 million and $0.2 million, respectively. These
losses include depreciation, depletion and amortization expense for each of such
periods of $6.6 million, $7.3 million and $7.3 million, respectively. Although
the Company recorded net income of $4.8 million for the six months ended June
30, 1995, no assurances can be given that the Company will not experience
additional losses in the future.
ESTIMATES OF PROVED RESERVES AND FUTURE NET REVENUES
This Prospectus contains estimates of the Company's natural gas and oil
reserves and the future net revenues therefrom prepared by the Company's
independent petroleum engineers. See "Business and Properties -- Reserves" and
Note 9 of Notes to Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994
10-K"). These estimates are based on various assumptions and, therefore, are
inherently imprecise. Actual future production, reserves, taxes, development
expenditures, operating expenses and quantities of recoverable natural gas and
oil reserves may vary substantially from those assumed in the estimates. In
addition, the Company's proved reserves may be subject to downward or upward
revision, based upon production history, results of future exploration and
development, prevailing natural gas and oil prices and other factors.
GOVERNMENT REGULATION AND ENVIRONMENTAL RISKS
The Company's business is regulated by certain federal, state and local
laws and regulations relating to the development, production, marketing and
transmission of natural gas and oil, as well as environmental and safety
matters. Certain of these laws and regulations have adversely affected the
Company's operations in the past, and there is no assurance that laws and
regulations enacted in the future will not adversely affect the Company's
exploration for, and the production and marketing of, natural gas and oil. See
"Business and Properties -- Regulation" in the 1994 10-K.
NO DIVIDENDS
The Company has never declared or paid any cash dividends to holders of
Common Stock and has no present intention to pay cash dividends to holders of
the Common Stock in the future. Under the terms of its Credit Agreement, the
Company is prohibited from paying cash dividends without the written consent of
the banks. Although the proceeds from this offering will be used to repay all
amounts presently outstanding under the Credit Facility, the Company intends to
maintain the Credit Facility and, consequently, will be prohibited from paying
dividends without the banks' prior written consent.
ANTI-TAKEOVER PROVISIONS
The ability of the Company's Board of Directors to authorize the issuance
of shares of preferred stock, the Company's Rights Plan, the Company's
Certificate of Incorporation and certain provisions of the Delaware General
Corporation Law may tend to deter unsolicited tender offers and make it
difficult to change control of the Company and replace incumbent management and
also may limit the liability of directors. See "Description of Capital Stock."
10
<PAGE> 13
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering are
estimated to be $53.3 million, assuming a price to the public of $14.125 per
share, less underwriting discounts and estimated offering expenses. The proceeds
will be used to repay all outstanding indebtedness under the Credit Facility
($46 million as of October 4, 1995), and the balance of the proceeds
(approximately $7.3 million) will be used for general corporate purposes,
including acquisitions of additional properties and exploration and development
of existing natural gas and oil properties. The Company borrowed $51 million
under the Credit Facility in September 1995 to refinance indebtedness incurred
in June 1995 when the Company acquired approximately $56 million principal
amount of GINs issued by Presidio. See "Recent Events -- Presidio." In September
1995, the Company used approximately $5.0 million of the proceeds from the sale
of the Arkoma properties to reduce its indebtedness from $51 million to $46
million. Borrowings under the Credit Facility are unsecured and bear interest,
at the election of the Company, at a rate equal to (i) the greater of the agent
bank's prime rate or the federal funds effective rate plus 0.50% or (ii) the
agent bank's Eurodollar rate plus a margin ranging from 0.75% to 1.00%. On
October 4, 1995, the interest rate on $41 million of outstanding borrowings was
6.825%, and 8.75% on an additional $5.0 million of outstanding borrowings. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity." The Credit Facility matures in
September 1998.
Following the application of the net proceeds from the offering made hereby
to repay all indebtedness outstanding under the Credit Facility, the Company
will have approximately $65 million of available borrowing capacity under the
Credit Facility. The Company may incur additional debt subsequent to this
offering as its future business needs require.
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1995, and as adjusted to reflect (i) the Company's
issuance and sale of the 4,000,000 shares of Common Stock offered hereby and the
application of the estimated net proceeds of $53.3 million therefrom as
described in "Use of Proceeds", and (ii) the sale of the Company's interests in
the Arkoma Basin and the application of the $9.0 million proceeds therefrom in
September 1995 to repay a portion of the outstanding indebtedness under the
Credit Facility. The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements appearing elsewhere in this Prospectus or incorporated
by reference in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1995
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................. $ 6,415 $ 17,709
======== ========
Long-term debt............................................. 51,000 --
-------- --------
Stockholders' Equity:
Common Stock, $.10 par value per share; 30,000,000 shares
authorized; 15,537,529 shares issued and outstanding;
19,537,529 shares issued and outstanding, as
adjusted(2)........................................... 1,554 1,954
Additional paid-in capital............................... 177,477 230,371
Accumulated deficit...................................... (71,230) (68,230)
-------- --------
Total stockholders' equity....................... 107,801 164,095
-------- --------
Total capitalization............................. $158,801 $164,095
======== ========
</TABLE>
- ---------------
(1) As adjusted to reflect (a) the offering of the shares of Common Stock hereby
and the application of the estimated net proceeds therefrom to retire all
outstanding indebtedness under the Credit Facility and (b) the sale of all
of the Company's interests in the Arkoma Basin.
(2) Does not include 1,566,850 shares of Common Stock issuable upon exercise of
outstanding stock options.
12
<PAGE> 15
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and
quoted on The Nasdaq National Market under the symbol "TMBR." The following
table sets forth, on a per share basis for the periods indicated, the range of
high and low closing bid prices of the Common Stock as reported by The Nasdaq
National Market during the periods shown.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1993
First Quarter.......................................................... $14.250 $ 6.750
Second Quarter......................................................... 14.250 11.875
Third Quarter.......................................................... 17.500 13.500
Fourth Quarter......................................................... 16.500 10.500
Fiscal 1994
First Quarter.......................................................... $12.875 $11.000
Second Quarter......................................................... 16.375 11.125
Third Quarter.......................................................... 16.000 11.125
Fourth Quarter......................................................... 13.750 9.375
Fiscal 1995
First Quarter.......................................................... $15.125 $10.625
Second Quarter......................................................... 15.375 13.625
Third Quarter.......................................................... 15.375 13.125
Fourth Quarter (through October 4, 1995)............................... 14.125 14.125
</TABLE>
On October 4, 1995, the last sale price for the Common Stock as reported by
The Nasdaq National Market was $14.125 per share.
DIVIDENDS
The Company has never declared or paid any cash dividends to the holders of
Common Stock and has no present intention to pay cash dividends to the holders
of Common Stock in the future. Under the terms of the Credit Agreement, the
Company is prohibited from paying cash dividends to the holders of Common Stock
without the written consent of the banks.
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS SIX MONTHS
ENDED YEARS ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
------------ --------------------------------------------- -------------------
1990(1) 1991 1992 1993 1994 1994 1995
------------ ------- ------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA(2):
Total revenues............................ $ 15,317 $18,928 $18,597 $ 28,708 $ 29,071 $ 17,276 $ 18,590
Costs and expenses:
Gas and oil production.................. 5,247 7,134 5,676 4,899 4,130 2,086 2,280
Taxes on gas and oil production......... 1,363 1,405 1,389 2,074 1,869 1,124 1,048
Cost of gas sold........................ 413 1,347 2,838 8,287 10,022 6,406 6,858
Exploration costs....................... 908 846 190 440 1,184 333 1,948
Impairments of leasehold costs.......... 381 284 267 1,462 910 537 344
General and administrative.............. 2,099 2,703 2,599 3,047 3,339 1,675 1,968
Option plan compensation................ -- -- 1,250 2,879 207 121 58
Depreciation, depletion and
amortization.......................... 5,933 10,592(3) 6,626 7,280 7,288 3,508 4,706
Writedown of properties................. -- -- -- -- -- -- 8,368
Interest expense........................ 995 1,117 465 319 20 22 27
------------ ------- ------- -------- -------- -------- --------
Total costs and expenses.......... 17,339 25,428 21,300 30,687 28,969 15,812 27,605
------------ ------- ------- -------- -------- -------- --------
Income (loss) before income taxes......... (2,022) (6,500) (2,703) (1,979) 102 1,464 (9,015)
Income tax provision:
Recognition of deferred tax asset....... -- -- -- -- -- -- 13,967
Income tax expense...................... (36) (36) (284) (339) (262) (159) (149)
------------ ------- ------- -------- -------- -------- --------
Net income (loss)......................... $ (2,058) $(6,536) $(2,987) $ (2,318) $ (160) $ 1,305 $ 4,803
============ ======= ======= ======== ======== ======== ========
Weighted average number of common shares
outstanding............................. 7,510(4) 7,503(4) 7,515(4) 11,898 15,464 15,448 16,312
Net income (loss) per common share........ $ (0.27) $ (0.87) $ (0.40) $ (0.19) $ (0.01) $ 0.08 $ 0.29
CONSOLIDATED BALANCE SHEET DATA AT PERIOD
END:
Cash and cash equivalents................. $ 1,891 $ 962 $ 1,095 $ 28,503 $ 19,147 $ 26,896 $ 6,415
Total assets.............................. 94,988 82,078 76,866 108,084 115,092 110,492 166,607
Working capital........................... (411) 1,584 3,388 30,372 16,565 27,457 7,846
Long-term debt............................ 11,500 12,500 9,650 -- -- -- 51,000
Stockholders' equity...................... 71,366 64,818 62,540 102,376 102,869 103,876 107,801
</TABLE>
- ---------------
(1) In May 1990, the Company changed its fiscal year end from March 31 to
December 31.
(2) Certain reclassifications have been made to amounts reported in previous
years to conform to the 1995 presentation.
(3) In February 1992, the Company sold certain non-strategic gas and oil
properties in the Williston Basin of North Dakota and Montana for
approximately $7.0 million. In the fourth quarter of 1991, the Company
recognized a $3.4 million writedown of such properties to net realizable
value.
(4) Weighted average number of common shares outstanding does not include 4.4
million shares of Common Stock issued in June 1993 upon conversion of
preferred stock.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The factors which most significantly affect the Company's results of
operations are (1) the sales prices of natural gas and crude oil, (2) the level
of total sales volumes, and (3) the level and success of exploration and
development activity.
SELECTED OPERATING DATA
The following table sets forth certain operating information of the Company
for the periods presented.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues (in thousands):
Natural gas sales...................... $ 7,948 $12,399 $11,451 $ 6,835 $ 6,686
Crude oil sales........................ 7,234 5,360 4,341 2,196 3,435
Marketing, gathering and processing.... 3,352 10,387 11,876 7,533 7,980
Other.................................. 63 562 1,403 712 489
------- ------- ------- ------- -------
Total revenues................. $18,597 $28,708 $29,071 $17,276 $18,590
======= ======= ======= ======= =======
Net income (loss) (in thousands): $(2,987) $(2,318) $ (160) $ 1,305 $ 4,803
Natural gas production (MMcf)............ 4,393 7,157 7,347 3,924 5,330
Crude oil production (MBbls)............. 377 317 276 143 200
Average natural gas sales price
($/Mcf)................................ $ 1.81 $ 1.76 $ 1.62 $ 1.74 $ 1.25
Average crude oil sales price ($/Bbl).... $ 19.19 $ 16.91 $ 15.73 $ 15.36 $ 17.18
Average production costs ($/Mcfe)........ $ 1.06 $ 0.77 $ 0.67 $ 0.67 $ 0.51
</TABLE>
REVENUES
During the six month period ended June 30, 1995, revenues from natural gas
and oil production increased $1.1 million to $10.1 million compared to the same
period in 1994. An increase in natural gas sales volumes of 36% increased
revenues by approximately $1.8 million. A decrease in average natural gas prices
received by the Company from $1.74 per Mcf to $1.25 per Mcf decreased revenues
by approximately $1.9 million. An increase in oil sales volumes of 40% increased
revenues by approximately $1.0 million for the six months ended June 30, 1995.
An increase in the average crude oil sales price from $15.36 per Bbl to $17.18
per Bbl increased revenues by approximately $0.2 million for the six months
ended June 30, 1995.
The increase in gas and oil sales volumes for the six months ended June 30,
1995 as compared to the same period in 1994 was due primarily to increased
production in the Company's Val Verde Basin properties.
Marketing, gathering and processing revenues increased $0.4 million for the
six month period ended June 30, 1995 as a result of the increased activity in
the Company's natural gas marketing operations and increased revenues from the
Company's interest in the Wind River Gathering System.
During 1994, revenues from gas and oil production decreased $2.0 million to
$15.8 million as compared to the same period in 1993. A decrease in average gas
prices received by the Company from $1.76 per Mcf to $1.62 per Mcf decreased
revenues by approximately $1.0 million. A decrease in average oil prices from
$16.91 per Bbl to $15.73 per Bbl decreased revenue approximately $0.4 million.
The decrease in oil sales volumes of 13% reduced revenues by approximately $0.6
million for 1994. Gas sales volumes remained relatively constant.
The decrease in oil sales volumes for the year ended December 31, 1994 as
compared to the same period in 1993 was due primarily to property sales
completed throughout 1993 and 1994. Natural gas sales volumes
15
<PAGE> 18
remained constant as the Company increased its deliverability through its
development drilling in 1994 but curtailed greater portions of its production
due to low natural gas prices.
Marketing, gathering and processing revenues increased 14% in 1994 compared
to 1993 due to a full year of revenue in 1994 from the Company's interest in the
Wind River Gathering System which was acquired in June 1993.
Interest income and other revenues increased approximately $0.8 million due
to interest income from excess cash retained from the Company's June 1993 Common
Stock offering.
During 1993, revenues from gas and oil production increased $2.6 million to
$17.8 million as compared to the same period in 1992. A decrease in average gas
prices received by the Company from $1.81 per Mcf to $1.76 per Mcf decreased
revenues by approximately $0.2 million. A decrease in the average oil price from
$19.19 per Bbl to $16.91 per Bbl decreased revenues by approximately $0.9
million. An increase in natural gas volumes of 63% increased revenues by
approximately $4.7 million. The decrease to oil sales volumes of 16% reduced
revenues by approximately $1.0 million for 1993.
The decrease in oil sales volumes for the year ended December 31, 1993 as
compared to the same period in 1992 was due primarily to property sales
completed during the first quarter of 1992. The increase in natural gas sales
volumes for 1993 as compared to 1992 was attributable to the Company's decision
to increase production from the Wind River Basin of Wyoming, which, until late
1992, had been under a self-imposed curtailment. Contributing to the decision to
increase production were reduced transportation tariffs in certain key market
areas and a general increase in demand for natural gas.
Marketing, gathering and processing revenues increased 210% in 1993
compared to 1992 due to the start up in October 1992 of Retex, the Company's
marketing subsidiary.
COSTS AND EXPENSES
Costs and expenses for the six months ended June 30, 1995 increased to
$27.6 million from $15.8 million for the same period in 1994, primarily as a
result of an $8.4 million writedown of non-strategic properties due to the early
adoption of Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets...", which generally requires a separate
assessment for potential impairment of each of the Company's producing property
cost centers, in contrast to the Company's prior policy of evaluating the
producing property accounts for impairment in total. The $8.4 million charge
reduced the carrying value of certain of the Company's properties to their
estimated fair values, which properties were not part of the Company's Wind
River Basin or Val Verde Basin properties. Natural gas and oil production
expense increased $0.2 million as a result of the addition of several wells in
the Val Verde Basin. Although gas and oil sales increased, taxes on gas and oil
production remained relatively unchanged as lower-taxed production from Texas
accounted for the increased sales.
Compared to the first six months of 1994, cost of sales increased as higher
volumes of gas were purchased by the Company's marketing subsidiary during the
six months ended June 30, 1995. Exploration costs increased $1.6 million during
the six months ended June 30, 1995, as a result of 3-D seismic costs on the
Company's exploration efforts in the Wind River Basin. Compared to the first six
months of 1994, general and administrative expenses increased $0.3 million
during the six months ended June 30, 1995, due to additional costs to explore
and develop the Company's Wind River Basin and Val Verde Basin. Depreciation,
depletion and amortization increased 34% during the six months ended June 30,
1995, due to the additional production from the Company's Val Verde Basin
properties.
The Company recognized in the first quarter of 1995 a net deferred tax
asset in the amount of approximately $14 million and corresponding credit to
deferred income tax expense. Deferred tax assets (related primarily to the
Company's net operating loss and investment tax credit carryforwards) were
initially recorded in 1993, but these tax assets had been reserved entirely by a
valuation allowance until 1995. Based on recent additions to the Company's oil
and gas reserves, the resulting increases in anticipated future income and the
absence of significant option plan compensation charges to future income, the
Company now expects to realize a major portion of the future benefit of its net
operating loss carryforwards prior to their expiration.
16
<PAGE> 19
Accordingly, that portion of the valuation allowance was reversed in the first
quarter. A valuation allowance of approximately $10 million will be retained
against the Company's deferred tax assets, primarily because the Company's
investment tax credit carryforwards are still not expected to be realized in
future periods. The deferred tax assets and related valuation allowance will be
monitored for potential adjustments as future events so indicate, although
management does not expect such adjustments to be significant in the near term.
Costs and expenses for 1994 decreased 6% to $29 million as compared to
1993. Gas and oil production expenses decreased $0.8 million which reflects the
Company's disposition of certain high-cost oil producing properties in 1994.
Taxes on gas and oil production decreased $0.2 million as a result of decreased
oil production levels. Cost of gas sold increased 21% in 1994 compared to 1993
reflecting a higher volume of gas purchased in 1993 by Retex. Exploration costs
increased $0.7 million as a result of exploratory 3-D seismic costs in 1994.
Impairments of leasehold costs decreased $0.6 million as a result of the
writedown of an uneconomic oil producing property in 1993 due to lower year-end
oil prices. General and administrative expenses increased $0.3 million primarily
as a result of increases in insurance and salaries. Interest expense decreased
$0.3 million as a result of the Company's debt repayment in June 1993.
Costs and expenses for 1993 increased 44% to $30.7 million as compared to
1992. Depreciation, depletion and amortization expense increased primarily as a
result of increased natural gas production and lower year-end reserve estimates
for certain oil producing properties caused in part by low year-end oil prices.
Gas and oil production expenses decreased $0.8 million which reflect the
Company's disposition of certain high-cost oil producing properties in 1992.
Taxes on gas and oil production increased $0.7 million as a result of increased
natural gas production levels. Cost of gas sold increased 192% in 1993 compared
to 1992 due to the start up in October 1992 of Retex. Exploration costs
increased $0.3 million as a result of increased exploratory activity in 1993.
Impairments of leasehold costs increased $1.2 million as a result of the write
off of certain non-strategic leases and the writedown of an uneconomic oil
producing property due to low year end oil prices. General and administrative
expenses increased $0.4 million as a result of increases in professional fees,
insurance and salaries.
The Company recorded non-cash option plan compensation expense of $0.2
million, $2.9 million and $1.3 million in 1994, 1993 and 1992, respectively,
under certain stock option and phantom stock option plans due to an increase in
the market value of the Common Stock over the exercise prices of such options.
Compensation expense related to the option plans is based on the ratably vested
portion of the difference between the exercise prices and the market value of
the Common Stock. Certain changes to the option plans during 1993 eliminated the
need to recognize option plan compensation expense, except for some minor
vesting of previously incurred expense. The Company expects future non-cash
option plan compensation expense to total approximately $0.1 million, which will
be recognized over the remaining vesting period of the options (approximately
two years).
The Company incurred a tax liability in the amount of $24,000, $129,000 and
$134,000 in 1994, 1993 and 1992, respectively, as a result of the application of
the alternate minimum tax rules as provided under the Internal Revenue Code. The
Company has not paid, prior to the year ended December 31, 1990, Federal income
taxes for the past six years due to its net operating loss carryforwards. At
December 31, 1994, such carryforwards for tax purposes were approximately $71.8
million.
CAPITAL RESOURCES AND LIQUIDITY
The Company continues to operate under the strategy of maintaining a strong
balance sheet, adding value by increasing the Company's reserve base and
presence in significant natural gas areas, and further developing the ability to
control and market the Company's production.
On May 31, 1995, the Company announced that it had written to Presidio in
order to propose a business combination between the two companies. On June 28,
1995, the Company purchased approximately $56 million of the $100 million
principal amount outstanding of the GINs for approximately $51 million,
including accrued interest. Presidio was unable to meet the interest payment on
the GINs due on May 15, 1995 and is therefore in default in accordance with the
terms of the GINs. The purchase of the GINs was funded by a $51 million bank
note. See "Recent Events -- Presidio" and "Risk Factors."
17
<PAGE> 20
On September 14, 1995, the Company entered into the Credit Agreement and
borrowed $51 million under its $65 million Credit Facility. The bank debt was
incurred primarily to refinance the Company's $51 million demand note issued by
the Company to one of the bank lenders in June 1995 to fund the purchase of the
GINs. The Credit Facility matures in September 1998. Borrowings under the Credit
Facility are unsecured and bear interest, at the election of the Company, at a
rate equal to (i) the greater of the agent bank's prime rate or the federal
funds effective rate plus 0.50% or (ii) the agent bank's eurodollar rate plus a
margin ranging from 0.75% to 1.00%. On October 4, 1995, $46 million was
outstanding under the Credit Facility, after giving effect to the Company's
repayment of a portion of the original indebtedness with proceeds from the sale
of the Company's Arkoma properties. See "Recent Events -- Sale of Arkoma
Assets." The interest rate on $41 million of such borrowings was 6.825%, and
8.75% on $5.0 million of such borrowings. Interest on amounts outstanding under
the Credit Facility is due on the last day of each month in the case of loans
bearing interest at the prime rate or federal funds rate and, in the case of
loans bearing interest at the eurodollar rate, interest payments are due on the
last day of each applicable interest period of one, two or three month periods,
as selected by the Company at the time of borrowing or, in the case of six month
periods if selected by the Company, interest payments are due on the last day of
each three month period.
Following the application of the net proceeds from the offering made hereby
to repay all indebtedness outstanding under the Credit Facility, the Company
will have approximately $65 million of available borrowing capacity under the
Credit Facility. The Company may incur additional debt subsequent to this
offering as its future business needs require.
The Company's capital expenditures for the years ended December 31, 1994,
1993 and 1992 and the six month periods ended June 30, 1995 and June 30, 1994
were approximately $23 million, $12.3 million, $7.4 million, $14.9 million and
$8.3 million, respectively. The increase during 1993 as compared to 1992 was
primarily the result of additional drilling in certain of the Company's
principal natural gas areas and the acquisition of an interest in a pipeline and
related facilities. The increase during 1994 as compared to 1993 was due
primarily to the development drilling program in the Val Verde Basin where
approximately $11 million was incurred. The capital expenditures for the six
months ended June 30, 1995 include approximately $13.3 million in further
development of the Company's Wind River and Val Verde Basin properties.
The level of capital expenditures by the Company will vary in future
periods depending on energy market conditions and other related economic
factors. The Company has no material long-term capital expenditure commitments.
Consequently, the Company is able to adjust the level of its expenditures as
circumstances warrant.
In June 1993, the Company completed a Common Stock offering. The total
number of shares offered was 5,200,000 shares of Common Stock of which the
Company offered 3,000,000 shares and Prudential Insurance Company of America
offered 2,200,000 shares. The shares were sold at $12.00 per share and the
Company's proceeds, net of an underwriting discount of $1,890,000, were
$34,110,000. A portion of these proceeds was used to repay all of the Company's
debt outstanding under its debt agreement. In July 1993, a portion of the
over-allotment option was exercised which allowed for the issuance of an
additional 394,500 shares of Common Stock by the Company. Net proceeds from the
over-allotment were $4,485,000. In connection with this offering, all of the
outstanding Preferred Stock of the Company was converted to Common Stock.
Also in June 1993, a joint venture between a wholly-owned subsidiary of the
Company and a subsidiary of KN Energy, Inc. acquired the Wind River Gathering
System. The Company paid approximately $2.0 million for its 40.5% net interest.
The pipeline and related facilities have further complemented the Company's
ability to market its natural gas production from the Wind River Basin.
In September 1993, the Company acquired a 50% working interest in
approximately 58,000 net acres in the Val Verde Basin for approximately $1.6
million. The acreage purchase was in connection with the Company's successful
exploratory well completed on contiguous acreage in September 1993. The total
net acreage position held in this Basin is approximately 65,000 acres, of which
the Company owns a 50% interest. The Company had drilled or participated in the
drilling of 33 wells in this area as of June 30, 1995.
18
<PAGE> 21
Historically, the Company has funded capital expenditures and working
capital requirements with both internally-generated cash and borrowings. Net
cash provided by operating activities was $7.6 million for 1994, $9.7 million
for 1993, $3.1 million for 1992, $6.1 million for the six month period ended
June 30, 1995 and $6.6 million for the six month period ended June 30, 1994. Net
cash and cash equivalents decreased $9.4 million for 1994, increased $27.4
million for 1993, increased $0.1 million for 1992, decreased $12.7 million for
the six month period ended June 30, 1995 and decreased $1.6 million for the six
month period ended June 30, 1994.
The Company continues to pursue opportunities that will add value by
increasing its reserve base and presence in significant natural gas-prone basins
and further developing the Company's ability to control and market production of
natural gas. The Common Stock offering in June 1993 and the resulting
elimination of all debt served to strengthen the Company's balance sheet. As the
Company continues to evaluate potential acquisitions and property development
opportunities, it will benefit from its cash position, financing flexibility and
the leverage potential of the Company's overall capital structure.
19
<PAGE> 22
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------ ------------- ---------------------------------------
<S> <C> <C>
Donald L. Evans............... 49 Chairman of the Board of Directors,
President and Chief Executive Officer
Peter R. Scherer.............. 38 Executive Vice President
Thomas E. Klauss.............. 52 Vice President - Exploration South
Christopher E. Mullen......... 35 Vice President - Exploration North
Clifford C. Drescher.......... 43 Vice President - Production
Richard B. Porter............. 40 Vice President - Land
R. Kim Harris................. 39 Controller
B. Jack Reed.................. 46 Treasurer
James M. Alsup................ 58 Secretary
Thomas C. Brown............... 68 Director
William R. Granberry(1)....... 52 Director
Henry Groppe(1)............... 69 Director
Edward W. LeBaron, Jr.(2)..... 65 Director
James B. Wallace(2)........... 66 Director
Robert H. Whilden, Jr.(1)..... 60 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Directors of the Company serve until the annual meeting of stockholders to
be held in May 1996, and until their successors in office are elected and
qualified. Each officer is appointed annually by the Company's Board of
Directors to serve at the Board's discretion and until his successor in office
is elected and qualified.
Messrs. Evans, Scherer, Klauss, Drescher, Harris and Reed have been
employed by the Company in their present positions for more than five years,
except that Mr. Scherer was promoted from Vice President to Executive Vice
President in 1990. Mr. Drescher was promoted from Operations Engineer to Vice
President - Production in 1991. Mr. Klauss was promoted to Vice
President - Exploration South in 1995, and Mr. Evans was elected Chairman of the
Board in 1990 to succeed Mr. Brown who had previously served in that capacity.
Mr. Mullen has been employed by the Company since September 1994. He served
as Geologist-Rocky Mountain Division from September 1994 to September 1995 and
as Vice President - Exploration North from September 1995 to the present. Mr.
Mullen was a Petroleum Geologist with Unocal Corporation from 1987 to September
1994.
Mr. Porter has been employed by the Company since April 1994. He served as
Landman - Rocky Mountain Division from April 1994 to September 1995 and as Vice
President - Land from September 1995 to the present. Mr. Porter was Resource
Manager with Paragon Ranch Corporation from 1984 to January 1994.
Mr. Alsup has been a shareholder in the law firm of Lynch, Chappell & Alsup
in Midland, Texas for more than the past five years.
Mr. Brown is also a director of Weatherford International Incorporated and
has served as Chairman of the Board of Directors of TMBR/Sharp Drilling, Inc.
for the last five years.
Mr. Evans is also a director of TMBR/Sharp Drilling, Inc.
20
<PAGE> 23
Mr. Granberry has been Chairman of the Board of Directors and Chief
Executive Officer of Mineral Development, Inc. ("MDI") since August 1994, and
President of MDI since October 1994. Previously, he was Vice President of PG&E
Resources Company from May 1989 to July 1994.
Mr. Groppe has been an oil and gas consultant with Groppe, Long & Littell
since 1955.
Mr. LeBaron has served as Chairman of the Board of Directors of Pacific
Casino Management, Inc. since June 1994 and is a retired partner in the law firm
of Pillsbury, Madison and Sutro in Sacramento, California, with which he has
been associated with since April 1989.
Mr. Wallace was an officer, director and stockholder of BWAB Incorporated
from 1980 to 1992. Mr. Wallace has been a partner in Brownlie, Wallace,
Armstrong and Bander Exploration, a partnership, since 1992. Each of BWAB
Incorporated and Brownlie, Wallace, Armstrong and Bander were and are engaged in
oil and gas exploration and production with principal offices in Denver,
Colorado.
Mr. Whilden has been a partner in the law firm of Vinson & Elkins L.L.P. in
Houston, Texas, for more than the past five years.
There are no family relationships between any of the Directors or executive
officers of the Company.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, of which Messrs. Wallace and LeBaron constitute the present
members, has the responsibility of recommending the employment of the Company's
independent auditors, and reviews with management and the independent auditors
the Company's financial statements, basic accounting and financial policies and
practices, audit scope and competency of control personnel. The Compensation
Committee, which consists of Messrs. Granberry, Groppe and Whilden, reviews and
recommends to the Board of Directors the compensation and promotion of officers
of the Company, the terms of any proposed employee benefit arrangements and the
making of awards under such arrangements. Members of the Compensation Committee
are not required to abstain from voting in respect of compensation paid or
awards granted to them.
21
<PAGE> 24
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,500,000 shares of
preferred stock, $.10 par value per share, and 30,000,000 shares of common
stock, $.10 par value per share (the "Common Stock"). As of October 4, 1995,
15,571,529 shares of Common Stock were outstanding and no shares of preferred
stock were outstanding. All of the shares of Common Stock of the Company offered
hereby will be, when issued and sold, legally issued, fully paid and
non-assessable.
COMMON STOCK
Subject to the prior rights of shares of preferred stock that might be
outstanding from time to time, the shares of Common Stock of the Company: (1)
are entitled to such dividends as may be declared by the Board of Directors out
of funds legally available therefor (subject to limitations set forth in the
Credit Agreement); (2) are entitled to one vote per share and have no cumulative
voting rights; (3) have no preemptive or conversion rights; (4) are not subject
to, or entitled to the benefits of, any redemption or sinking fund provision;
and (5) are entitled upon liquidation to receive the assets of the Company
remaining after the payment of corporate debts and the satisfaction of the
liquidation preferences of preferred stock.
As discussed in "Dividends," the Company has never declared or paid any
cash dividends and does not anticipate the payment of any cash dividends on the
Common Stock in the foreseeable future. Under the terms of its Credit Agreement,
the Company is prohibited from paying cash dividends on the Common Stock without
the written consent of its lenders.
The Company's Rights Plan provides that a preferred stock purchase right is
associated with each share of Common Stock. See "-- Stockholder Rights Plan."
The Common Stock is quoted on The Nasdaq National Market under the symbol
"TMBR." The Transfer Agent and Registrar for the Common Stock is First National
Bank of Boston, Boston, Massachusetts.
PREFERRED STOCK
The Board of Directors is empowered, without approval of the stockholders,
to cause additional shares of preferred stock to be issued in one or more
series, with the number of shares of each series and the rights, preferences and
limitations of each series to be determined by it. Among the specific matters
that may be determined by the Board of Directors are the rate of dividends,
redemption and conversion prices, terms and amounts payable in the event of
liquidation and voting rights. Issuance of shares of preferred stock could
involve dilution of the equity of the holders of Common Stock and further
restrict the rights of such stockholders to receive dividends. Although the
Company has no present intention to issue any shares of preferred stock, the
issuance of such shares in the future could be used to discourage an unsolicited
acquisition proposal.
STOCKHOLDER RIGHTS PLAN
On March 1, 1991, the Board of Directors adopted a Rights Plan designed to
help assure that all stockholders receive fair and equal treatment in the event
of a hostile attempt to take over the Company and to help guard against abusive
takeover tactics. The Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock. The
dividend was distributed on March 15, 1991 to the stockholders of record on that
date. Each Right entitles the registered holder to purchase, for a $20.00 per
share exercise price, in lieu of preferred shares, shares of Common Stock or
other securities of the Company (or, under certain circumstances, of the
acquiring person) worth twice the per share exercise price of the Right.
The Rights will be exercisable only if a person or group acquires 20% or
more of the Company's Common Stock or announces a tender offer which would
result in ownership by a person or group of 20% or more of the Common Stock. The
date on which the above occurs is to be known as the "Distribution Date."
22
<PAGE> 25
The Rights are not exercisable until the Distribution Date. The Rights will
expire on March 15, 2001, unless extended or redeemed earlier by the Company.
At the time the Rights dividend was declared, the Board of Directors
further authorized the issuance of one Right with respect to each share of
Common Stock that shall become outstanding between March 15, 1991 and the
earlier of the Distribution Date or the expiration or redemption of the Rights.
Until the Distribution Date occurs, the certificates representing shares of
Common Stock also evidence the Rights. Following the Distribution Date, the
Rights will be evidenced by separate certificates.
The provisions described above may tend to deter any potential unsolicited
tender offers or other efforts to obtain control of the Company that are not
approved by the Board of Directors and thereby deprive the stockholders of
opportunities to sell shares of Common Stock at prices higher than the
prevailing market price. On the other hand, these provisions will tend to assure
continuity of management and corporate policies and to induce any person seeking
control of the Company or a business combination with the Company to negotiate
on terms acceptable to the then elected Board of Directors.
DELAWARE ANTI-TAKEOVER LAW
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation whose stock generally is publicly traded or held of record by more
than 2,000 stockholders and an "interested stockholder" are prohibited for a
three-year period following the date such stockholder became an interested
stockholder, unless (1) the corporation has elected in its certificate of
incorporation not to be governed by the Delaware anti-takeover law (the Company
has not made such an election), (2) the business combination was approved by the
board of directors of the corporation before the other party to the business
combination became an interested stockholder, (3) upon consummation of the
transaction that made it an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan) or (4)
the business combination was approved by the board of directors of the
corporation and ratified by 66 2/3% of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder with the
approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an "interested stockholder," transactions with an
"interested stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as those stockholders who become beneficial owners of 15%
or more of a Delaware corporation's voting stock.
23
<PAGE> 26
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below, for whom Schroder Wertheim & Co.
Incorporated, Howard, Weil, Labouisse, Friedrichs Incorporated, Petrie Parkman &
Co. Inc. and Salomon Brothers Inc are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company the
number of shares of Common Stock set forth below opposite their respective
names:
<TABLE>
<CAPTION>
UNERWRITER NUMBER OF SHARES
---------- ----------------
<S> <C>
Schroder Wertheim & Co. Incorporated.................................
Howard, Weil, Labouisse, Friedrichs Incorporated.....................
Petrie Parkman & Co., Inc............................................
Salomon Brothers Inc ................................................
---------
Total...................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all of the shares of Common Stock being offered (other
than the shares covered by the over-allotment option), if any are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the price to the
public set forth on the cover page of this Prospectus and to certain dealers at
such price, less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount of not in
excess of $ per share to certain other dealers. After this offering to the
public, the price to the public, concession and discount to dealers may be
changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to 600,000 additional
shares of Common Stock at the public offering price set forth less underwriting
discounts and commissions on the cover page hereof. The Underwriters may
exercise this option, in whole or in part, solely for the purpose of covering
over-allotments, if any, made in the sale of the Common Stock offered hereby.
In connection with the offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on The Nasdaq National Market
immediately prior to the commencement of sales in the offering made hereby, in
accordance with Rule 10b-6A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Passive market making consists of displaying bids
on The Nasdaq National Market limited by the bid prices of independent market
makers and purchases limited by such prices and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the Common Stock during a specified prior period and must be discontinued
when such limit is reached. Passive market making may stabilize the market price
of the Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.
The Company and its executive officers and directors have agreed not to
offer to sell, sell, grant any option to purchase or otherwise dispose of any
shares of any capital stock of the Company (or securities convertible into, or
exchange for, capital stock of the Company), directly or indirectly, for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Schroder Wertheim & Co. Incorporated, except for grants of stock
options under the Company's stock option plans and issuance of stock upon
exercise of such options, and except for shares of capital stock issued by the
Company in connection with the acquisition of assets or capital stock of any
company engaged in the oil and gas business.
24
<PAGE> 27
Certain of the underwriters have performed investment banking services for
the Company for which they received customary compensation.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas 77002. Robert H.
Whilden, Jr., a partner in the firm of Vinson & Elkins L.L.P., is a Director of
the Company. See "Management -- Compensation of Directors" in the Company's 1995
Proxy Statement, which has been incorporated herein by reference, for a
description of stock options held by Mr. Whilden. Certain legal matters will be
passed upon for the Underwriters by Andrews & Kurth L.L.P., 4200 Texas Commerce
Tower, Houston, Texas 77002.
EXPERTS
The consolidated financial statements and schedules included or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, to the extent and for the periods indicated in their report, have
been audited by Arthur Andersen LLP, independent public accountants, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
The estimated reserve evaluations and related calculations of Williamson
Petroleum Consultants, Inc. incorporated by reference into this Prospectus have
been included herein in reliance upon the authority of said firm as experts in
petroleum engineering.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith the Company files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60601. Copies of such materials can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at the prescribed rates.
The Company's Common Stock is traded on The Nasdaq National Market and, as a
result, the periodic reports, proxy statements and other information filed by
the Company with the Commission can be inspected at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement, including the exhibits filed as a part thereof and
otherwise incorporated therein.
Statements contained in this Prospectus or in any document incorporated by
reference in this Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
25
<PAGE> 28
INCORPORATION OF CERTAIN DOCUMENTS
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(A) Annual Report filed on Form 10-K for the fiscal year ended December
31, 1994 (File No. 0-3880);
(B) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1995 and June 30, 1995;
(C) Proxy Statement for Annual Meeting of Stockholders held May 17, 1995;
and
(D) Form 8-K Report dated September 27, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the shares of Common Stock hereunder shall be
deemed incorporated by reference in this Prospectus and shall be deemed to be a
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed incorporated herein by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference in this
Prospectus modifies or supersedes such statement.
The Company undertakes to provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information which have been or may be incorporated in this
Prospectus by reference but not delivered herewith, except for certain exhibits
to such documents. Requests for such information should be directed to
Treasurer, Tom Brown, Inc., 500 Empire Plaza Building, 508 West Wall Street,
Midland, Texas, 79701, telephone number (915) 682-9715.
26
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses of the offering are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................... $ 22,112
National Association of Securities Dealers, Inc. Filing Fee............... 6,913
Legal Fees and Expenses................................................... 75,000
Accounting Fees and Expenses.............................................. 15,000
Blue Sky Fees and Expenses................................................ 15,000
Printing Costs............................................................ 100,000
Miscellaneous............................................................. 5,975
-------
Total................................................................ $240,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 145 of the General Corporation
Law of the State of Delaware to indemnify its officers, directors, employees and
agents to the extent provided in such statute. Article Tenth of the Registrant's
Certificate of Incorporation, referenced as Exhibit 4.1 hereto, provides for
indemnification of the Registrant's officers and directors to the full extent
provided in Section 145. Article 4 of the Registrant's Bylaws referenced as
Exhibit 4.6 hereto, provides for indemnification of the Registrant's officers,
directors, employees and agents.
Section 102 of the General Corporation Law of the State of Delaware permits
the limitation of a director's personal liability to the corporation or its
stockholders for monetary damages for breach of fiduciary duties as a director
except in certain situations including the breach of a director's duty of
loyalty or acts or omissions not made in good faith. Article Ninth of the
Registrant's Certificate of Incorporation limits directors' personal liability
to the extent permitted by Section 102.
Article Tenth of the Registrant's Certificate of Incorporation provides
that the Registrant may maintain insurance, at its expense, to protect itself
and any of its directors, officers, employees or agents or any person serving at
the request of the Registrant as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any expense, liability or loss, whether or not the Registrant would have
the power to indemnify such person against such expense, liability or loss under
the Delaware General Corporation Law. Even though the Registrant has directors
and officers liability insurance, the liability and indemnification provisions
contained in the Certificate of Incorporation of the Registrant would remain in
place and such provision will affect not only the Registrant, but its
stockholders as well.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
II-1
<PAGE> 30
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(A) EXHIBITS
<TABLE>
<S> <C> <C>
*(1.1) -- Form of Underwriting Agreement.
(4.1) -- Certificate of Incorporation of the Registrant. (Incorporated by reference to
Exhibit No. 3.1 in the Registrant's Form 8-B Registration Statement dated July
15, 1987 and filed with the Securities and Exchange Commission on July 17, 1987.)
(4.2) -- Certificate of Amendment to the Certificate of Incorporation of the Registrant,
as amended September 7, 1988. (Incorporated by reference to Exhibit No. 3.1 in
the Registrant's Form 10-K Report dated June 27, 1989 and filed with the
Securities and Exchange Commission on June 29, 1989.)
(4.3) -- Certificate of Amendment to the Certificate of Incorporation of the Registrant,
as amended June 5, 1990. (Incorporated by reference to Exhibit No. 3.3 in the
Registrant's Form 10-K Report dated March 26, 1993 and filed with the Securities
and Exchange Commission on March 31, 1993.)
*(4.4) -- Certificate of Amendment to Certificate of Incorporation of the Registrant, as
amended May 25, 1994.
*(4.5) -- Certificate of Designation, Rights and Preferences of Series B Preferred Stock,
$.10 par value.
(4.6) -- Bylaws of the Registrant. (Incorporated by reference to Exhibit No. 3.2 in the
Registrant's Form 8-B Registration Statement dated July 15, 1987 and filed with
the Securities and Exchange Commission on July 17, 1987.)
(4.7) -- Specimen Common Stock Certificate. (Incorporated by reference to Exhibit No. 4.2
in the Registrant's Form 8-B Registration Statement dated July 15, 1987 and filed
with the Securities and Exchange Commission on July 17, 1987.)
(4.8) -- Rights Agreement dated as of March 5, 1991 between Tom Brown, Inc. and American
Stock Transfer & Trust Company. (Incorporated by reference to Exhibit No. 4(a) in
the Registrant's Form 8-K Report dated March 12, 1991 and filed March 15, 1991.)
*(5.1) -- Opinion and Consent of Vinson & Elkins L.L.P.
*(23.1) -- Consent of Independent Public Accountants.
*(23.2) -- Consent of Independent Petroleum Engineers.
(23.3) -- Consent of Vinson & Elkins L.L.P. included as part of Exhibit 5.1.
*(24.1) -- Power of Attorney contained on page II-4 hereof.
</TABLE>
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
II-2
<PAGE> 31
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of competent
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 32
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MIDLAND, STATE OF TEXAS ON THE 4TH DAY OF OCTOBER
1995.
TOM BROWN, INC.
By: DONALD L. EVANS
-----------------------------------
Donald L. Evans, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald L. Evans and R. Kim Harris, and each of
them, either one of whom may act without joinder of the other, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or the substitute or substitutes
of any or all of them, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- ---------- ----
<S> <C> <C>
DONALD L. EVANS Chairman of the Board of October 4, 1995
- ------------------------------------------ Directors, President and
Donald L. Evans Chief Executive Officer
(Principal Executive Officer)
R. KIM HARRIS Controller (Principal Financial October 4, 1995
- ------------------------------------------ and Accounting Officer)
R. Kim Harris
THOMAS C. BROWN Director October 4, 1995
- ------------------------------------------
Thomas C. Brown
WILLIAM R. GRANBERRY Director October 4, 1995
- ------------------------------------------
William R. Granberry
HENRY GROPPE Director October 4, 1995
- ------------------------------------------
Henry Groppe
EDWARD W. LEBARON, JR. Director October 4, 1995
- ------------------------------------------
Edward W. LeBaron, Jr.
JAMES B. WALLACE Director October 4, 1995
- ------------------------------------------
James B. Wallace
ROBERT H. WHILDEN, JR. Director October 4, 1995
- ------------------------------------------
Robert H. Whilden, Jr.
</TABLE>
II-4
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- -------- -----------------------
<S> <C> <C>
*(1.1) -- Form of Underwriting Agreement.
(4.1) -- Certificate of Incorporation of the Registrant. (Incorporated by reference to
Exhibit No. 3.1 in the Registrant's Form 8-B Registration Statement dated July
15, 1987 and filed with the Securities and Exchange Commission on July 17, 1987.)
(4.2) -- Certificate of Amendment to the Certificate of Incorporation of the Registrant,
as amended September 7, 1988. (Incorporated by reference to Exhibit No. 3.1 in
the Registrant's Form 10-K Report dated June 27, 1989 and filed with the
Securities and Exchange Commission on June 29, 1989.)
(4.3) -- Certificate of Amendment to the Certificate of Incorporation of the Registrant,
as amended June 5, 1990. (Incorporated by reference to Exhibit No. 3.3 in the
Registrant's Form 10-K Report dated March 26, 1993 and filed with the Securities
and Exchange Commission on March 31, 1993.)
*(4.4) -- Certificate of Amendment to Certificate of Incorporation of the Registrant, as
amended May 25, 1994.
*(4.5) -- Certificate of Designation, Rights and Preferences of Series B Preferred Stock,
$.10 par value.
(4.6) -- Bylaws of the Registrant. (Incorporated by reference to Exhibit No. 3.2 in the
Registrant's Form 8-B Registration Statement dated July 15, 1987 and filed with
the Securities and Exchange Commission on July 17, 1987.)
(4.7) -- Specimen Common Stock Certificate. (Incorporated by reference to Exhibit No. 4.2
in the Registrant's Form 8-B Registration Statement dated July 15, 1987 and filed
with the Securities and Exchange Commission on July 17, 1987.)
(4.8) -- Rights Agreement dated as of March 5, 1991 between Tom Brown, Inc. and American
Stock Transfer & Trust Company. (Incorporated by reference to Exhibit No. 4(a) in
the Registrant's Form 8-K Report dated March 12, 1991 and filed March 15, 1991.)
*(5.1) -- Opinion and Consent of Vinson & Elkins L.L.P.
*(23.1) -- Consent of Independent Public Accountants.
*(23.2) -- Consent of Independent Petroleum Engineers.
(23.3) -- Consent of Vinson & Elkins L.L.P. included as part of Exhibit 5.1.
*(24.1) -- Power of Attorney contained on page II-4 hereof.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
DRAFT OF 10/4/95
UNDERWRITING AGREEMENT
TOM BROWN, INC.
4,000,000 Shares
Common Stock
(Par Value $0.10 Per Share)
___________________________
New York, New York
________________________, 1995
SCHRODER WERTHEIM & CO. INCORPORATED
HOWARD, WEIL, LABOUISSE, FRIEDRICHS INCORPORATED
PETRIE PARKMAN & CO., INC.
SALOMON BROTHERS INC
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder Wertheim & Co. Incorporated
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
Tom Brown, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of
4,000,000 shares of Common Stock, par value $0.10 per share (the "Common
Stock"). The 4,000,000 shares of Common Stock to be sold by the Company are
herein referred to as the "Firm Securities." In addition, the Company proposes
to grant to the Underwriters an option to purchase up to an additional 600,000
shares of Common Stock (the "Option Securities"), on the terms and for the
purposes set forth in Section 2 hereof. The Firm Securities and the Option
Securities are herein collectively referred to as the "Securities." Except as
may be expressly set forth below, any reference to you in this Agreement shall
be solely in your capacity as the Representatives.
<PAGE> 2
1. The Company represents and warrants to, and
agrees with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File
No. 33-_____________), and as a part thereof a preliminary
prospectus, in respect of the Securities, has been filed with
the Securities and Exchange Commission (the "Commission") in
the form heretofore delivered to you and, with the exception
of exhibits to the registration statement, to you for each of
the other Underwriters; if such registration statement has not
become effective, an amendment (the "Final Amendment") to such
registration statement, including a form of final prospectus,
necessary to permit such registration statement to become
effective, will promptly be filed by the Company with the
Commission; if such registration statement has become
effective and any post-effective amendment to such
registration statement has been filed with the Commission
prior to the execution and delivery of this Agreement, which
amendment or amendments shall be in form acceptable to you,
the most recent such amendment has been declared effective by
the Commission; if such registration statement has become
effective, a final prospectus (the "Rule 430A Prospectus")
relating to the Securities containing information permitted to
be omitted at the time of effectiveness by Rule 430A of the
rules and regulations of the Commission under the Securities
Act of 1933, as amended (the "Act"), will promptly be filed by
the Company pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act (any preliminary
prospectus filed as part of such registration statement being
herein called a "Preliminary Prospectus," such registration
statement as amended at the time that it becomes or became
effective, or, if applicable, as amended at the time the most
recent post-effective amendment to such registration statement
filed with the Commission prior to the execution and delivery
of this Agreement became effective (the "Effective Date"),
including all exhibits thereto and all information deemed to
be a part thereof at such time pursuant to Rule 430A of the
rules and regulations of the Commission under the Act, being
herein called the "Registration Statement" and the final
prospectus relating to the Securities in the form first filed
pursuant to Rule 424(b) (1) or (4) of the rules and
regulations of the Commission under the Act or, if no such
filing is required, the form of final prospectus included in
the Registration Statement, being herein called the
"Prospectus"); any reference herein to any Preliminary
Prospectus or the Prospectus or the Registration Statement
shall be deemed to include any information incorporated by
reference therein, as of the date of such Preliminary
Prospectus, the Prospectus or the Registration Statement, as
the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus, the Prospectus or
the Registration Statement shall be deemed to refer to any
documents filed after such date under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder and so
incorporated by reference;
-2-
<PAGE> 3
(b) 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, conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
(c) On the Effective Date and the date the
Prospectus is filed with the Commission, and when any further
amendment or supplements thereto become effective or are filed
with the Commission, as the case may be, the Registration
Statement, the Prospectus and such amendment or supplements
did and will conform in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder, and did not and will not contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use
therein;
(d) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they
were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of
the Exchange Act and the rules and regulations of the
Commission thereunder, and when read together with other
information in the Prospectus, at the time the Registration
Statement becomes effective and at the Time of Delivery (as
defined in Section 4 hereof), will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(e) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and to conduct its
business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification (except
where the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, or
the business affairs or prospects of the Company and its
subsidiaries, taken as a whole); and each of the Company's
subsidiaries has been duly incorporated and is validly
existing as a
-3-
<PAGE> 4
corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority
(corporate and other) to own its properties and to conduct
its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification (except
where the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, or
the business affairs or prospects of the Company and its
subsidiaries, taken as a whole);
(f) All the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned by the Company free and clear of all liens,
encumbrances, equities, security interests, or claims; and
there are no outstanding options, warrants or other rights
calling for the issuance of, and there are no commitments,
plans or arrangements to issue, any shares of capital stock of
any subsidiary or any security convertible or exchangeable or
exercisable for capital stock of any subsidiary; except for
the shares of stock of each subsidiary owned by the Company,
neither the Company nor any subsidiary owns, directly or
indirectly, any shares of capital stock of any corporation or
have any equity interest in any firm, partnership, joint
venture, association or other entity;
(g) The Company has all requisite power and
authority to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance
by the Company of its obligations under this Agreement have
been duly and validly authorized by all requisite corporate
action of the Company; and this Agreement constitutes the
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms;
(h) Neither the Company nor any of its
subsidiaries has sustained since the date of the latest
audited financial statements included in or incorporated by
reference into the Prospectus, any loss or interference with
its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, which loss
or interference is material to the Company and its
subsidiaries, taken as a whole; and, since the respective
dates as of which information is given in the Registration
Statement and the Prospectus, there has not been, and prior to
the Time of Delivery (as defined in Section 4 hereof) there
will not be, any change in the capital stock (other than
shares issued pursuant to exercise of employee stock options
that the Prospectus indicates are outstanding (the "Employee
Option Shares")) or short-term debt or long-term debt of the
Company or any of its subsidiaries, or any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the general affairs,
management, financial position,
-4-
<PAGE> 5
stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole, otherwise than as set
forth or contemplated in the Prospectus;
(i) The Company and its subsidiaries have (i)
good and indefeasible title to all their interests in their
oil and gas properties, (ii) good and marketable title in fee
simple to all real property and, (iii) good and marketable
title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except
such as are described or contemplated by the Prospectus, or
would not result in a material adverse effect on the condition
(financial or other), earnings, business or properties of the
Company or the Company and its subsidiaries, taken as a whole,
and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries, and any
real property and buildings held under lease by the Company
and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed
to be made of such real property and buildings by the Company
and its subsidiaries;
(j) The estimates of present values of reserves
included in or incorporated by reference into the Prospectus
were prepared in accordance with the methodology specified in
the rules and regulations under the Act with respect to prices
for production, taxes and discount factor; to the knowledge of
the Company, Williamson Petroleum Consultants were, as of the
date of the reserve report incorporated by reference into the
Registration Statement (the "Reserve Report"), and are, as of
the date hereof, independent petroleum engineers with respect
to the Company.
(k) The Company has an authorized, issued and
outstanding capitalization as set forth in the Registration
Statement, and all the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are
fully paid and non-assessable, are free of any preemptive
rights, rights of first refusal or similar rights, were issued
and sold in compliance with the applicable Federal and state
securities laws and conform in all material respects to the
description in the Prospectus; except as described in the
Prospectus, there are no outstanding options warrants or other
rights calling for the issuance of, and there are no
commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible or
exchangeable or exercisable for capital stock of the Company;
there are no holders of securities of the Company who, by
reason of the filing of the Registration Statement have the
right (and have not waived such right) to request the Company
to include in the Registration Statement securities owned by
them;
(l) The Securities to be issued and sold by the
Company to the Underwriters hereunder have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein, will be duly and validly
issued, fully paid and non-assessable, and will conform in all
material respects to the
-5-
<PAGE> 6
description thereof in the Prospectus and will be quoted on
the Nasdaq National Market as of the Effective Date;
(m) The performance of this Agreement, the
consummation of the transactions herein contemplated and the
issue and sale of the Securities and the compliance by the
Company with all the provisions of this Agreement will not
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,
claim, or encumbrance upon, any of the property or assets of
the Company or any of its subsidiaries pursuant to any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject,
nor will such action result in any violation of the provisions
of the Certificate of Incorporation or the By-laws, in each
case as amended to the date hereof, of the Company or any of
its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or
any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with
any court or governmental agency or body is required for the
issue and sale of the Securities or the consummation of the
other transactions contemplated by this Agreement, except the
registration under the Act of the Securities, and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
(n) Except as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries or any of their respective
officers or directors is a party or of which any property of
the Company or any of its subsidiaries is the subject, other
than litigation or proceedings incident to the business
conducted by the Company and its subsidiaries which will not
individually or in the aggregate have a material adverse
effect on the current or future financial position,
stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened or
contemplated by others; and neither the Company nor any of its
subsidiaries is involved in any labor dispute, nor, to the
Company's knowledge, is any labor dispute threatened;
(o) The Company and its subsidiaries have such
licenses, permits and other approvals or authorizations of and
from governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective
properties and to conduct their respective businesses in the
manner now being conducted and
-6-
<PAGE> 7
as described in the Prospectus; and the Company and its
subsidiaries have fulfilled and performed all of their
respective obligations with respect to such Permits, and no
event has occurred which allows, or after notice or lapse of
time or both would allow, revocation or termination thereof or
result in any other material impairment of the rights of the
holder of any such permits;
(p) Arthur Anderson LLP, who have certified
certain financial statements of the Company and its
consolidated subsidiaries and delivered their report with
respect to the audited consolidated financial statements and
schedules included in or incorporated by reference into the
Registration Statement and the Prospectus, are independent
public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(q) The consolidated financial statements and
schedules of the Company and its subsidiaries included in or
incorporated by reference into the Registration Statement and
the Prospectus present fairly the financial condition, the
results of operations and the cash flows of the Company and
its subsidiaries as of the dates and for the periods therein
specified in conformity with generally accepted accounting
principles consistently applied throughout the periods
involved, except as otherwise stated therein; and the other
financial and statistical information and data set forth in
the Registration Statement and the Prospectus is accurately
presented and, to the extent such information and data is
derived from the financial statements and books and records of
the Company and its subsidiaries, is prepared on a basis
consistent with such financial statements and the books and
records of the Company and its subsidiaries; no other
financial statements or schedules are required to be included
in the Registration Statement and the Prospectus;
(r) There are no statutes or governmental
regulations, or any contracts or other documents that are
required to be described in or filed as exhibits to the
Registration Statement which are not described therein or
filed or incorporated by reference as exhibits thereto; and
all such contracts to which the Company or any subsidiary is a
party have been duly authorized, executed and delivered by the
Company or such subsidiary, constitute valid and binding
agreements of the Company or such subsidiary and are
enforceable against the Company or subsidiary in accordance
with the terms thereof;
(s) The Company and its subsidiaries own or
possess adequate patent rights or licenses or other rights to
use patent rights, inventions, trademarks, service marks,
trade names, copyrights, technology and know-how necessary to
conduct the general business now or proposed to be operated by
them as described in the Prospectus; neither the Company nor
any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions,
trademarks, service marks, trade names, copyrights,
-7-
<PAGE> 8
technology or know-how which, singly or in the aggregate,
could materially adversely affect the business, operations,
financial condition, income or business prospects of the
Company and its subsidiaries considered as a whole.
(t) Neither the Company nor any of and its
subsidiaries are in violation of any term or provision of its
Certificate of Incorporation or By-Laws (or similar corporate
constituent documents), in each case as amended to the date
hereof, or any law, ordinance, administrative or governmental
rule or regulation applicable to the Company or any of its
subsidiaries, or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any of
its subsidiaries;
(u) No default exists, and no event has occurred
which with notice or lapse of time, or both, would constitute
a default in the due performance and observance of any term,
covenant or condition of any indenture, mortgage, deed of
trust, bank loan or credit agreement, lease or other agreement
or instrument to which the Company or any of its subsidiaries
is a party or by which any of them or their respective
properties is bound or may be affected in any material adverse
respect with regard to the property, business or operations of
the Company and its subsidiaries;
(v) The Company and its subsidiaries have timely
filed all necessary tax returns and notices and have paid all
federal, state, county, local and foreign taxes of any nature
whatsoever for all tax years through December 31, 1994, to the
extent such taxes have become due. The Company has no
knowledge, or any reasonable grounds to know, of any tax
deficiencies which would have a material adverse effect on the
Company or any of its subsidiaries; the Company and its
subsidiaries have paid all taxes which have become due,
whether pursuant to any assessments, or otherwise, and there
is no further liability (whether or not disclosed on such
returns) or assessments for any such taxes, and no interest or
penalties accrued or accruing with respect thereto, except as
may be set forth or adequately reserved for in the financial
statements included in or incorporated by reference into the
Registration Statement; the amounts currently set up as
provisions for taxes or otherwise by the Company and its
subsidiaries on their books and records are sufficient for the
payment of all their unpaid federal, foreign, state, county
and local taxes accrued through the dates as of which they
speak, and for which the Company and its subsidiaries may be
liable in their own right, or as a transferee of the assets
of, or as successor to any other corporation, association,
partnership, joint venture or other entity;
(w) The Company will not, during the period of
180 days after the date hereof except pursuant to this
Agreement, offer, sell, contract to sell or otherwise dispose
of any capital stock of the Company (or securities convertible
into, or exchangeable for, capital stock of the Company),
directly or indirectly, without the prior written consent of
Schroder Wertheim & Co. Incorporated, except for grants of
-8-
<PAGE> 9
stock options under the Company's stock option plans and
except for shares of capital stock issued in connection with
the acquisition of assets or capital stock of any company
engaged in the oil and gas business.
(x) The Company and its subsidiaries maintain a
system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in
accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
(y) Neither the Company nor any of its
subsidiaries is in violation of any foreign, federal, state or
local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants, nor any
federal or state law relating to discrimination in the hiring,
promotion or paying of employees nor any applicable federal or
state wages and hours laws, nor any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or the
rules and regulations promulgated thereunder, where such
violation would have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(z) None of the Company or its subsidiaries, or
its officers, directors, employees or agents has used any
corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political
activity, or made any unlawful payment of funds of the Company
or any subsidiary or received or retained any funds in
violation of any law, rule or regulation; and
(aa) None of the Company or its subsidiaries, or
its officers, directors, employees or agents have taken or
will take, directly or indirectly, any action designed to or
which has constituted or that might be reasonably be expected
to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of the Securities.
(bb) The conditions for use of Form S-3 as set forth
in the General Instructions thereto, have been satisfied.
(cc) The Company is in compliance with all of the
provisions of Section 517.075 of the Florida Statutes, and all
rules and regulations promulgated thereunder relating to
issuers doing business in Cuba.
-9-
<PAGE> 10
(dd) The Company and each of its subsidiaries carry,
or are covered by, insurance in such amounts and covering such
risks as is reasonably necessary for the conduct of their
respective business and the value of their respective
properties and as is customary for companies engaged in
similar businesses in similar industries.
2. Subject to the terms and conditions herein set forth,
the Company agrees to issue and sell to the several Underwriters an aggregate
of 4,000,000 Firm Securities, and each of the Underwriters agrees to purchase
from the Company, at a purchase price of $__________ per share, the respective
aggregate number of Firm Securities determined in the manner set forth below.
The obligation of each Underwriter to the Company shall be to purchase that
portion of the number of shares of Common Stock to be sold by the Company
pursuant to this Agreement as the number of Firm Securities set forth opposite
the name of such Underwriter on Schedule I bears to the total number of Firm
Securities to be purchased by the Underwriters pursuant to this Agreement, in
each case adjusted by you such that no Underwriter shall be obligated to
purchase Firm Securities other than in 100 share amounts. In making this
Agreement, each Underwriter is contracting severally and not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriters, as required (for the sole
purpose of covering over-allotments in the sale of the Firm Securities), up to
600,000 Option Securities at the purchase price per share of the Firm
Securities being sold by the Company as stated in the preceding paragraph. The
right to purchase the Option Securities may be exercised by your giving 48
hours' prior written or telephonic notice (subsequently confirmed in writing)
to the Company of your determination to purchase all or a portion of the Option
Securities. Such notice may be given at any time within a period of 30 days
following the date of this Agreement. Option Securities shall be purchased
severally for the account of each Underwriter in proportion to the number of
Firm Securities set forth opposite the name of such Underwriter in Schedule I
hereto. No Option Securities shall be delivered to or for the accounts of the
Underwriters unless the Firm Securities shall be simultaneously delivered or
shall theretofore have been delivered as herein provided. The respective
purchase obligations of each Underwriter shall be adjusted by you so that no
Underwriter shall be obligated to purchase Option Securities other than in 100
share amounts. The Underwriters may cancel any purchase of Option Securities
at any time prior to the Option Securities Delivery Date (as defined in Section
4 hereof) by giving written notice of such cancellation to the Company.
3. The Underwriters propose to offer the Securities for
sale upon the terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm
Securities to be purchased by each Underwriter hereunder shall be delivered by
or on behalf of the Company to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase price therefor by
certified or official bank check or checks, payable in New York Clearing House
funds, to the order of the Company, for the purchase price of the Firm
Securities being sold by the Company at the office of Schroder Wertheim & Co.
Incorporated, Equitable Center, 787 Seventh
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<PAGE> 11
Avenue, New York, New York, at 9:30 A.M., New York City time, on _________ __,
1995, or at such other time, date and place as you and the Company may agree
upon in writing, such time and date being herein called the "Time of Delivery."
Certificates in definitive form for the Option Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company to you for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price thereof by certified or
official bank check or checks, payable in New York Clearing House funds, to the
order of the Company, for the purchase price of the Option Securities, in New
York, New York, at such time and on such date (not earlier than the Time of
Delivery nor later than ten business days after giving of the notice delivered
by you to the Company with reference thereto) and in such denominations and
registered in such names as shall be specified in the notice delivered by you
to the Company with respect to the purchase of such Option Securities. The
date and time of such delivery and payment are herein sometimes referred to as
the "Option Securities Delivery Date." The obligations of the Underwriters
shall be subject, in their discretion, to the condition that there shall be
delivered to the Underwriters on the Option Securities Delivery Date opinions
and certificates, dated such Option Securities Delivery Date, referring to the
Option Securities, instead of the Firm Securities, but otherwise to the same
effect as those required to be delivered at the Time of Delivery pursuant to
Section 7(d), 7(e), 7(f) and 7(i).
Certificates for the Firm Securities and the Option Securities so to
be delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not less than 48 hours prior to the
Time of Delivery and the Option Securities Delivery Date, respectively. Such
certificates will be made available for checking and packaging in New York, New
York, at least 24 hours prior to the Time of Delivery and Option Securities
Delivery Date.
5. The Company covenants and agrees with each of the
Underwriters:
(a) If the Registration Statement has not become
effective, to file promptly the Final Amendment with the Commission
and use its best efforts to cause the Registration Statement to become
effective; if the Registration Statement has become effective, to file
promptly the Rule 430A Prospectus with the Commission; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you after reasonable notice
thereof; to advise you, promptly after it receives notice thereof of
the time when the Registration Statement, or any amendment thereto, or
any amended Registration Statement has become effective or any
supplement to the Prospectus or any amended Prospectus has been filed,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information;
and in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
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<PAGE> 12
Prospectus or suspending any such qualification, to use promptly its
best efforts to obtain withdrawal of such order;
(b) Promptly from time to time to take such action as you
may request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(c) To furnish each of the Representatives and counsel
for the Underwriters, without charge, signed copies of the
registration statement originally filed with respect to the Securities
and each amendment thereto (in each case including all exhibits
thereto) and to each other Underwriter, without charge, a conformed
copy of such registration statement and each amendment thereto (in
each case without exhibits thereto) and, so long as a prospectus
relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus, the Prospectus and all
amendments or supplements thereto as you may from time to time
reasonably request. If at any time when a prospectus is required to
be delivered under the Act an event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply
with the Act, the Company will forthwith prepare and, subject to the
provisions of Section 5(a) hereof, file with the Commission an
appropriate supplement or amendment thereto, and will furnish to each
Underwriter and to any dealer in securities, without charge, as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus or make an appropriate
filing under Section 13,14 or 15(d) of the Exchange Act which will
correct such statement or omission or effect such compliance in
accordance with the requirements of Section 10 of the Act;
(d) To make generally available to its stockholders as
soon as practicable, but in any event not later than 105 days after
the close of the period covered thereby, an earnings statement in form
complying with the provisions of Section 11(a) of the Act covering a
period of 12 consecutive months beginning not later than the first day
of the Company's fiscal quarter next following the Effective Date;
(e) To file promptly all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act subsequent to the Effective Date and during any period
when the Prospectus is required to be delivered;
(f) For a period of five years from the Effective Date,
to furnish to its stockholders after the end of each fiscal year an
annual report (including a consolidated
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<PAGE> 13
balance sheet and statements of income, cash flow and stockholders'
equity of the Company and its subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the Effective Date), consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the Effective
Date, to furnish to you copies of all reports or other communications
(financial or other) furnished to its stockholders, and deliver to you
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission, the Nasdaq
National Market or any national securities exchange on which any class
of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request in connection
with your obligations hereunder;
(h) To apply the net proceeds from the sale of the
Securities in the manner set forth in the Prospectus under the caption
"Use of Proceeds";
(i) That it will not, and will cause its subsidiaries,
officers, directors, employees, agents and affiliates not to, take,
directly or indirectly, any action designed to cause or result in, or
that might reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities;
(j) That prior to the Time of Delivery there will not be
any change in the capital stock or material change in the short-term
debt or long-term debt of the Company or any of its subsidiaries, or
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or
results of operations of the Company or any of its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus;
(k) That it will not, during the period of 180 days after
the date hereof (other than pursuant to this Agreement), offer, sell,
contract to sell or otherwise dispose of any capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company), directly or indirectly, without the prior
written consent of Schroder Wertheim & Co. Incorporated except for
grants of stock options under the Company's stock option plans and
except for shares of capital stock issued in connection with the
acquisition of assets or capital stock of any company engaged in the
oil and gas business;
(l) That it has caused the Securities to be included for
quotation on the Nasdaq National Market as of the Effective Date; and
6. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid: (i) the fees,
disbursements and expenses of counsel and
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<PAGE> 14
accountants for the Company, and all other expenses, in connection with the
preparation, printing and filing of the Registration Statement and the
Prospectus and amendments and supplements thereto and the furnishing of copies
thereof, including charges for mailing, air freight and delivery and counting
and packaging thereof and of any Preliminary Prospectus and related offering
documents to the Underwriters and dealers; (ii) the cost of printing this
Agreement, the Agreement Among Underwriters, the Selling Agreement,
communications with the Underwriters and selling group and the Preliminary and
Final Blue Sky Memoranda and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities for offering and sale under
securities laws as provided in Section 5(b) hereof, including filing and
registration fees and the fees, disbursements and expenses for counsel for the
Underwriters in connection with such qualification and in connection with Blue
Sky surveys or similar advice with respect to sales; (iv) the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Securities; (v) all
fees and expenses in connection with quotation of the Securities on the Nasdaq
National Market; and (vi) all other costs and expenses incident to the
performance of their obligations hereunder which are not otherwise specifically
provided for in this Section 6, including the fees of the Company's Transfer
Agent and Registrar, the cost of any stock issue or transfer taxes on sale of
the Securities to the Underwriters, the cost of the Company's personnel and
other internal costs, the cost of printing and engraving the certificates
representing the Securities and all expenses and taxes incident to the sale and
delivery of the Securities to be sold by the Company to the Underwriters
hereunder. It is understood, however, that, except as provided in this
Section, Section 8 and Section 11 hereof, the Underwriters will pay all their
own costs and expenses, including the fees of their counsel, stock transfer
taxes on resale of any of the Securities by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall
be subject, in their discretion, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of the
Time of Delivery, true and correct, the condition that the Company shall have
performed all its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Registration Statement shall have become
effective, and you shall have received notice thereof not later than
10:00 P.M., New York City time, on the date of execution of this
Agreement, or at such other time as you and the Company may agree; if
required, the Prospectus shall have been filed with the Commission in
the manner and within the time period required by Rule 424(b); no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) All corporate proceedings and related legal and other
matters in connection with the organization of the Company and the
registration, authorization, issue, sale and
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<PAGE> 15
delivery of the Securities shall have been reasonably satisfactory to
Andrews & Kurth L.L.P., counsel to the Underwriters, and Andrews &
Kurth L.L.P. shall have been timely furnished with such papers and
information as they may reasonably have requested to enable them to
pass upon the matters referred to in this subsection;
(c) You shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact or omits to state a fact
which in your judgment is in either case material and in the case of
an omission is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
(d) Vinson & Elkins L.L.P., counsel to the Company, shall
have furnished to you their written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly and validly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware, and is
qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of properties
requires such qualification or the conduct of its business
requires such qualification (except where the failure to so
qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a
whole); and the Company has all necessary corporate power and
all material governmental authorizations, permits and
approvals required to own, lease and operate its properties
and conduct its business as described in the Prospectus;
(ii) Each of the Company's subsidiaries has been
duly and validly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, and is qualified to do
business and is in good standing in each jurisdiction in which
its ownership or leasing of properties requires such
qualification or the conduct of its business requires such
qualification (except where the failure to so qualify would
not have a material adverse effect on the condition, financial
or otherwise, or the business affairs or prospects of the
Company and its subsidiaries, taken as a whole); and each such
subsidiary has all necessary corporate power and all material
governmental authorizations, permits and approvals required to
own, lease and operate its properties and to conduct its
business as described in the Prospectus;
(iii) All the outstanding shares of capital stock
of each of the Company's subsidiaries have been duly
authorized and are validly issued and outstanding, are fully
paid and non-assessable and are owned by the Company of record
and to the best knowledge of such counsel, (A) beneficially
and (B) free and clear of all liens, encumbrances, equities,
security interests or claims of any nature whatsoever; and
neither the Company nor any of its subsidiaries has granted
any outstanding options,
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<PAGE> 16
warrants or commitments with respect to any shares of its
capital stock, whether issued or unissued, except as
otherwise described in the Prospectus;
(iv) The Company has an authorized capitalization
as set forth in the Registration Statement and all the issued
shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and
non-assessable, are free of any preemptive rights, and were
issued and sold in compliance with all applicable Federal and
state securities laws; except as described in the Prospectus,
to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of,
and there are no commitments, plans or arrangements to issue,
any shares of capital stock of the Company; the Securities
being sold by the Company have been duly and validly
authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued, delivered and paid
for in accordance with the provisions of the Registration
Statement and this Agreement, will be duly and validly issued,
fully paid and non- assessable; the Securities conform to the
description thereof in the Prospectus; the Securities have
been duly authorized for quotation on the Nasdaq National
Market, as of the Effective Date; and the certificates for the
Securities are in valid and sufficient form;
(v) To the best of such counsel's knowledge there
are no legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries or any of
their respective officers or directors is a party or of which
any property of the Company or any of its subsidiaries is the
subject which, if resolved against the Company or any of its
subsidiaries or any of their respective officers or directors,
individually, or to the extent involving related claims or
issues, in the aggregate, is of a character required to be
disclosed in the Prospectus which has not been properly
disclosed therein;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid
and binding agreement of the Company enforceable in accordance
with its terms, except as enforceability of the same may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
and except as enforceability of those provisions relating to
indemnity may be limited by the Federal securities laws and
principles of public policy;
(vii) The Company has full corporate power and
authority to execute, deliver and perform this Agreement, and
the execution, delivery and performance of this Agreement, the
consummation of the transactions herein contemplated and the
issue and sale of the Securities and the compliance by the
Company with all the provisions of this Agreement will not
conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim or
encumbrance upon, any of the property or
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<PAGE> 17
assets of the Company or any of its subsidiaries pursuant to,
the terms of any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to
such counsel to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws, in each case as
amended, of the Company or any of its subsidiaries, or any
statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or
any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental body is required
for the issue and sale of the Securities or the consummation
of the other transactions contemplated by this Agreement,
except such as have been obtained under the Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
(ix) To the best of such counsel's knowledge,
neither the Company nor any of its subsidiaries is currently
in violation of its Certificate of Incorporation or By-laws or
in default under, any indenture, mortgage, deed of trust,
lease, bank loan or credit agreement or any other agreement or
instrument of which such counsel has knowledge to which the
Company or any of its subsidiaries is a party or by which any
of them or any of their property may be bound or affected (in
any respect that is material in light of the financial
condition of the Company and its subsidiaries, taken as a
whole);
(x) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the
voting or transfer of, any Securities pursuant to the
Company's Certificate of Incorporation or By-Laws, in each
case as amended to the date hereof, or any agreement or other
instrument known to such counsel; and no holders of securities
of the Company have rights to the registration thereof under
the Registration Statement or, if any such holders have such
rights, such holders have waived such rights;
(xi) To the extent summarized therein, all
contracts and agreements summarized in the Registration
Statement and the Prospectus are fairly summarized therein,
conform in all material respects to the descriptions thereof
contained therein, and, to the extent such contracts or
agreements or any other material agreements are required under
the Act or the rules and regulations thereunder to be filed or
incorporated by reference therein, as exhibits to the
Registration Statement, they are
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<PAGE> 18
so filed or incorporated by reference; and such counsel does
not know of any contracts or other documents required to be
summarized or disclosed in the Prospectus or to be so filed
or incorporated by reference as an exhibit to the Registration
Statement, which have not been so summarized or disclosed,
or so filed or incorporated by reference;
(xii) All descriptions in the Prospectus of
statutes, regulations or legal or governmental proceedings are
fair summaries thereof and fairly present the information
required to be shown with respect to such matters;
(xiii) Nothing has come to such counsel's attention
to give such counsel reason to believe that any of the
representations and warranties of the Company contained in
this Agreement or in any certificate or document contemplated
under this Agreement to be delivered are not true or correct
or that any of the covenants and agreements herein contained
to be performed on the part of the Company or any of the
conditions herein contained, or set forth in the Registration
Statement and the Prospectus, to be fulfilled or complied with
by the Company have not been or will not be duly and timely
performed, fulfilled or complied with; and
(xiv) The Registration Statement has become
effective under the Act, the Prospectus has been filed in
accordance with Rule 424(b) of the rules and regulations of
the Commission under the Act, including the applicable time
periods set forth therein, or such filing is not required and,
to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act, and the
Registration Statement, the Prospectus and each amendment or
supplement thereto, as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations
thereunder; the documents incorporated by reference in the
Prospectus comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
of the Commission thereunder; it being understood that such
counsel need express no opinion as to the financial statements
and schedules or other financial data contained or
incorporated by reference in the Registration Statement or the
Prospectus; and the condition for use of Form S-3 set forth in
the General Instructions thereto have been satisfied.
Such counsel shall also state that nothing has come
to such counsel's attention that would lead such counsel to
believe that either the Registration Statement or any
amendment or supplement thereto, at the time such Registration
Statement or amendment or supplement became effective and as
of the Time of Delivery, or the Prospectus or any amendment or
supplement thereto, as of its date and as of the Time of
Delivery, contains or contained any untrue statement of
material fact or omitted or omits to state a material fact
required to be stated therein
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<PAGE> 19
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering their opinions set forth in Section 7(d)
above, such counsel may rely, to the extent deemed advisable
by such counsel, (a) as to factual matters, upon certificates
of public officials and officers of the Company, and (b) as to
the laws of any jurisdiction other than the United States and
jurisdictions in which they are admitted, on opinions of
counsel (provided, however, that you shall have received a
copy of each of such opinions which shall be dated the Time of
Delivery, addressed to you or otherwise authorizing you to
rely thereon, and Vinson & Elkins L.L.P. in its opinion to you
delivered pursuant to this subsection, shall state that such
counsel are satisfactory to them and Vinson & Elkins L.L.P.
has no reason to believe that the Underwriters and they are
not justified to so rely);
(e) Andrews & Kurth L.L.P., counsel to the Underwriters,
shall have furnished to you their written opinion or opinions, dated
the Time of Delivery, in form and substance satisfactory to you, with
respect to the incorporation of the Company, the validity of the
Securities, the Registration Statement, the Prospectus and other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(f) At the time this Agreement is executed and also at
the Time of Delivery, Arthur Anderson L.L.P. shall have furnished to
you a letter or letters, dated the date of this Agreement and the Time
of Delivery, in form and substance satisfactory to you, to the effect,
that:
(i) They are independent accountants with respect
to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion the consolidated financial
statements of the Company and its subsidiaries (including the
related schedules and notes) included or incorporated by
reference in the Registration Statement and Prospectus and
covered by their reports included or incorporated by reference
therein comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange
Act, as applicable and the published rules and regulations
thereunder;
(iii) They have performed the procedures specified
by the American Institute of Certified Public Accountants for
a review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
or incorporated by reference into the Registration Statement;
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<PAGE> 20
(iv) On the basis of the review referred to in
clause (iii) above and certain other specified procedures as
of a specified date not more than five days prior to the date
of their letter (which procedures do not constitute an
examination made in accordance with generally accepted
auditing standards), consisting of a reading of the latest
available unaudited interim consolidated financial statements
of the Company and its subsidiaries, a reading of the latest
available minutes of any meeting of the Board of Directors and
stockholders of the Company and its subsidiaries since the
date of the latest audited financial statements included in or
incorporated by reference into the Prospectus, inquiries of
officials of the Company and its subsidiaries who have
responsibility for financial and accounting matters, and such
other procedures or inquiries as are specified in such letter,
nothing came to their attention that caused them to believe
that:
(A) The unaudited consolidated condensed
financial statements of the Company and its
subsidiaries included in the Prospectus do not comply
in form in all material respects with the applicable
accounting requirements of the Act and the rules and
regulations promulgated thereunder or are not
presented in conformity with generally accepted
accounting principles applied on a basis
substantially consistent with that of the audited
consolidated financial statements included in the
Registration Statement and the Prospectus;
(B) as of a specified date not more than
five days prior to the date of their letter, there
was any change in the capital stock, or the long-term
debt or short-term debt of the Company and its
subsidiaries on a consolidated basis, or any decrease
in total assets, net current assets, net assets or
stockholders' equity or other items specified by the
Representatives, of the Company and its subsidiaries
on a consolidated basis, each as compared with the
amounts shown on the [June 30], 1995 included in the
Registration Statement and the Prospectus, except in
each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur
or such other changes, decreases or increases which
are described in their letter and which do not, in
the sole judgment of the Representatives, make it
impractical or inadvisable to proceed with the
purchase and delivery of the Securities as
contemplated by the Registration Statement; and
(C) for the period from [July 1], 1995
to a specified date not more than five days prior to
the date of such letter, there was any decrease, as
compared with the corresponding period of the
preceding fiscal year, in the following consolidated
amounts: total revenues, income from operations,
income before provision for income taxes, net income
or net income per share of the Company and its
subsidiaries, except in all instances for decreases
which the Registration Statement discloses have
occurred or may
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<PAGE> 21
occur; or such other decreases which are described in their
letter and which do not, in the sole judgment of the
Representatives, make it impractical or inadvisable to
proceed with the purchase and delivery of the Securities as
contemplated by the Registration Statement; and
(v) in addition to the examination referred to in
their reports included in the Registration Statement and the
Prospectus and the limited procedures referred to in clause
(iv) above, they have carried out certain specified
procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information specified by
the Representatives, which are derived from the general
accounting records of the Company and its subsidiaries which
appear in the Prospectus, or in Part II of, or in exhibits and
schedules to, (a) the Registration Statement, (b) the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995, under Items 1, 6 and 7, (c) the Company's
Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995 and June 30, 1995, under Items 1 and 2 of Part I, and
have compared such amounts and financial information with the
accounting records of the Company and its subsidiaries, and
have found them to be in agreement and have proved the
mathematical accuracy of certain specified percentages.
(g) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in or incorporated by reference into the
Prospectus, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which
information is given in the Prospectus, there shall not have been any
change in the capital stock (other than shares issued pursuant to the
exercise of Employee Option Shares) or short-term debt or long- term
debt of the Company or any of its subsidiaries nor any change or any
development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities on the terms and in
the manner contemplated in the Prospectus;
(h) Between the date hereof and the Time of Delivery
there shall have been no declaration of war by the Government of the
United States; at the Time of Delivery there shall not have occurred
any material adverse change in the financial or securities markets in
the United States or in political, financial or economic conditions in
the United States or any outbreak or material escalation of
hostilities or other calamity or crisis, the effect of which is such
as to make it, in the judgment of the Representatives, impracticable
to market the Securities or to enforce contracts for the resale of
Securities and no event shall have occurred resulting in (i) trading
in securities generally on the New York Stock Exchange or in the
-21-
<PAGE> 22
Common Stock on the principal securities exchange or market in which
the Common Stock is listed or quoted being suspended or limited or
minimum or maximum prices being generally established on such exchange
or market, or (ii) additional material governmental restrictions, not
in force on the date of this Agreement, being imposed upon trading in
securities generally by the New York Stock Exchange or in the Common
Stock on the principal securities exchange or market in which the
Common Stock is listed or quoted or by order of the Commission or any
court or other governmental authority, or (iii) a general banking
moratorium being declared by either Federal or New York authorities;
(i) The Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of
the Company, satisfactory to you as to such matters as you may
reasonably request and as to (i) the accuracy of the Company's
representations and warranties herein at and as of the Time of
Delivery and (ii) the performance by the Company of all its
obligations hereunder to be performed at or prior to the Time of
Delivery; the Company shall have furnished or caused to be furnished
to you at the Time of Delivery certificates signed by the chief
executive officer and the chief financial officer, on behalf of the
Company, as to (i) the fact that they have carefully examined the
Registration Statement and Prospectus and, (a) as of the Effective
Date, the statements contained or incorporated by reference in the
Registration Statement and the Prospectus were true and correct and
neither the Registration Statement nor the Prospectus omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (b) since the Effective Date, no
event has occurred that is required by the Act or the rules and
regulations of the Commission thereunder to be set forth in an
amendment of, or a supplement to, the Prospectus that has not been set
forth in such an amendment or supplement; and (ii) the matters set
forth in subsection (a) of this Section 7;
(j) Each director and officer of the Company shall have
delivered to you an agreement not to offer, sell, contract to sell or
otherwise dispose of any shares of capital stock of the Company (or
securities convertible into, or exchangeable for, capital stock of the
Company), directly or indirectly, for a period of 180 days after the
date of this Agreement, without the prior written consent of Schroder
Wertheim & Co. Incorporated; and
(k) The Company shall have delivered to you evidence that
the Securities have been authorized for quotation on the Nasdaq
National Market as of the Effective Date.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter 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 or
alleged untrue statement of a material fact contained in or incorporated by
reference into any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
application or other document executed by the Company specifically for that
purpose or based
-22-
<PAGE> 23
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all the Securities under the security
laws thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements made or incorporated by reference therein not
misleading, or (ii) any untrue statement or alleged untrue statement made by
the Company in Section 1 of this Agreement, or (iii) the employment by the
Company of any device, scheme or artifice to defraud, or the engaging by the
Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in which
the Company shall participate, in connection with the issuance and sale of any
of the Securities, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating, preparing to defend, defending or appearing as a third-party
witness in connection with any such action or claim; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission relating
to an Underwriter made in any Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement or any Application in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through you expressly for use therein.
(b) In addition to any obligations of the Company under Section
8(a), the Company agrees that it shall perform its indemnification obligations
under Section 8(a) (as modified by the last paragraph of this Section 8(b))
with respect to counsel fees and expenses and other expenses reasonably
incurred by making payments within 45 days to the Underwriter in the amount of
the statements of the Underwriter's counsel or other statements which shall be
forwarded by the Underwriter, and that they shall make such payments
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have
been improper by a court and a court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition to any
liability which the Company may otherwise have and shall extend upon the same
terms and conditions to each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act.
(c) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company 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 an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or any Application, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement or any
-23-
<PAGE> 24
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter relating to such Underwriter
through you expressly for use therein, and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim.
The indemnity agreement in this Section 8(c) shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and to each person, if any, who controls the Company within the meaning
of the Act or the Exchange Act.
(d) Promptly after receipt by an indemnified party under Section
8(a) or 8(c) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
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 under Section
8(a) or 8(c) except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any liability which
it may have to any indemnified party otherwise than under such Section 8(a) or
8(c). In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel 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, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. If, however, (i) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party or (ii) an indemnified party shall have reasonably concluded
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them and the
indemnified party so notifies the indemnifying party, then the indemnified
party shall be entitled to employ counsel different from counsel for the
indemnifying party at the expense of the indemnifying party and the
indemnifying party shall not have the right to assume the defense of such
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to local counsel) for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same set
of allegations or circumstances. The counsel with respect to which fees and
expenses shall be so reimbursed shall be designated in writing by Schroder
Wertheim & Co. Incorporated in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(c).
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by Section 8(b), the
-24-
<PAGE> 25
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(e) In order to provide for just and equitable contribution under
the Act in any case in which (i) any Underwriter (or any person who controls
any Underwriter within the meaning of the Act or the Exchange Act) makes claim
for indemnification pursuant to Section 8(a) hereof, but 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
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8(a) provides for indemnification in such
case or (ii) contribution under the Act may be required on the part of any
Underwriter or any such controlling person in circumstances for which
indemnification is provided under Section 8(c), then, and in each such case,
each indemnifying party shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject as an indemnifying party
hereunder (after contribution from others) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
the Underwriters on the other from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Securities
purchased under this Agreement, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8(e). The
amount paid or payable by an
-25-
<PAGE> 26
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof referred to above in this Section 8(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section
8(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) Promptly after receipt by any party to this Agreement of
notice of the commencement of any action, suit or proceeding, such party will,
if a claim for contribution in respect thereof is to be made against another
party (the "contributing party"), notify the contributing party of the
commencement thereof; but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party for
contribution under the Act except to the extent it was unaware of such action
and has been prejudiced in any material respect by such failure or from any
liability which it may have to any other party other than for contribution
under the Act. In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party of the commencement
thereof, the contributing party will be entitled to participate therein with
the notifying party and any other contributing party similarly notified.
9. (a) If any Underwriter shall default in its obligation to
purchase the Firm Securities which it has agreed to purchase hereunder, you may
in your discretion arrange for you or another party or other parties to
purchase such Firm Securities on the terms contained herein. If the aggregate
number of Firm Securities as to which Underwriters default is more than
one-eleventh of the aggregate number of all the Firm Securities and within 36
hours after such default by any Underwriter you do not arrange for the purchase
of such Firm Securities, then the Company shall be entitled to a further period
of 36 hours within which to procure another party or other parties satisfactory
to you to purchase such Firm Securities on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Firm Securities, or the Company notifies
you that it has so arranged for the purchase of such Firm Securities, you or
the Company shall have the right to postpone the Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Firm Securities.
-26-
<PAGE> 27
(b) If, after giving effect to any arrangements for the purchase
of the Firm Securities of such defaulting Underwriter or Underwriters by you or
the Company or both as provided in subsection (a) above, the aggregate number
of such Firm Securities which remain unpurchased does not exceed one-eleventh
of the aggregate number of all the Firm Securities, then the Company shall have
the right to require each nondefaulting Underwriter to purchase the number of
the Firm Securities which such Underwriter agreed to purchase hereunder and, in
addition, to require each nondefaulting Underwriter to purchase its pro rata
share (based on the number of Firm Securities which such Underwriter agreed to
purchase hereunder) of the Firm Securities of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing shall
relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Firm Securities of a defaulting Underwriter or Underwriters by you or
the Company as provided in subsection (a) above, the aggregate number of such
Firm Securities which remain unpurchased exceeds one-eleventh of the aggregate
number of all the Firm Securities, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting Underwriters
to purchase Firm Securities of a defaulting Underwriter or Underwriters, then
this Agreement shall thereupon terminate without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity agreement in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or an officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon,
New York City time, on the first full business day after the Registration
Statement becomes effective, or at such time after the Registration Statement
becomes effective as you may authorize the sale of the Securities to the public
by Underwriters or other securities dealers, or (b) if the Registration
Statement has heretofore become effective, at the earlier of 24 hours after the
filing of the Prospectus with the Commission or at such time as you may
authorize the sale of the Securities to the public by Underwriters or
securities dealers, unless, prior to any such time you shall have received
notice from the Company that it elects that this Agreement shall not become
effective, or you, or through you such of the Underwriters as have agreed to
purchase in the aggregate fifty percent or more of the Firm Securities
hereunder, shall have given notice to the Company that you or such Underwriters
elect that this Agreement shall not become effective; provided, however, that
the provisions of this Section and Section 6 and Section 8 hereof shall at all
times be effective.
-27-
<PAGE> 28
If this Agreement shall be terminated pursuant to Section 9 hereof, or
if this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company shall not
then be under any liability to any Underwriter except as provided in Section 6
and Section 8 hereof, but if this Agreement becomes effective and is not so
terminated but the Securities are not delivered by or on behalf of the Company
as provided herein because the Company has been unable for any reason beyond
its control and not due to any default by it to comply with the terms and
conditions hereof, the Company will reimburse the Underwriters through you for
all out-of- pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Underwriter except as
provided in Section 6 and Section 8 hereof.
12. The statements set forth in the last paragraph on the front
cover page of the Prospectus, the paragraphs on the inside front cover of the
Prospectus containing stabilization and passive market making language and the
third paragraph under the caption "Underwriting" in the Prospectus constitute
the only information furnished by any Underwriter through the Representatives
to the Company for purposes of Sections 1(b), 1(c) and 8 hereof.
13. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Schroder Wertheim & Co. Incorporated on behalf of
you as the Representatives.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
you as the Representatives in care of Schroder Wertheim & Co. Incorporated,
Equitable Center, 787 Seventh Avenue, New York, New York 10019, Attention:
Syndicate Department; and if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission (subsequently confirmed by delivery or by
letter sent by mail) to the address of the Company set forth in the
Registration Statement, Attention:_____________________; provided, however,
that any notice to any Underwriter pursuant to Section 8(d) hereof shall be
delivered or sent by mail, telex or facsimile transmission (subsequently
confirmed by delivery or by letter sent by mail) to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Section 8 and Section 10 hereof, the officers and directors of the Company and
each person who controls the Company or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of
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<PAGE> 29
any of the Securities from any Underwriter shall be deemed a successor or
assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
16. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
17. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument. If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement Among Underwriters, manually or facsimile executed
counterparts of which, to the extent practicable and upon request, shall be
submitted to the Company for examination, but without warranty on your part as
to the authority of the signers thereof.
Very truly yours,
TOM BROWN, INC.
By:
______________________________
Name:
Title:
Accepted as of the date hereof:
SCHRODER WERTHEIM & CO. INCORPORATED
HOWARD, WEIL, LABOUISSE, FRIEDRICHS INCORPORATED
PETRIE PARKMAN & CO., INC.
SALOMON BROTHERS INC
as Representatives of the several Underwriters
By: SCHRODER WERTHEIM & CO. INCORPORATED
By: _______________________________
Managing Director
-29-
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
Underwriter Number of Firm Securities
----------- -------------------------
<S> <C>
Schroder Wertheim & Co. Incorporated . . . . . . . . . .
Howard, Weil, Labouisse, Friedrichs Incorporated . . . .
Petrie Parkman & Co., Inc. . . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . .
_____________
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
=============
</TABLE>
-30-
<PAGE> 1
EXHIBIT 4.4
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
Pursuant to the provisions of the Delaware General Corporation Law,
the Board of Directors and the stockholders of the Corporation adopted an
amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the
Delaware General Corporation Law, the purpose of which amendment is to increase
the number of authorized shares of Common Stock:
"RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing the first sentence of Article Fourth thereof, so
that as amended, the first sentence of Article Fourth shall read as
follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 32,500,000, of
which 2,500,000 shares shall be Preferred Stock, par value
$.10 per share, and 30,000,000 shares shall be Common Stock,
$.10 par value per share.
Except as specifically amended hereby, all other provisions of Article
Fourth shall remain in full force and effect.
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Amendment to be signed by Donald L. Evans, its Chairman of the Board of
Directors, and attested by Kim Harris, its Assistant Secretary, this 18th day
of May, 1994.
TOM BROWN, INC.
By: /s/ Donald L. Evans
----------------------------
Donald L. Evans, Chairman of the
Board of Directors
ATTESTED:
/s/ Kim Harris
- ---------------------------------
Kim Harris, Assistant Secretary
<PAGE> 2
The undersigned Chairman of the Board of Directors of Tom Brown, Inc.,
being duly sworn, does verify that the foregoing instrument represents the act
and deed of Tom Brown, Inc. and that the facts stated in such instrument are
true.
/s/ Donald L. Evans
---------------------------
Donald L. Evans, Chairman of
the Board of Directors
STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
DONALD L. EVANS and KIM HARRIS, Chairman of the Board of Directors and
Assistant Secretary, respectively, of Tom Brown, Inc., a corporation formed
under the laws of the State of Delaware, known to me to be the individuals
whose names are subscribed to the foregoing instrument, and acknowledged and
swore to me that they each executed the same for the purposes and consideration
therein expressed and as the act and deed of said corporation and that the
facts stated in the foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 18th day of May, 1994.
/s/ Carolyn Vannoy
---------------------------------
Name: Carolyn Vannoy
Notary Public in and for
the State of Texas
2
<PAGE> 1
EXHIBIT 4.5
CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES
of
SERIES B PREFERRED STOCK, $.10 PAR VALUE
of
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That at a meeting of the Board of Directors of Tom Brown, Inc. the
following resolution, creating a series of three hundred thousand (300,000)
shares of Preferred Stock, designated as Series B Preferred Stock, was duly
adopted pursuant to the authority granted to and vested in the Board of
Directors of this corporation in accordance with the provisions of its
Certificate of Incorporation, as amended:
RESOLVED, that a series of Preferred Stock, $.10 par value, of
the corporation be, and it hereby is, created and that the designation
and amount thereof and the preferences and relative, participating,
optional and other special rights, and the qualifications, limitations
and restrictions thereof (in addition to the provisions set forth in
the Certificate of Incorporation, as amended, of the corporation,
which are applicable to the Preferred Stock of all classes and series)
are as follows:
I. Designation and Amount. The shares of such series
shall be designated as the "Series B Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting such series
shall be three hundred thousand (300,000). Such number of shares may
be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series
B Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the corporation.
II. Dividends and Distributions.
(A) Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock
ranking prior and superior to the shares of Series B Preferred
Stock with respect to dividends, the holders of shares of
Series B Preferred Stock, in preference to the holders of
common stock, $.10 par value, of the corporation (the "Common
Stock") and of any other stock ranking junior (as to
dividends) to Series B Preferred Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, cumulative
quarterly dividends payable in
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cash or in kind, as hereinafter provided, on the last day of
March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a
share of Series B Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$1.00 (payable in cash) or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate
per share amount (payable in cash) of all cash dividends, and
100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a
share of Series B Preferred Stock. If the corporation shall
at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by
reclassification or otherwise), into a greater or lesser
number of shares of Common Stock, then in each such case the
amount to which holders of Series B Preferred Stock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that was outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or
distribution on the Series B Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, if
no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series B
Preferred Stock shall nevertheless accrue and be cumulative on
the outstanding shares of Series B Preferred Stock as provided
in paragraph (C) of this Section.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series B Preferred Stock
from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series B Preferred Stock,
unless the date of issue of such shares is
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prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares
of Series B Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series B Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share by share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series B Preferred Stock entitled to receive a
payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
III. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series B Preferred Stock
shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the share-holders of the corporation.
If the corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders
of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which
is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided in the
Certificate of Incorporation or by law, the holders of shares
of Series B Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the corporation.
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IV. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series B Preferred
Stock as provided in Section II are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Preferred Stock
outstanding shall have been paid in full, the corporation
shall not:
(i) declare or pay dividends on, make
any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of
stock ranking junior (as to dividends) to the Series
B Preferred Stock;
(ii) declare or pay dividends on or make
any other distributions on any shares of stock
ranking on a parity (as to dividends) with the Series
B Preferred Stock, except dividends paid ratably on
the Series B Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled; or
(iii) purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock,
or any shares of stock ranking on a parity (as to
dividends) with the Series B Preferred Stock, except
in accordance with a purchase offer made in writing
or by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration
of the respective annual dividend rates and other
relative rights and preferences of the respective
series and classes, shall determine in good faith
will result in fair and equitable treatment among the
respective series or classes.
(B) The corporation shall not permit any
subsidiary of the corporation to purchase or otherwise acquire
for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (A) of this
Section IV, purchase or otherwise acquire such shares at such
time and in such manner.
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V. Reacquired Shares. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the corporation in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
VI. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (as to amounts payable upon liquidation, dissolution or
winding up) to the Series B Preferred Stock unless, prior thereto, the
holders of Series B Preferred Stock shall have received an amount per
share (rounded to the nearest cent) equal to the greater of (a)
$100.00 per share, or (b) an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common
Stock, plus, in either case, an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the
date of such payment, or (2) to the holders of stock ranking on a
parity (as to amounts payable or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up. If the corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect
a subdivision or combination of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under the provision in clause (1)(b)
of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
VII. Consolidation, Merger, Etc. If the corporation shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash or any other property, or any
combination thereof, then in any such case the shares of Series B
Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash or any other property, or any
combination thereof, into which or for which each share of Common
Stock is
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changed or exchanged. If the corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
VIII. No Redemption. The shares of Series B Preferred
Stock shall not be redeemable.
IX. Rank. Except as otherwise provided in its
Certificate of Incorporation, as amended, the corporation may
authorize or create any series of Preferred Stock ranking prior to or
on a parity with the Series B Preferred Stock as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up.
X. Amendment. The Certificate of Incorporation of the
corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the
Series B Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock, voting together as a single class.
The foregoing resolution was adopted by the Board of Directors of the
corporation, pursuant to the authority vested in it by the Certificate of
Incorporation of the corporation, at a meeting of the Board of Directors duly
held on the 1st day of March, 1991.
IN WITNESS WHEREOF, this Certificate has been executed on behalf of
the corporation by its President and attested by its Secretary this 13th day of
March, 1991.
TOM BROWN, INC.
By: /s/ Donald L. Evans
-------------------------------
President
ATTEST:
/s/ James M. Alsup
- ----------------------------
Secretary
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EXHIBIT 5.1
[VINSON & ELKINS LETTERHEAD]
October 4, 1995
Tom Brown, Inc.
500 Empire Plaza Building
Midland, TX 79701
Re: Sale of up to 4,600,000 shares of Common Stock
Gentlemen:
We have acted as counsel to Tom Brown, Inc., a Delaware corporation (the
"Company"), in connection with the proposed issuance and sale by the Company of
4,000,000 shares (or up to 4,600,000 shares if the underwriters exercise their
over-allotment option in full) of Common Stock, $.10 par value ("Common
Stock"), of the Company pursuant to a Registration Statement on Form S-3 to be
filed by the Company with the Securities and Exchange Commission (herein
referred to as the "Registration Statement")
We have made such inquiries and examined such documents as we have
considered necessary or appropriate for the purpose of giving the opinions
hereinafter set forth. We have assumed the genuineness and authenticity of all
signatures on all original documents, the authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies and the due authorizations, execution, delivery or
recordation of all documents where due authorization, execution or recordation
are prerequisites to the effectiveness thereof.
Based upon the foregoing, and having regard for such legal considerations
as we deem relevant, we are of the opinion that:
(i) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) the authorized capital stock of the Company consists of
2,500,000 shares of Preferred Stock, $.10 par value, of which,
as of the date hereof, no shares are outstanding, and
30,000,000 shares of Common
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Tom Brown, Inc.
Page 2
October 4, 1995
Stock, $.10 par value, of which, as of the date hereof,
15,537,529 shares are issued and outstanding; and
(iii) the 4,000,000 shares of Common Stock, and up to an aggregate
of 600,000 additional shares of Common Stock to cover over-
allotments (if any), proposed to be issued and sold by the
Company pursuant to the Registration Statement and the
Underwriting Agreement with the underwriters will, upon
issuance and delivery against payment therefor, be duly
authorized and legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
statements made regarding our Firm and to the use of our name under the heading
"Legal Matters" in the prospectus constituting a part of the Registration
Statement.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
October 4, 1995
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CONSENT OF INDEPENDENT PETROLEUM CONSULTANTS
As independent oil and gas consultants, Williamson Petroleum Consultants Inc.
hereby consents to (a) the use of our report entitled "Evaluation of Oil and
Gas Reserves to the Interests of Tom Brown, Inc., Effective December 31, 1994,
for disclosure to the Securities and Exchange Commission, Williamson Project
4.8233" dated February 24, 1995, and to all references to our firm included in
or made a part of this Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended and (b) the incorporation by reference into the Tom Brown, Inc.
Registration Statement on Form S-3 of all references to our firm included in or
made part of the Tom Brown, Inc. annual report on Form 10-K for the year ending
December 31, 1994.
/s/ WILLIAMSON PETROLEUM CONSULTANTS, INC.
WILLIAMSON PETROLEUM CONSULTANTS, INC.
Houston, Texas
October 5, 1995
