<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 15, 1999
AMENDMENT NO. 1
CROSS TIMBERS OIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-10662 75-2347769
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
810 Houston Street, Suite 2000, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
(817) 870-2800
(Registrant's telephone number, including area code)
<PAGE>
Item 7. Financial Statements and Exhibits.
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Financial statements of businesses acquired.
Ocean Energy Acquisition:
Report of Independent Public Accountants........................................... 3
Statements of Revenues and Direct Operating Expenses
for the Years Ended December 31, 1998 and 1997
and the Nine Months Ended September 30, 1999 and 1998......................... 4
Notes to Statements of Revenues and Direct Operating Expenses...................... 5
(b) Pro forma financial information.
Cross Timbers Oil Company:
Pro Forma Consolidated Financial Statements (Unaudited)............................ 7
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1998 (Unaudited).............................. 8
Pro Forma Consolidated Statement of Operations
for the Nine Months Ended September 30,1999 (Unaudited)....................... 9
Notes to Pro Forma Consolidated Financial Statements (Unaudited)................... 10
(c) Exhibits.
Exhibit Number and Description
-------------------------------
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1 Purchase and Sale Agreement by and between Ocean Energy, Inc. and
Cross Timbers Oil Company, dated July 30, 1999. *
(23) Consents of experts
23.1 Consent of Arthur Andersen LLP
(99) Additional exhibits
99.1 Revolving Credit Agreement, dated September 15, 1999, among
Summer Acquisition Company and certain commercial banks named therein. *
99.2 Stockholders Agreement, dated September 15, 1999, among
Whitewine Holding Company, LBI Group Inc. and Cross Timbers
Trading Company.
99.3 Put and Call Agreement, dated September 15, 1999, by and between
Cross Timbers Oil Company and LBI Group Inc.
99.4 Registration Rights Agreement, dated September 15, 1999, by and between
Cross Timbers Oil Company and Whitewine Holding Company.
</TABLE>
- --------------------------------
* Previously filed
-2-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Cross Timbers Oil Company:
We have audited the accompanying statements of revenues and direct operating
expenses of the Ocean Energy Acquisition (see Note 1) for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility
of the management of Cross Timbers Oil Company. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such statements present fairly, in all material respects, the
revenues and direct operating expenses of the Ocean Energy Acquisition described
in Note 1 for the years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
November 22, 1999
-3-
<PAGE>
OCEAN ENERGY ACQUISITION
Statements of Revenues and Direct Operating Expenses
For the Years Ended December 31, 1998 and 1997
and the Nine Months Ended September 30, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------
1998 1997 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
(unaudited)
REVENUES
Oil.............................. $ 2 $ 3 $ 2 $ 2
Gas.............................. 42,671 59,413 25,086 31,828
------- ------- ------- -------
Total........................... 42,673 59,416 25,088 31,830
------- ------- ------- -------
DIRECT OPERATING EXPENSES
Production....................... 3,358 2,767 1,822 2,555
Taxes, transportation and other.. 3,683 4,378 1,949 2,507
------- ------- ------- -------
Total........................... 7,041 7,145 3,771 5,062
------- ------- ------- -------
EXCESS OF REVENUES OVER
DIRECT OPERATING EXPENSES........ $35,632 $52,271 $21,317 $26,768
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Statements of Revenues and Direct Operating Expenses.
-4-
<PAGE>
OCEAN ENERGY ACQUISITION
Notes to Statements of Revenues and Direct Operating Expenses
1. Basis of Presentation
On September 15, 1999, Cross Timbers Oil Company ("the Company") and Lehman
Brothers Holdings, Inc. ("Lehman") acquired Arkoma Basin oil and gas properties
from Ocean Energy, Inc. ("Ocean Energy Acquisition") for $231 million. The
original purchase price of $235.3 million was reduced by estimated net revenue
received between the July 1, 1999 effective date and the closing date.
Additional purchase price adjustments may result from post-closing adjustments.
All purchase costs will be allocated to oil and gas properties.
The Company and Lehman each own 50% of Whitewine Holding Company
("Whitewine"), which was formed to acquire the Arkoma Basin properties. The
Company entered into a put and call agreement with Lehman whereby the Company
has the right to purchase Lehman's 50% interest in the Ocean Energy Acquisition
from January 1, 2000 through September 15, 2000. If the Company does not
exercise its option on or before that date, Lehman has the right to sell its 50%
interest to the Company on September 15, 2000. The option exercise price is
Lehman's cost of $100 million plus an annualized return of 20%. The parties
agreed to the put and call agreement in order to provide the Company a method of
purchasing the remainder of the Ocean Energy Acquisition, and to provide Lehman
a method to sell its interest, if either party determined it to be in its best
interest.
The accompanying financial statements include 100% of the revenues and
direct operating expenses of the properties acquired through Whitewine.
Whitewine's financial results are consolidated in the Company's financial
statements, with recognition of Lehman's 50% interest as a minority interest.
The accompanying statements of revenues and direct operating expenses do not
include general and administrative expense, interest income or expense, a
provision for depreciation, depletion and amortization or any provision for
income taxes because the property interests acquired represent only a portion of
a business, and the costs incurred by Ocean Energy, Inc. are not necessarily
indicative of the costs to be incurred by Whitewine.
Historical financial information reflecting financial position, results of
operations and cash flows of the Ocean Energy Acquisition are not presented
because the entire acquisition cost was assigned to oil and gas property
interests. Accordingly, the historical statements of revenues and direct
operating expenses have been presented in lieu of the financial statements
required under Rule 3-05 of Securities and Exchange Commission Regulation S-X.
2. Supplemental Oil and Gas Reserve Information (Unaudited)
Estimated Quantities of Proved Oil and Gas Reserves
The proved reserve information presented below has been estimated by the
Company's internal engineers using December 31, 1998 prices and costs. Proved
reserves are estimated quantities of crude oil and natural gas which, based on
geologic and engineering data, are estimated to be reasonably recoverable in
future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those which are expected to be
recovered through existing wells with existing equipment and operating methods.
Because of inherent uncertainties and the limited nature of reservoir data, such
estimates are subject to change as additional information becomes available.
-5-
<PAGE>
<TABLE>
<CAPTION>
Proved Oil and Gas Reserves at December 31, 1998
Oil (Bbls) Gas (Mcf)
------------- ------------
(in thousands)
<S> <C> <C>
Proved reserves....................... 2 229,837
======= =======
Proved developed reserves............. 2 195,995
======= =======
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil
and Gas Reserves
The standardized measure of discounted future net cash flows ("Standardized
Measure") is prepared using assumptions required by the Financial Accounting
Standards Board. Such assumptions include the use of year-end prices for oil
and gas and year-end costs for estimated future development and production
expenditures to produce year-end estimated proved reserves. Discounted future
net cash flows are calculated using a 10% rate.
The Standardized Measure does not represent the Company's estimate of
future net cash flows or the value of proved oil and gas reserves. Probable and
possible reserves, which may become proved in the future, are excluded from the
calculations. Furthermore, year-end prices, used to determine the standardized
measure of discounted cash flows, are influenced by seasonal demand and other
factors and may not be the most representative in estimating future revenues or
reserve data.
Standardized Measure of Discounted Future Net Cash Flows at December 31,
1998
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Future cash inflows........................ $ 449,591
Future costs:
Production................................ (110,847)
Development............................... (19,168)
---------
Future net cash inflows.................... 319,576
10% annual discount........................ (155,072)
---------
Standardized measure of discounted future
net cash flows before income taxes $ 164,504
=========
</TABLE>
-6-
<PAGE>
CROSS TIMBERS OIL COMPANY
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The accompanying Pro Forma Consolidated Financial Statements have been
prepared by recording pro forma adjustments to the historical consolidated
financial statements of Cross Timbers Oil Company ("the Company"). The Pro
Forma Consolidated Statement of Operations for the nine months ended September
30, 1999 has been prepared as if the Ocean Energy Acquisition, Spring Holding
Company Acquisition and Other Acquisitions and Dispositions were consummated on
January 1, 1999. The Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1998 has been prepared as if the Ocean Energy
Acquisition, Spring Holding Company Acquisition and Other Acquisitions and
Dispositions were consummated immediately prior to January 1, 1998. No pro
forma balance sheet is included since these transactions occurred prior to
September 30, 1999, and therefore are included in the Company's historical
balance sheet.
The Pro Forma Consolidated Financial Statements are not necessarily
indicative of the results of operations that would have occurred had the
transactions been effected on the assumed dates. Additionally, future results
may vary significantly from the results reflected in the Pro Forma Consolidated
Statements of Operations due to normal production declines, changes in prices,
future transactions and other factors. These statements should be read in
conjunction with the Company's audited consolidated financial statements and the
related notes for the year ended December 31, 1998 included in the Company's
1998 Form 10-K, the Company's unaudited consolidated financial statements and
the related notes for the nine months ended September 30, 1999 included in the
Company's Form 10-Q for the quarter ended September 30, 1999 and the statement
of revenues and direct operating expenses of the Ocean Energy Acquisition for
the year ended December 31, 1998 included in this Form 8-K/A.
-7-
<PAGE>
CROSS TIMBERS OIL COMPANY
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments (Note 3)
---------------------------------------------------------
Spring
Ocean Holding Other
Energy Company Acquisitions
Acquisition Acquisition & Dispositions
Historical (a) (b) (c) Other Pro Forma
---------- ----------- ------------ --------------- ------------ ---------------
REVENUES (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Oil and condensate........ $ 56,164 $ 2 $ - $ 5,795 $ - $ 61,961
Gas and natural gas
liquids.................. 182,587 42,671 21,554 (12,212) - 234,600
Gas gathering, processing
and marketing.......... 9,438 - 880 - - 10,318
Other..................... 1,297 - 791 - - 2,088
--------- ------- ------- ------------ -------------- ---------
Total Revenues.......... 249,486 42,673 23,225 (6,417) - 308,967
--------- ------- ------- ------------ -------------- ---------
EXPENSES
Production................ 63,148 3,358 3,439 (3,565) 3,435(d) 69,815
Exploration............... 8,034 - - - - 8,034
Taxes, transportation and
other.................. 29,105 3,683 539 (3,468) - 29,859
Depreciation, depletion
and amortization....... 83,560 - 9,893 - 27,319(f) 120,772
Impairment................ 2,040 - - - - 2,040
General and administrative 13,479 - 2,525 - (4,515)(d) 11,489
Gas gathering and
processing............... 8,360 - - - - 8,360
Trust development costs... 1,498 - - - - 1,498
--------- ------- ------- ------------ -------------- ---------
Total Expenses.......... 209,224 7,041 16,396 (7,033) 26,239 251,867
--------- ------- ------- ------------ -------------- ---------
OPERATING INCOME........... 40,262 35,632 6,829 616 (26,239) 57,100
--------- ------- ------- ------------ -------------- ---------
OTHER INCOME (EXPENSE)
Gain (loss) on investment
in equity securities... (93,719) - - - - (93,719)
Interest income
(expense), net........... (52,113) - (5,947) - 603(g) (57,457)
--------- ------- ------- ------------ -------------- ---------
Total Other Income
(Expense).............. (145,832) - (5,947) - 603 (151,176)
--------- ------- ------- ------------ -------------- ---------
INCOME (LOSS) BEFORE
INCOME TAX
AND MINORITY INTEREST..... (105,570) 35,632 882 616 (25,636) (94,076)
INCOME TAX EXPENSE
(BENEFIT)................. (35,851) - 339 - 3,462(i) (32,050)
MINORITY INTEREST
in Net Income of Consolidated
Subsidiaries............ - - - - (715)(j) (715)
--------- --------- ------- ------------ ------------- ---------
NET INCOME (LOSS).......... (69,719) 35,632 543 616 (29,813) (62,741)
Preferred Stock Dividends.. (1,779) - - - - (1,779)
--------- --------- ------- ------------ -------------- ---------
EARNINGS (LOSS) AVAILABLE
TO COMMON STOCK........... $ (71,498) $35,632 $ 543 $ 616 $(29,813) $ (64,520)
========= ======= ======= ============ ============== =========
EARNINGS (LOSS) PER COMMON
SHARE
Basic..................... $(1.65) $(1.26)
========= =========
Diluted................... $(1.65) $(1.26)
========= =========
Weighted Average
Common Shares Outstanding. 43,396 4,000 3,651 51,047
========= ======= ============ =========
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
-8-
<PAGE>
CROSS TIMBERS OIL COMPANY
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments (Note 3)
------------------------------------------------------
Spring
Ocean Holding Other
Energy Company Acquisitions
Acquisition Acquisition & Dispositions
Historical (a) (b) (c) Other Pro Forma
------------- ----------- ----------- --------------- ----------- ----------
REVENUES (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Oil and condensate........ $ 58,413 $ 2 $ - $ (4,581) $ - $ 53,834
Gas and natural gas
liquids.................. 161,556 25,086 22,308 (17,367) - 191,583
Gas gathering, processing
and marketing.......... 4,791 - 991 - - 5,782
Other..................... 6,120 - 580 - - 6,700
-------- ------- ------- -------------- ---------- --------
Total Revenues.......... 230,880 25,088 23,879 (21,948) - 257,899
-------- ------- ------- -------------- ---------- --------
EXPENSES
Production................ 56,282 1,822 3,010 (5,603) 1,755(e) 57,266
Exploration............... 804 - - - - 804
Taxes, transportation and
other.................... 23,971 1,949 337 (2,591) - 23,666
Depreciation, depletion
and amortization....... 77,630 - 9,454 - 10,327(f) 97,411
General and administrative 9,058 - 1,984 - (3,579)(e) 7,463
Gas gathering and
processing............... 6,429 - - - - 6,429
-------- ------- ------- -------------- ---------- --------
Total Expenses.......... 174,174 3,771 14,785 (8,194) 8,503 193,039
-------- ------- ------- -------------- ---------- --------
OPERATING INCOME........... 56,706 21,317 9,094 (13,754) (8,503) 64,860
-------- ------- ------- -------------- ---------- --------
OTHER INCOME (EXPENSE)
Gain on sale of Hugoton
Royalty Trust units.... 40,566 - - - - 40,566
Gain on investment in
equity securities...... 8,939 - - - - 8,939
Interest expense, net..... (44,591) - (6,079) - (1,912)(h) (52,582)
-------- ------- ------- -------------- ---------- --------
Total Other Income
(Expense).............. 4,914 - (6,079) - (1,912) (3,077)
-------- ------- ------- -------------- ---------- --------
INCOME BEFORE INCOME TAX...
AND MINORITY INTEREST..... 61,620 21,317 3,015 (13,754) (10,415) 61,783
INCOME TAX EXPENSE
(BENEFIT)................. 20,803 - 1,152 - (1,171)(i) 20,784
MINORITY INTEREST
in Net Loss of
Consolidated Subsidiaries 645 - - - 49 (k) 694
-------- ------- ------- -------------- ---------- ------
NET INCOME................. 41,462 21,317 1,863 (13,754) (9,195) 41,693
Preferred Stock Dividends.. (1,334) - - - - (1,334)
-------- ------- ------- -------------- ---------- --------
EARNINGS AVAILABLE TO
COMMON STOCK.............. $ 40,128 $21,317 $ 1,863 $(13,754) $ (9,195) $ 40,359
======== ======= ======= ============== ========== ========
EARNINGS PER COMMON SHARE
Basic..................... $0.87 $0.83
======== ========
Diluted................... $0.85 $0.81
======== ========
Weighted Average
Common Shares Outstanding. 46,140 2,652 48,792
======== ======= ========
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
-9-
<PAGE>
CROSS TIMBERS OIL COMPANY
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1998 has been prepared assuming that the Company
consummated the Ocean Energy Acquisition, Spring Holding Company Acquisition and
Other Acquisitions and Dispositions immediately prior to January 1, 1998. The
accompanying Pro Forma Consolidated Statement of Operations for the nine months
ended September 30, 1999 has been prepared assuming that the Company consummated
the Ocean Energy Acquisition, Spring Holding Company Acquisition and Other
Acquisitions and Dispositions on January 1, 1999. The Pro Forma Consolidated
Statements of Operations are not necessarily indicative of the results of
operations had the above described transactions occurred on the assumed dates.
2. Acquisitions and Dispositions
Ocean Energy Acquisition
On September 15, 1999, Cross Timbers Oil Company ("the Company") and Lehman
Brothers Holdings, Inc. ("Lehman") acquired Arkoma Basin oil and gas properties
from Ocean Energy, Inc. ("Ocean Energy Acquisition") for $231 million. The
original purchase price of $235.3 million was reduced by estimated net revenue
received between the July 1, 1999 effective date and the closing date.
Additional purchase price adjustments may result from post-closing adjustments.
All purchase costs will be allocated to oil and gas properties.
The Company and Lehman each own 50% of Whitewine Holding Company
("Whitewine"), which was formed to acquire the Arkoma Basin properties. Lehman
contributed $100 million in cash to Whitewine and the Company contributed $100
million in securities, including its common stock. The purchase price was
funded with $100 million from the jointly owned company and $131 million
financed through a revolving credit agreement between Whitewine's wholly owned
subsidiary, Summer Acquisition Company, and commercial banks. Although the
Company and Lehman have equal board representation and control of Whitewine, the
Company's management controls operations of the properties. Whitewine's
financial results are consolidated in the Company's financial statements, with
recognition of Lehman's 50% interest as a minority interest.
The Company entered into a put and call agreement with Lehman whereby the
Company has the right to purchase Lehman's 50% interest in the Ocean Energy
Acquisition from January 1, 2000 through September 15, 2000. If the Company
does not exercise its option on or before that date, Lehman has the right to
sell its 50% interest to the Company on September 15, 2000. The option exercise
price is Lehman's cost of $100 million plus an annualized return of 20%. The
parties agreed to the put and call agreement in order to provide the Company a
method of purchasing the remainder of the Ocean Energy Acquisition, and to
provide Lehman a method to sell its interest, if either party determined it to
be in its best interest.
Spring Holding Company Acquisition
On July 1, 1999, the Company and Lehman acquired the common stock of Spring
Holding Company ("Spring Holding Company Acquisition"), a private oil and gas
company located in Tulsa, Oklahoma for $85 million. The Company issued
4,000,000 shares of common stock, less $3.2 million cash received, for its
ownership interest in Spring and Lehman contributed $42.5 million in cash. The
Company and Lehman each owned 50% of a limited liability company that acquired
the common stock of Spring. The Company consolidates its investment in Spring
using the purchase method of accounting, with recognition of Lehman's investment
as a minority interest through September 14, 1999. On September 15, 1999, the
Company purchased Lehman's interest for $44.3 million, or $1.8 million in excess
of the recorded minority interest, which excess was recorded as producing
property cost.
-10-
<PAGE>
Other Acquisitions and Dispositions
The acquisitions described in the following paragraphs are collectively
referred to as the "Other Acquisitions."
On April 24, 1998, the Company acquired producing properties in the East
Texas Basin from EEX Corporation ("EEX Acquisition") for $265 million. After
purchase price adjustments primarily resulting from net revenues from the
January 1, 1998 effective date through April 24, 1998, the properties were
purchased for $245 million. In connection with the acquisition, the Company
sold a production payment to EEX Corporation for $30 million. The cost of the
EEX Acquisition (net of the production payment sold) of $215 million was funded
by bank borrowings which were partially repaid by proceeds from the sale of
7,203,450 shares of common stock.
On September 30, 1998, the Company acquired oil-producing properties in the
Middle Ground Shoal Field of Alaska's Cook Inlet ("Cook Inlet Acquisition") from
various Shell Oil Company affiliates ("Shell"). The acquired interests include
a 100% working interest in two State of Alaska leases, two offshore production
platforms and a 50% interest in certain operated production pipelines and
onshore processing facilities. The Company acquired the properties in exchange
for 1,921,850 shares of the Company's common stock, subject to a $20 per share
price guarantee, and $6 million which was paid in August and September 1999.
The total purchase price of the Cook Inlet Acquisition was $45 million.
On November 20, 1998, the Company acquired primarily gas-producing
properties in northwest Oklahoma and the San Juan Basin of New Mexico for $33.4
million from Seagull Energy Corp. After purchase price adjustments primarily
resulting from net revenues from the October 1, 1998 effective date through
November 20, 1998, the properties were purchased for an estimated price of $29.2
million. Additional purchase price revisions may result from post-closing
adjustments. The Company funded the acquisition with bank debt.
The dispositions described in the following paragraphs are collectively
referred to as the "Dispositions."
In December 1998, the Company formed the Hugoton Royalty Trust by conveying
80% net profits interests in properties located in the Hugoton area of Kansas
and Oklahoma, the Anadarko Basin of Oklahoma and the Green River Basin of
Wyoming. These net profits interests were conveyed to the trust in exchange for
40,000,000 units of beneficial interest. On April 8, 1999, the Company sold
15,000,000, or 37.5%, of the trust units, in an initial public offering at a
price of $9.50 per unit, less underwriters' discount and expenses. Pursuant to
the underwriters' overallotment option, the Company sold an additional 2,004,000
trust units at $9.50 per unit less discount on May 7, 1999. Total net proceeds
from the sale were $148.6 million, resulting in a gain of $40.3 million before
income tax. Proceeds from the sale were used to reduce bank debt.
On May 4, 1999, the Company sold non-operated producing properties in the
San Juan Basin of New Mexico to Vastar Resources, Inc. for $29.9 million. The
sale was effective March 1, 1999 and is subject to typical post-closing
adjustments. The Company sold other non-operated producing properties in June
1999 for approximately $15 million. Proceeds from the sales were used to reduce
bank debt.
On September 14, 1999, oil and gas producing properties were sold for
approximately $63.5 million before closing costs. In two transactions, Cross
Timbers sold a total of $41 million of primarily non-operated properties in
Oklahoma, the Permian Basin of West Texas and New Mexico, and the Green River
Basin of Wyoming. Additionally, Spring sold $22.5 million of properties in the
Panhandle area of Texas and in Coal County, Oklahoma.
-11-
<PAGE>
3. Pro Forma Adjustments
Pro forma adjustments necessary to adjust the Statements of Operations are
as follows:
(a) To record revenue and direct operating expenses of the Ocean Energy
Acquisition for the year ended 1998 and nine months ended September 30,
1999, from January 1 through the date of acquisition. Revenue and
direct operating expenses subsequent to the date of acquisition are
included in the Company's historical results of operations.
(b) To record the results of operations of Spring Holding Company for the
year ended 1998 and nine months ended September 30, 1999, from January
1 through the date of acquisition. Revenue and direct operating
expenses subsequent to the date of acquisition are included in the
Company's historical results of operations.
(c) To record revenue and direct operating expenses of the Other
Acquisitions, net of the Dispositions, from January 1 through the date
of acquisition or disposition. Revenue and direct operating expenses
subsequent to the date of acquisition or disposition are included in
or excluded from the Company's historical results of operations.
(d) To record the estimated net increase in general and administrative
expense ($344,000) and an allocation from general and administrative
expense to production expense ($4,859,000, less billings to joint
owners of $1,424,000) attributable to the Ocean Energy Acquisition, the
Spring Holding Company Acquisition and the Other Acquisitions, net of
the Dispositions, for the year ended 1998.
(e) To record the estimated net decrease in general and administrative
expense ($834,000) and an allocation from general and administrative
expense to production expense ($2,745,000, less billings to joint
owners of $990,000) attributable to the Ocean Energy Acquisition, the
Spring Holding Company Acquisition and the Other Acquisitions, net of
the Dispositions, for the nine months ended September 30, 1999.
(f) To record the estimated increase in depreciation and depletion expense
attributable to the Ocean Energy Acquisition, the Spring Holding
Company Acquisition and the Other Acquisitions, net of the
Dispositions, for the year ended December 31, 1998 and the nine months
ended September 30, 1999 using the unit-of-production method applied to
the cost of the properties acquired.
(g) To record the decrease in interest expense for the year ended 1998
attributable to the decrease in long-term debt from proceeds from the
Dispositions, net of the increase in long-term debt to finance the
purchase of the Ocean Energy Acquisition, the Spring Holding Company
Acquisition and the Other Acquisitions. The change in interest expense
was determined using the weighted average interest rate incurred by the
Company under its revolving credit facilities, assuming the entire cost
of the acquisitions had been funded with bank borrowings, and the
entire proceeds from the dispositions had been used to reduce bank
borrowings, at January 1, 1998.
(h) To record the increase in interest expense for the nine months ended
September 30, 1999 attributable to the increase in long-term debt to
finance the Ocean Energy Acquisition, the Spring Holding Company
Acquisition and the Other Acquisitions, net of the decrease in long-
term debt from proceeds from the Dispositions. The change in interest
expense was determined using the weighted average interest rate
incurred by the Company under its revolving credit facilities, assuming
the entire cost of the acquisitions had been funded with bank
borrowings, and the entire proceeds from the dispositions had been used
to reduce bank borrowings, at January 1, 1999.
(i) To record income tax at a rate of 38.4% for the Ocean Energy
Acquisition and the Spring Holding Company Acquisition, and 34% for the
Other Acquisitions and Dispositions related to net pro forma
adjustments.
(j) To record the minority interest related to the pro forma net income of
Whitewine Holding Company for the year ended December 31, 1998.
(k) To reverse the minority interest related to the net loss of Spring
Holding Company and record the minority interest related to the pro
forma net loss of Whitewine Holding Company for the nine months ended
September 30, 1999.
-12-
<PAGE>
4. Pro Forma Supplemental Oil and Gas Reserve Information
Estimated Quantities of Pro Forma Proved Oil and Gas Reserves
Pro forma reserve estimates at December 31, 1998 are based on reports
prepared by independent petroleum engineers for proved reserves of the Company
and reports prepared by the Company's internal engineers for proved reserves of
the Ocean Energy Acquisition, Spring Holding Company Acquisition and Other
Acquisitions and Dispositions, using December 31, 1998 prices and costs.
Proved reserves are estimated quantities of crude oil, natural gas and
natural gas liquids which, based on geologic and engineering data, are estimated
to be reasonably recoverable in future years from known reservoirs under
existing economic and operating conditions. Proved developed reserves are those
which are expected to be recovered through existing wells with existing
equipment and operating methods. Because of inherent uncertainties and the
limited nature of reservoir data, such estimates are subject to change as
additional information becomes available.
<TABLE>
<CAPTION>
Pro Forma Proved Oil and Gas Reserves at December 31, 1998
Natural Gas
Oil (Bbls) Gas (Mcf) Liquids (Bbls)
------------------ ------------------ ---------------------
<S> <C> <C> <C>
(in thousands)
Proved reserves............ 49,714 1,379,272 13,975
====== ========= ======
Proved developed reserves.. 38,324 1,097,435 11,682
====== ========= ======
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows Relating to Pro Forma
Proved Oil and Gas Reserves
The standardized measure of discounted future net cash flows ("Standardized
Measure") is prepared using assumptions required by the Financial Accounting
Standards Board. Such assumptions include the use of year-end prices for oil
and gas and year-end costs for estimated future development and production
expenditures to produce year-end estimated proved reserves. Discounted future
net cash flows are calculated using a 10% rate.
The Standardized Measure does not represent the Company's estimate of
future net cash flows or the value of proved oil and gas reserves. Probable and
possible reserves, which may become proved in the future, are excluded from the
calculations. Furthermore, year-end prices, used to determine the standardized
measure of discounted cash flows, are influenced by seasonal demand and other
factors and may not be the most representative in estimating future revenues or
reserve data.
Pro Forma Standardized Measure of Discounted Future Net Cash Flows at
December 31, 1998
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Future cash inflows......................................... $ 3,294,194
Future costs:
Production................................................. (1,134,043)
Development................................................ (251,863)
-----------
Future net cash inflows before income tax................... 1,908,288
Future income tax........................................... (182,084)
-----------
Future net cash flows....................................... 1,726,204
10% annual discount......................................... (766,700)
-----------
Standardized measure of discounted future net cash flows $ 959,504
===========
</TABLE>
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CROSS TIMBERS OIL COMPANY
Date: November 29, 1999 By: LOUIS G. BALDWIN
----------------------------
Louis G. Baldwin
Executive Vice President and
Chief Financial Officer
-14-
<PAGE>
EXHIBIT 23.1
INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the incorporation
by reference in Registration Statement No. 333-56983 on Form S-3 of Cross
Timbers Oil Company and Cross Timbers Royalty Trust, Registration Statement Form
S-3 of Cross Timbers Oil Company and on Form S-1 of Texas Permian Trust No. 333-
85777 and Registration Statements No. 333-46909 and No. 333-79747 on Form S-3 of
Cross Timbers Oil Company of our report dated November 22, 1999, included in
Cross Timbers Oil Company's Current Report on Form 8-K/A dated September 15,
1999, Amendment No. 1. It should be noted that we have not audited any financial
statements of the Company subsequent to December 31, 1998, or performed any
audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Fort Worth, Texas
November 29, 1999
<PAGE>
EXHIBIT 99.2
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT, dated as of September 15, 1999 (this
"Agreement"), is entered into among Whitewine Holding Company, a Texas
corporation (the "Company"), LB I Group Inc., a Delaware corporation ("Lehman"),
and Cross Timbers Trading Company, a Texas corporation ("Cross Timbers Sub",
Lehman and Cross Timbers Sub are collectively referred to as "Stockholders").
W I T N E S S E T H:
WHEREAS, the authorized capital stock of the Company consists of 1,000
shares of common stock, par value $.01 per share (the "Common Stock");
WHEREAS, Lehman and Cross Timbers Sub own all the issued and outstanding
Common Stock of the Company;
WHEREAS, the Company owns all the issued and outstanding common stock of
Summer Acquisition Company, a Texas corporation ("Summer");
WHEREAS, pursuant to the Purchase and Sale Agreement between Seagull Energy
E&P Inc., a Delaware corporation ("Seagull") and Cross Timbers Oil Company, a
Delaware corporation ("Cross Timbers"), executed on July 30, 1999 (the "Arkoma
Purchase and Sale Agreement"), Summer is purchasing 100% of the outstanding
common stock of Arkoma Holding Corporation, a Delaware corporation ("Arkoma");
WHEREAS, the Company, as purchaser, and Cross Timbers and Cross Timbers
Sub, as sellers (the "Sellers"), have entered into that certain Stock Purchase
Agreement dated as of September 15, 1999 (the "Stock Purchase Agreement")
pursuant to which the Company purchased from the Sellers certain securities
listed on schedules 1 and 2 thereto (the "Scheduled Securities");
WHEREAS, the Company, and the Sellers have entered into that certain Call
Agreement dated September 15, 1999 (the "Call Agreement"), pursuant to which the
Sellers have a call option to purchase the Scheduled Securities (the "Scheduled
Securities Call Option");
WHEREAS, Cross Timbers and Lehman have entered into that certain Put and
Call Agreement dated September 15, 1999 (the "Put and Call Agreement"), pursuant
to which, among other things, Lehman has been granted the option to put its
equity interest in the Company to Cross Timbers (the "Put Option")
WHEREAS, the parties hereto wish to enter into certain agreements with
respect to the Common Stock holdings of Lehman and Cross Timbers Sub.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
<PAGE>
2
1. Formation and Continuation.
(a) The Company was initially formed as a Texas corporation by the
filing of an Articles of Incorporation (the "Articles"), under and pursuant to
the Texas Business Corporation Act, as amended from time to time ("TBCA").
Lehman has contributed $100,000,000 and received 500 shares of Common Stock of
the Company. Immediately thereafter, the Company purchased the Scheduled
Securities and 4,555,756 shares of common stock of Cross Timbers ("XTO Shares")
from Cross Timbers and Cross Timbers Sub. Immediately thereafter, Cross Timbers
Sub contributed $100,000,000 in cash to the Company, and received 500 shares of
Common Stock of the Company.
(b) The Stockholders agree to execute, acknowledge, file, record
and/or publish, as necessary, such amendments to the Articles of Incorporation
and such other certificates and documents and take all other necessary action
required by law to perfect and maintain the Company as a corporation under the
TBCA and to qualify, continue or terminate the Company as a foreign corporation
in all other jurisdictions in which the Company may elect to conduct or cease
conducting business. The rights and liabilities of the Stockholders shall be as
provided in the TBCA, except as otherwise expressly provided herein.
2. Name.
The name of the Company is, and the business of the Company shall be
conducted under the name of, "Whitewine Holding Company." The name of the
Company may be changed from time to time by amendment of this Agreement and the
Articles. The Company may transact business under an assumed name by filing an
assumed name certificate in the manner prescribed by applicable law.
3. Office.
The registered office of the Company required by the TBCA to be
maintained in the State of Texas shall be the office of the initial registered
agent named in the Articles, or such other place as the Stockholders may
designate in the manner provided by law. The registered agent for service of
process at such address shall be the initial registered agent named in the
Articles, or such other person as the Stockholders may designate in the manner
provided by law.
4. Purpose.
The Company is formed for the sole objects and purposes of, and the
nature of the business to be conducted and promoted by the Company is limited to
(i) acquiring, holding and disposing of XTO Shares and the Scheduled Securities,
(ii) contributing $100,000,000 in cash to Summer to fund a portion of the
purchase price for the purchase of all of the issued and outstanding common
stock of Arkoma (the "Arkoma Shares"), (iii) entering into and performing its
obligations under any contracts to which it is made a party relating to
acquiring, holding and disposing of XTO Shares, the Scheduled Securities and its
interest in Summer and (iv) engaging in those activities that are necessary to
accomplish the foregoing or are incidental thereto.
<PAGE>
3
5. Stockholders, Shares and Contributions.
(a) The names and business or mailing addresses of the Stockholders
and their respective interests and contributions are set forth in Exhibit A
hereto.
(b) Other than to Affiliates or pursuant to the terms of that certain
Put and Call Agreement dated of even date herewith between Cross Timbers and
Lehman (the "Put and Call Agreement") and as provided in the second sentence of
this clause (b), neither Stockholder may sell, assign, transfer, exchange,
pledge or make any other disposition (collectively, a "transfer"), or enter into
any commitment to make any such disposition, of its Common Stock, and any such
attempted disposition, other than to Affiliates or pursuant to the Put and Call
Agreement, shall be null and void. If Lehman exercises its Put Option (as
defined in the Put and Call Agreement) and Cross Timbers does not pay to Lehman
the Put Price (as defined in the Put and Call Agreement) pursuant to the terms
of the Put and Call Agreement, Lehman may transfer its Common Stock to any
Person. No Stockholder may be expelled from the Company.
(c) Unless otherwise Approved by both Stockholders, no Stockholder
shall be required or obligated to make any contribution to the Company other
than as provided in this paragraph 5. The contribution commitments of the
Stockholders under this Agreement are solely for the benefit of the
Stockholders, as among themselves, and may not be enforced by or for the benefit
of any other Person.
(d) No interest shall accrue on any contributions to the capital of
the Company. No Stockholder shall be entitled to the return of its contribution
except (i) to the extent, if any, that distributions made pursuant to the
express terms of this Agreement may be considered as such by law or as Approved
by both the Stockholders, or (ii) upon dissolution and liquidation of the
Company, and then only to the extent expressly provided for in this Agreement as
permitted by Applicable Law.
6. Management.
(a) Except to the extent delegated to, or properly delegated by, the
Chairman or President and except as set forth in Section 6(j) below, the
business and affairs of the Company shall be managed under the exclusive
direction of the Board of Directors of the Company by Resolution. The
Stockholders may act through authorized Directors appointed as set forth below,
subject to any restrictions the Stockholders may establish. A Director shall be
responsible only to the Stockholder that appointed him, and shall not be charged
with any duty to the Company or the other Stockholder. The Stockholders shall
not be fiduciaries with respect to each other or to the Company. In the absence
of fraud, each Stockholder shall be entitled to act in its own interest in
regard to the management of the Company.
(b) Each Stockholder may appoint up to three Directors. Unless
contrary notice is provided to the other Stockholder, each Director appointed by
a Stockholder may act as the authorized Director of any other Director
(including voting on behalf of, and as proxy for, such Directors), if any, the
Stockholder has appointed. Each Director shall serve at the pleasure of the
appointing Stockholder until the Director's death, resignation or replacement by
the
<PAGE>
4
Stockholder's appointment of a successor Director, which appointment shall be
given in writing to the other Stockholder.
(c) The following persons are hereby Approved as the initial
Directors of the Stockholders, to serve in such capacity from the Effective Date
until their earlier death, resignation, retirement or removal from office in
accordance with this Agreement:
Directors Appointed by Cross Timbers Bob R. Simpson
Sub: Keith A. Hutton
Vaughn O. Vennerberg, II
Directors Appointed by Lehman: Gregory P. Pipkin
Hugh E. McGee, III
Lee Jacobe
(d) Regular meetings of the Directors shall be held no less
frequently than once every three months at such times and places (or by
telephonic call) as may be fixed by Resolution. Any Company business may be
performed at any regular meeting.
(e) Special meetings of the Directors may be called by any
Stockholder by giving written notice of the time, date, place (or telephonic
call) and purpose or purposes thereof to the Directors not less than one
Business Day before the date of the meeting. Only the business provided for in
the notice may be conducted at the special meeting.
(f) At all meetings of the Directors, the presence of at least one
Director appointed by each Stockholder shall be necessary to constitute a quorum
for the transaction of business. If a quorum shall not be present, the Directors
present may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At any such
adjourned meeting, any business may be transacted that might have been
transacted at the meeting as originally convened. A Director appointed by a
Stockholder may vote and take any action on behalf of, and act as the authorized
Director of, any other Director appointed by the same Stockholder in the absence
of such Director.
(g) The Chairman of the Company shall, if present, preside at any
meeting of the Directors. In the absence of the Chairman at any meeting of the
Directors, or in the event of any vacancy in the office of Chairman, the
Directors present at such meeting shall designate one of them to preside at the
meeting.
(h) At any meeting of the Directors, the Directors will bind the
Stockholders to action pursuant to Resolution only if a majority of the
Directors of each Stockholder voting at the meeting (whether in person or acting
through another authorized Director appointed by the same Stockholder) votes in
favor of such action.
(i) Participation in a meeting of Directors by telephone using
equipment by means of which all Persons participating in the meeting can hear
each other shall constitute presence in person at such meeting.
<PAGE>
5
(j) The Stockholders may take any action without a meeting of the
Directors, if both Stockholders shall have signed a written consent setting
forth the action so taken. The Directors may take action without a meeting, by
unanimous written consent of the Directors. Such written consents shall be filed
with the minutes of the proceedings of the Company.
7. Officers
(a) The Stockholders, at their discretion, may elect any one or more
officers of the Company, which may include a Chairman, President, one or more
Vice Presidents, a Chief Financial Officer, a Secretary, a Treasurer, one or
more Assistant Secretaries and one or more Assistant Treasurers. One person may
hold any two or more of these offices. Each officer shall hold office until his
or her successor shall have been duly elected and qualified or until his or her
death, resignation or removal in the manner hereinafter provided. The following
persons are hereby Approved as the initial officers of the Company, to serve in
such capacity from the Effective Date in accordance with this Agreement:
Name Title
---- -----
Keith A. Hutton Chairman
Vaughn O. Vennerberg, II President
John M. O'Rear Treasurer
Frank G. McDonald Secretary
(b) Every officer shall only have such authority to act as agent of
the Company, and to bind the Company, as is expressly delegated to such officer
in the Resolution electing such officer.
(c) The Stockholders may appoint such other officers and agents as
they shall deem necessary, who shall hold their office for such terms, have such
authority and perform such duties as the Stockholders may from time to time
determine. The Stockholders may delegate to any committee or officer the power
to appoint any such subordinate officer or agent. No subordinate officer
appointed by any committee or superior officer as aforesaid shall be considered
as an officer of the Company, the officers of the Company being limited to the
officers elected or appointed by the Stockholders.
(d) Any officer may resign at any time by giving written notice
thereof to the Stockholders. Any such resignation shall take effect at the time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective. Any officer
elected or appointed by the Stockholders or any other officer may be removed at
any time with or without cause by the Stockholders. The removal of any officer
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create any contract rights. A vacancy in any office shall be filled for the
unexpired portion of the term by the Stockholders, but in the case of a vacancy
occurring in an office filled by a committee or superior officer in accordance
with this Agreement, such vacancy may be filled by such committee or superior
officer.
<PAGE>
6
(e) The duties of the Chairman and the President are (i) to enter
into, execute and deliver, in the name of, and on behalf of, the Company, any
contract, agreement or other instrument deemed necessary by such officer to
effect the acquisition of all the outstanding shares of capital stock of Arkoma,
(ii) to enter into, execute and deliver all other contracts, agreements or other
instruments and that are authorized or approved by the Directors, and (iii) to
perform such other duties and functions as the Directors may delegate to such
officers from time to time.
(f) The duties of the Treasurer are to take charge of and be
responsible for all funds, securities, receipts and disbursements of the
Company, and shall deposit all monies and securities of the Company in such
banks and depositories as shall be designated by the Directors and shall be
responsible (i) for maintaining adequate financial accounts and records in
accordance with generally accepted accounting practices; (ii) for the
preparation of appropriate operating budgets and financial statements; (iii) for
the preparation and filing of all tax returns required by law; and (iv) for the
performance of all duties incident to the office of Treasurer such other duties
as from time to time may be assigned to him by the Directors.
(g) The duties of the Secretary are to act as secretary of all
meetings of the Directors and Stockholders of the Company. The Secretary shall
keep and preserve the minutes of all such meetings in permanent books; see that
all notices required to be given by the Company are duly given and served; have
custody of all deeds, leases, contracts and other important corporate documents;
have charge of the books, records and papers of the Company relating to its
organization and management as a corporation; see that all reports, statements
and other documents required by law (except tax returns) are properly filed; and
in general perform all the duties incident to the office of Secretary and such
other duties as from time to time may be assigned by the Directors.
8. Approval Required for Certain Actions.
The unanimous written Approval of the Stockholders is required: (a) to file
a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings under Section 301 of the Bankruptcy Code, 11 U.S.C. (S) 301, or any
successor thereto (the "Bankruptcy Code"), or any similar statute, seeking
protection of the Company or any Subsidiary as a debtor in such proceedings, or
(b) to amend, repeal or supersede any provision of this Agreement.
9. Special Voting and Disposition Rights Related to the XTO Shares
and the Scheduled Securities.
(a) Cross Timbers Sub shall have sole power to vote (or to direct the
voting of) and to dispose of (or to direct the disposition of) the XTO Shares
and the Scheduled Securities owned and held by the Company.
(b) On September 15, 2000 (i) to the extent they have not already
been disposed of, the Company shall sell all of the Scheduled Securities for
cash and (ii) the Company shall deliver a demand registration request to Cross
Timbers with respect to the XTO Shares. As soon as practicable thereafter, the
Company shall sell all remaining XTO Shares for cash.
<PAGE>
7
10. Special Rights Related to Summer, Arkoma Investment and Certain
Transactions.
(a) Notwithstanding anything to the contrary in this Agreement, each
Stockholder shall have the right, without the Approval of the other Stockholder
or its appointed Directors, upon written notice to the other Stockholder to:
(i) cause the Company to take all actions necessary to elect a
person or persons designated by such Stockholder as
directors of Summer in such number such that its designees
would constitute up to 50% of the number of directors
serving on such board;
(ii) cause the Company to take all actions necessary to cause
Summer (or any subsidiary of Summer) to elect a person or
persons designated by such Stockholder as directors of any
or all of the subsidiaries of Summer in such number that
its designees would constitute up to 50% of the number of
directors serving on any such boards.
(b) Notwithstanding anything to the contrary in this Agreement, the
Company and its Stockholders shall not take any action, and shall cause Summer
and its subsidiaries and their respective officers and directors not to take any
action, without the Approval by Resolution of the Stockholders that would have
the effect of the following:
(i) the merger, consolidation, reorganization or sale of
substantially all the assets of the Company, Summer or any
of their respective subsidiaries;
(ii) except as provided in paragraph 9, the sale or other
disposition of assets, in any transaction or series of
related transactions, by the Company, Summer or any of
their respective subsidiaries, having a value in excess of
$1 million;
(iii) the making of any capital expenditure or drilling or
workover expenses (or series of related expenditures or
expenses) by the Company, Summer or any of their
respective subsidiaries of $100,000 or more, except for
any such expenditure set forth in any budget previously
Approved by Resolution;
(iv) the entering into of any agreement (including any
amendment thereof), or execution of any instrument, or
effecting of any transaction by the Company, Summer or any
of their respective subsidiaries (a) with a Stockholder or
an Affiliate of a Stockholder, (b) for the borrowing or
lending of funds, (c) for the purpose of modifying,
amending or supplementing in any material respect any
existing loan or credit agreement, indenture, note, deed
of trust,
<PAGE>
8
mortgage, security agreement or other similar document
related to the borrowing of funds, or increasing any
obligation of the Company or Summer in excess of $1
million under any such documents, (d) involving the sale
or purchase of oil and gas under an agreement that cannot
be terminated on less than one months' notice, or any
gathering, processing, or transportation agreements that
have a term of greater than three years, (e) involving the
purchase of oil and gas properties, leases, working or
other production interests reasonably estimated to exceed
$1,000,000 in value, (f) involving the lease of assets or
real property (other than oil and gas leases) with
payments reasonably estimated to be in excess of $50,000
per month, or (g) involving future capital expenditures or
drilling commitments reasonably estimated to exceed
$100,000, unless such expenditure or commitment is set
forth in any budget previously Approved by Resolution;
(v) the settlement of any claim or litigation by the Company,
Summer or any of their respective subsidiaries involving
payments or estimated future payments in excess of
$100,000;
(vi) the taking of any action that shall constitute an Event of
Bankruptcy;
(vii) the commencement of a voluntary liquidation of the
Company, Summer or any of their respective subsidiaries;
or
(viii) the issuance or repurchase of any capital stock by the
Company, Summer or any of their respective subsidiaries.
11. Commingling.
Neither the Company's nor Summer's nor any of their respective
Subsidiaries' funds nor any other assets thereof shall be commingled with those
of any other person or entity, and the Company's and Summer's funds shall be
clearly traceable at all times and in all transactions. The Company's and
Summer's assets shall remain identifiably separate from those of all other
entities such that there shall be no material difficulty in segregating and
ascertaining the assets of the Company and Summer as distinct from those of its
affiliates or any other person or entity. Notwithstanding the foregoing, equity
or other contributions from any Stockholder of the Company may be received by
the Company, deposited to the account of the Company and treated as funds of the
Company.
12. Conduct of Business; Etc.
The Company, Summer and their respective Subsidiaries:
<PAGE>
9
(a) shall maintain complete records and books of account which at all
times shall be separate from those of any other person or entity and shall be
materially correct and complete;
(b) shall conduct their own businesses solely in their own names or
through their authorized agents, and not in the name of the Stockholders, in a
manner which is not likely to mislead others as to the identity of the legal
entity with which such others are dealing, shall not permit any person or entity
to conduct any business of such person or entity in the Company's or Summer's or
their respective Subsidiaries' names, and without limiting the generality of the
foregoing: (i) shall ensure that all oral and written communications, including
without limitation, letters, invoices, purchase orders, contracts, statements
and applications, are and will be made solely in the name of the entity to which
they relate or in the name of such entity's authorized agents, and (ii) shall
not refer, and shall ensure that the Stockholders do not refer, to the Company
or Summer as a division or department of any other entity (including any
Affiliate thereof);
(c) shall prepare financial statements separate from any other person
or entity, which shall disclose its separate existence in accordance with
generally accepted accounting principles, and shall disclose that the assets of
the Company or Summer are not available to any creditor of the Stockholders;
(d) shall pay its liabilities out of its own funds, and shall not
permit the Stockholders to pay such liabilities unless such payment is subject
to a right of reimbursement from the Company or Summer;
(e) shall not hold out employees or officers of the Stockholders as
employees or officers of the Company or Summer, nor permit employees or officers
of the Company or Summer to be held out as employees or officers of the
Stockholders; provided that such restrictions shall not preclude a particular
employee or officer of any of the Stockholders from also holding a position as
an employee or officer of the Company or Summer, so long as the Company and
Summer takes reasonably appropriate steps to assure that unaffiliated parties
dealing with such employee or officer are able to distinguish the particular
entity which such person is representing at any particular time;
(f) shall not guarantee or become obligated for the debts of the
Stockholders or hold out its credit as being available to satisfy the
obligations of the Stockholders;
(g) shall not pledge its funds or assets for the benefit of the
Stockholders;
(h) shall allocate fairly and equitably any overhead for office space
shared with the Stockholders;
(i) shall use stationery, invoices, checks and other business forms
identifiably separate and distinct from those of the Stockholders. Such items
shall bear a mailing address and telephone number for the Company and Summer
which is different from that used by the Stockholders. The Company and Summer
further shall maintain, as their principal addresses and
<PAGE>
10
telephone numbers for receipt of notices and other communications, mailing
addresses and telephone numbers separate from those of the Stockholders; and
(j) at all times shall hold itself out to the public as an entity
legally separate and distinct from the Stockholders.
13. Dividends and Other Distributions.
Dividends and other distributions shall be made pro rata to the
Stockholders of the Company in accordance with the number of shares of Common
Stock they hold in the Company at the times and in the aggregate amounts
determined by the unanimous vote of the Directors.
14. Governing Law.
This Agreement shall be governed by, and construed under, the internal
laws of the State of Texas, without regard to principles of conflicts of laws,
with all rights and remedies being governed by said laws.
15. Dissolution, Liquidation and Termination.
(a) The Company shall be dissolved upon the occurrence of any of the
following:
(i) The Approval of both of the Stockholders; or
(ii) In accordance with Article 6.01 et seq. of the TBCA.
(b) If the Company is to be dissolved upon either of the events
specified in Section 15(a), it shall be dissolved in accordance with the
applicable provisions of the TBCA.
16. Indemnification.
(a) Each person who was or is made a party or is threatened to be
made a party to or is involved (including, without limitation, as a witness) in
any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason that he
is or was a Stockholder, Director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, employee or
agent of another company or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "Indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, Stockholder, Director,
employee or agent or in any other capacity while serving as such a director,
officer, Stockholder, Director, employee or agent, shall be indemnified and held
harmless by the Company to the fullest extent legally permissible, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), or by other Applicable Law as then in effect,
<PAGE>
11
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts to be paid in settlement)
actually and reasonably incurred or suffered by such Indemnitee in connection
therewith and such indemnification shall continue as to an Indemnitee who has
ceased to be a director, officer, Stockholder, Director, employee or agent and
shall inure to the benefit of the Indemnitee's heirs, executors and
administrators; provided, however, that except as provided in paragraph 16(b)
with respect to proceedings seeking to enforce rights to indemnification, the
Company shall indemnify any such Indemnitee seeking indemnification in
connection with a proceeding (or part thereof) initiated by such Indemnitee only
if such proceeding (or part thereof) was authorized by the Stockholders. The
right to indemnification conferred in this paragraph shall be a contract right
and shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); further provided, however, that, if the TBCA
requires, an advancement of expenses incurred by an Indemnitee in his capacity
as a director, officer, Stockholder, Director or employee (and not in any other
capacity in which service was or is rendered by such Indemnitee while a
director, officer, Stockholder, Director or employee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Company of an undertaking, by or on behalf of such Indemnitee,
to repay all amounts so advanced if it shall ultimately be determined that such
Indemnitee is not entitled to be indemnified under this paragraph 16, or
otherwise.
(b) If a claim under paragraph 16(a) is not paid in full by the
Company within 60 days after a written claim has been received by the Company,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be 20 days, the Indemnitee may at any time thereafter
bring suit against the Company to recover the unpaid amount of the claim and, to
the extent successful in whole or in part, the Indemnitee shall be entitled to
be paid also the expense of prosecuting such suit. The Indemnitee shall be
presumed to be entitled to indemnification under this paragraph upon submission
of a written claim (and, in an action brought to enforce a claim for an
advancement of expenses, where the required undertaking, if any is required, has
been tendered to the Company), and thereafter the Company shall have the burden
of proof to overcome the presumption that the Indemnitee is not so entitled.
Neither the failure of the Company (including its independent legal counsel or
its Stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances, nor
an actual determination by the Company (including its independent legal counsel
or its Stockholders) that the Indemnitee is not entitled to indemnification,
shall be a defense to the suit or create a presumption that the Indemnitee is
not so entitled.
(c) The indemnification provided pursuant to this paragraph 16 shall
not be deemed to be exclusive of any other rights to which the Stockholders or
any Indemnitee may be entitled under any agreement, as a matter of law, in
equity or otherwise, and shall inure to the benefit of the heirs, successors,
assigns and administrators of the Stockholders or Indemnitee.
(d) The Company may maintain insurance, at its expense, to protect
itself and any officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the TBCA.
<PAGE>
12
The Company may enter into contracts with any Indemnitee in furtherance of the
provisions of this paragraph and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this paragraph.
(e) Any person who is or was serving as a director of a wholly owned
subsidiary of the Company shall be deemed, for purposes of this paragraph only,
to be an officer or employee of the Company entitled to indemnification under
this paragraph.
(f) The Company may, by action of the Stockholders from time to time,
grant rights to indemnification and advancement of expenses to agents of the
Company with the same scope and effect as the provisions of this paragraph with
respect to the indemnification and advancement of expenses of officers and
employees of the Company.
(g) No Indemnitee shall be liable to the Company for any act or
omission based upon errors of judgment or other fault in connection with the
business or affairs of the Company, except as provided for in the TBCA.
(h) Any indemnification pursuant to this paragraph 16 shall be
payable only from the assets of the Company.
17. Fiscal Year
The fiscal year of the Company shall be a calendar year.
18. Miscellaneous
(a) Any Stockholder may by written instrument (i) waive compliance by
the other Stockholder with, or modify any of, the covenants or agreements made
to it by any other Stockholder contained in this Agreement or (ii) waive or
modify performance of any of the obligations or other acts of the other
Stockholder. The delay or failure on the part of any Stockholder to insist, in
any one instance or more, upon strict performance of any of the terms or
conditions of this Agreement, or to exercise any right or privilege herein
conferred shall not be construed as a waiver of any such terms, conditions,
rights or privileges, but the same shall continue and remain in full force and
effect. All rights and remedies are cumulative.
(b) All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) when sent by telecopier (on the first business day
after electronic confirmation), (c) when received by the addressee, if sent by
Express Mail, Federal Express, other delivery service (receipt requested) or by
such other means as the Stockholders may agree from time to time or (d) five
business days after being mailed in the United States, by first class postage
prepaid registered or certified mail, return receipt requested; in each case to
the appropriate addresses and telecopier numbers set forth in Exhibit A hereto
(or to such other addresses and telecopier numbers as a party may designate as
to itself by notice to the Company).
<PAGE>
13
(c) Whenever any notice is required to be given to any Stockholder
under the provisions of the TBCA, the Articles or this Agreement, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Attendance of a Stockholder at a meeting of the
Stockholders shall constitute a waiver of notice of such meeting, except where a
Stockholder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
(d) This Agreement may be executed in one or more counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same document.
(e) This Agreement, the Exhibits hereto, the Put and Call Agreement,
the Stock Purchase Agreement, the Call Agreement and the Commitment Letters
contain the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings between the Stockholders relating to the subject matters hereof and
thereof. There are no additional terms, whether consistent or inconsistent, oral
or written, which are intended to be part of the Stockholders' understanding
which have not been incorporated into this Agreement or the Exhibits hereto.
(f) Every provision in this Agreement is intended to be severable. If
any term or provisions hereof is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity of the remainder of
this Agreement.
(g) This Agreement may be amended or restated only by a written
instrument adopted, executed and agreed to by all of the Stockholders.
19. Definitions
When used in this Agreement, the following terms shall have the
respective meanings assigned to them in this paragraph 19 or in the paragraphs
referenced below:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management of such Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreement" means this Stockholders Agreement.
"Applicable Law" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, certificates, orders, interpretations, licenses and
permits of any governmental entity and judgments, decrees, injunctions, writs,
orders or like action of any court, arbitrator or other competent jurisdiction
(including, without limitation, those pertaining to health, safety or the
environment).
<PAGE>
14
"Approval of," "Approved by" or "Approved," when used in reference to
a Stockholder, means the written consent of the Stockholder or approval of the
matter in question by the authorized Directors of the Stockholder at a meeting
of the Board of Directors of the Company.
"Articles" is defined in paragraph 1.
"Bankruptcy Code" is defined in paragraph 8.
"Business Day" means a day other than a Saturday, Sunday or legal
holiday for commercial banking institutions in New York, New York.
"Commitment Letters" means collectively the (i) Commitment Letter
dated May 17, 1999 between Lehman Brothers Inc. and Cross Timbers and (ii)
Amended and Restated Equity Commitment dated September 14, 1999 between Lehman
Brothers Inc. and Cross Timbers.
"Company" has the meaning assigned to such term in paragraph 1 hereof
and shall include any successor entity thereto.
"Director" means a director appointed by, and authorized to act for, a
Stockholder.
"Effective Date" is defined in paragraph 1.
"Event of Bankruptcy" as to the Company or a Stockholder means:
(i) filing a voluntary petition in bankruptcy or for reorganization
or for the adoption of an arrangement under Title 11 of the United States Code
(or any corresponding provision or provisions of succeeding law) or an admission
seeking the relief therein provided or the taking of similar action under the
laws of any state or local jurisdiction;
(ii) making a general assignment for the benefit of its creditors;
(iii) consenting to the appointment of a receiver for all or a
substantial part of its property;
(iv) in the case of the filing of an involuntary petition in
bankruptcy, the failure to have such filing dismissed within 120 days of filing
or, if earlier, an entry of an order for relief;
(v) the entry of a court order appointing a receiver or trustee for
all or a substantial part of its property without its consent; or
(vi) the assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of its property.
<PAGE>
15
"Share" means, with respect to a Stockholder, the Stockholder's
entire ownership interest in the Company and any portion or constituent element
thereof, including the right of such Stockholder to any and all benefits to
which a Stockholder may be entitled as provided in this Agreement and in the
TBCA, together with the obligations of such Stockholder to comply with all the
terms and provisions of this Agreement and of the TBCA.
"Person" means an individual, corporation, partnership, joint venture,
corporation, association, joint stock company, trust, unincorporated
organization, a government or any department or agency thereof, or any legal
entity.
"Put and Call Agreement" means the Put and Call Agreement dated of
even date herewith between Cross Timbers and Lehman.
"Resolution" means a resolution for any action Approved by both
Stockholders, which Approval may be taken by the Director or Directors appointed
by each such Stockholder, as provided in Section 6(h) of this Agreement.
"TBCA" shall mean the Texas Business Corporation Act (Article 1.01 et
seq.), as amended from time to time, or any successor statute thereto.
<PAGE>
16
IN WITNESS WHEREOF, the Stockholders have executed this Agreement
effective as of the date first written above.
Stockholders:
LB I GROUP INC.
By: /S/ STEVEN L. BERKENFELD
----------------------------
Name: Steven L. Berkenfeld
Title: Senior Vice President
CROSS TIMBERS TRADING COMPANY
By: /S/ FRANK G. MCDONALD
----------------------
Frank G. McDonald
Vice President and General Counsel
<PAGE>
EXHIBIT 99.3
PUT AND CALL AGREEMENT
----------------------
THIS PUT AND CALL AGREEMENT (the "Agreement") dated as of September 15,
1999 is entered by and between Cross Timbers Oil Company, a Delaware corporation
(the "Company") and LB I Group Inc., a Delaware corporation ("Lehman") as
follows:
PRELIMINARY STATEMENTS
WHEREAS, Lehman and Cross Timbers Trading Company have entered into that
certain Stockholders Agreement dated September 15, 1999 (the "Stockholders
Agreement") pursuant to which Lehman and the Company have purchased certain
equity investments in Whitewine Holding Company, a Texas corporation
("Whitewine"), which in turn has purchased and holds all of the issued and
outstanding common stock of Summer Acquisition Company, a Texas corporation
("Summer"); which in turn has purchased and holds all of the issued and
outstanding common stock of Arkoma Holding Corporation, a Delaware corporation
("Arkoma");
WHEREAS, Whitewine, as purchaser, and the Company and Cross Timbers Trading
Company, a Texas corporation (together with the Company, the "Sellers"), as
sellers, have entered into that certain Stock Purchase Agreement dated as of
September 15, 1999 pursuant to which Whitewine purchased from the Sellers
certain securities listed on schedules 1 and 2 thereto (the "Scheduled
Securities");
WHEREAS, Whitewine and the Sellers have entered into that certain Call
Agreement dated September 15, 1999 (the "Call Agreement"), pursuant to which the
Sellers have a call option to purchase the Scheduled Securities (the "Scheduled
Securities Call Option");
WHEREAS, Lehman and the Company desire to enter into this Agreement for the
purposes, among others, of providing certain rights in favor of Lehman and the
Company; and
WHEREAS, this Agreement is being entered into as a condition to the
execution of the Stockholders Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lehman and the Company hereby
agree as follows:
<PAGE>
2
ARTICLE I
Definitions and Interpretation
------------------------------
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement shall have the respective meanings set forth herein. Capitalized
terms used but not specifically defined herein shall have the meaning prescribed
in the Amended and Restated Equity Commitment Letter between Lehman Brothers,
Inc. and the Company dated September 14, 1999 (the "Commitment Letter").
ARTICLE II
Put Rights
----------
Section 2.01. Grant of Put Option. The Company hereby grants to
Lehman the right and option (the "Put Option") to sell to the Company and to
require the Company to purchase, and upon the exercise of such option the
Company shall purchase from Lehman all (and not less than all) of Lehman's then
remaining equity interest in Whitewine ("Lehman's Equity Interest") in
accordance with the terms of this Agreement. This Put Option may be exercised
by Lehman on the Put Date (which shall be defined as the date or the next
Business Day (as defined in the Stockholders Agreement) if such date is not a
Business Day) which is one year after the closing of the acquisition by Summer
of all the outstanding capital stock of Arkoma ("Arkoma Closing").
Section 2.02. Exercise Price. In the event Lehman elects to
exercise the Put Option, the price (the "Put Price") payable by the Company for
the purchase of Lehman's Equity Interest shall be equal to (i) the aggregate
amount of Lehman's capital contributions to Whitewine, plus (ii) an amount equal
to an annualized return on such aggregate amount of capital contributions
(compounded semi-annually after the first year) (the "Annualized Return") of
20%. The Annualized Return shall be calculated from the dates of each of
Lehman's capital contributions in Whitewine to the date of payment of such
Annualized Return and based upon a 360-day year. To the extent any
distributions are made on Lehman's Equity Interest, such distributions shall be
treated as a partial payment of the Put Price, and shall be applied
proportionately to repayment of Lehman's capital contributions and payment of
the then accrued Annualized Return.
Section 2.03. Method and Date of Payment. The Put Price shall be
payable in cash by the Company on or before the 30th day (or the next Business
Day if such date is not a Business Day) after the Put Date.
<PAGE>
3
Section 2.04. Put Notice Date. The Put Option may be exercised by
Lehman on the Put Date by giving written notice on or before the Put Date to the
Company of its election to exercise the Put Option.
Section 2.05. Put Closing. The closing of the purchase of Lehman's
Equity Interest shall occur on the date described in Section 2.03 and shall be
at such time and place as the parties shall mutually agree. At the closing,
Lehman shall execute and deliver all instruments to evidence its assignment of
Lehman's Equity Interest as may be necessary, in the opinion of the Company, to
transfer to the Company or a designee of the Company good and valid title to
Lehman's Equity Interest free and clear of any liens, claims or encumbrances, to
the Company. In consideration therefor at closing, the Company shall make
payment to Lehman of the Put Price in immediately available funds.
ARTICLE III
Call Rights
-----------
Section 3.01. Grant of Call Option. Lehman hereby grants to the
Company the right and option (the "Call Option"), at any time after December 31,
1999 and on or before the Put Date (the "Call Period"), to purchase from Lehman
and to require Lehman to sell, and upon the exercise of such option Lehman shall
sell to the Company all (and not less than all) of Lehman's Equity Interest in
accordance with the terms of this Agreement.
Section 3.02. Exercise Price. In the event the Company elects to
exercise the Call Option, the price (the "Call Price") payable by the Company
for Lehman's Equity Interest shall be an amount of cash equal to the sum of (i)
the amount of Lehman's capital contributions in Whitewine, plus (ii) an amount
equal to a 20% Annualized Return; provided, however, that (A) the Annualized
Return shall be 30% if a Royalty Trust Monetization is completed within the
period ending on the later of (1) the date that is six months after the date of
closing of an exercised Call Option and (2) the thirtieth day following the Put
Date and (B) if a Royalty Trust Monetization is completed at a time after the
Company pays the initial Call Price to Lehman but prior to the later of (1) and
(2) described above in (A), the Company shall also pay Lehman an amount in
addition to the initial Call Price that will increase the Annualized Return to
30%. In each case, the Annualized Return shall be calculated from the dates of
each of Lehman's capital contributions in Whitewine to the date of payment of
such Annualized Return and based upon a 360-day year. To the extent any
distributions are made on Lehman's Equity Interest, such distributions shall be
treated as a partial payment of the Call Price and shall be applied
proportionately to repayment of Lehman's capital contributions and payment of
the then accrued Annualized Return.
Section 3.03. Call Notice Date. The Call Option may be exercised by
the Company at any time during the Call Period by the Company giving written
notice to Lehman of (i) its election to exercise the Call Option (the date of
such notice being hereinafter defined as the
<PAGE>
4
"Call Notice Date") and (ii) the date of the closing which shall be 30 days
after the Call Notice Date (or the next Business Day if such date is not a
Business Day).
Section 3.04. Call Closing. The closing of the purchase of Lehman's
Equity Interest shall occur on the date described in Section 3.03 and shall be
at such time and place as the parties shall mutually agree. At the closing,
Lehman shall execute and deliver all instruments to evidence its assignment of
Lehman's Equity Interest as may be necessary, in the opinion of the Company, to
transfer to the Company good and valid title to such interest, free and clear of
any liens, claims or encumbrances. In consideration therefore, at the Closing
the Company shall deliver to Lehman the Call Price, in immediately available
funds.
ARTICLE IV
Miscellaneous
-------------
Section 4.01. Notices. Any and all notices, requests or other
communications hereunder shall be given in writing and delivered by: (a)
regular, overnight or registered or certified mail (return receipt requested),
with first class postage prepaid; (b) hand delivery; (c) facsimile transmission;
or (d) overnight courier service, to the parties at the following addresses or
facsimile numbers:
(i) if the Company, to the address or fax telephone number set
forth below the Company's name on the signature pages hereof; and
(ii) if to Lehman, to the address or fax telephone number set forth
below Lehman's name on the signature pages hereto,
or at such other address or number as shall be designated in a notice by the
Company or Lehman, given in accordance with this Section 4.01. All such
communications shall be deemed to have been duly given (A) in the case of a
notice sent by regular mail, three business days after it is duly deposited in
the mails, (B) in the case of a notice sent by registered or certified mail, on
the date receipted for (or refused) on the return receipt, (C) in the case of a
notice delivered by hand, when personally delivered, (D) in the case of a notice
sent by facsimile, upon transmission subject to electronic confirmation of
sending to the appropriate telephone number, and (E) in the case of a notice
sent by overnight mail or overnight courier service, the date delivered at the
designated address.
Section 4.02. Dispute Resolution. Any claim, counterclaim, demand,
cause of action, dispute, and controversy arising out of or relating to this
Agreement or the relationship established by this Agreement, any provision
hereof, the alleged breach hereof, or in any way relating to the subject matter
of this Agreement, involving the parties and/or their respective representatives
(each a "Dispute"), even if a Dispute allegedly is extra-contractual in nature,
sounds in contract, tort, or otherwise, or arises under state or federal law,
shall be resolved by
<PAGE>
5
binding arbitration. Arbitration shall be conducted in accordance with the
rules of arbitration of the Federal Arbitration Act and, to the extent an issue
is not addressed by the federal law on arbitration, by the commercial
arbitration rules of the American Arbitration Association. The validity,
construction, and interpretation of this Agreement to arbitrate, and all
procedural aspects of the arbitration conducted pursuant hereto shall be decided
by the arbitrators. In deciding the substance of the Dispute, the arbitrators
shall refer to the governing law. The arbitrators shall have no authority to
award treble, exemplary, or punitive damages of any type under any circumstances
whether or not such damages may be available under state or federal law, or
under the Federal Arbitration Act, or under the commercial arbitration rules of
the American Arbitration Association, the parties hereby waiving their right, if
any, to recover any such damages. The arbitration proceeding shall be conducted
in Dallas, Texas. Within 30 days of the notice of initiation of the arbitration
procedure, each party shall select one arbitrator. The two arbitrators shall
select a third arbitrator. The third arbitrator shall be a person who has over
eight years professional experience in investment transactions and who has not
previously been employed by either party and does not have a direct or indirect
interest in either party or the subject matter of the arbitration. While the
third arbitrator shall be neutral, the two party-appointed arbitrators are not
required to be neutral, and it shall not be grounds for removal of either of the
two party-appointed arbitrators or for vacating the arbitrators" award that
either of such arbitrators has past or present minimal relationships with the
party that appointed such arbitrator. To the fullest extent permitted by law,
any arbitration proceeding and the arbitrators" award shall be maintained in
confidence by the parties.
Section 4.03. Benefit and Burden. This Agreement shall inure to the
benefit of and shall be binding upon, the Company, Lehman and their respective
executors, personal representatives, administrators, successors, heirs,
distributees, devisees, legatees and permitted assigns.
Section 4.04. No Third Party Rights. Nothing in this Agreement shall
be deemed to create any right in any creditor or other person other than the
Company, Lehman and their respective heirs, executors, administrators, personal
representatives and permitted assigns, and this Agreement shall not be construed
in any respect to be a contract in whole or in part for the benefit of any other
person.
Section 4.05. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same document.
Section 4.06. Governing Law. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
Section 4.07. Entire Agreement. This Agreement sets forth all of the
promises, agreements, conditions, understandings, warranties and representations
between the parties with
<PAGE>
6
respect to the subject matter of this Agreement, and supersedes all prior
agreements, arrangements and understandings between the parties (whether
written, oral or otherwise) with respect to the subject matter hereof. There are
no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, between the parties
concerning the subject matter hereof except as set forth herein.
Section 4.08. Compliance with Indenture. For so long as the Put
Option or the Call Option under this Agreement shall be exercisable, the Company
shall comply with all covenants of the Company set forth in Article IX of that
certain Indenture dated as of October 28, 1997 between the Company and The Bank
of New York, as Trustee relating to the Company's 8 3/4% Senior Subordinated
Notes due 2009 (Series A and Series B), as such Indenture is in effect as of the
date of this Agreement. In addition, the Company shall not make any Restricted
Payment or Investment if, immediately after such payment or investment, it could
not purchase Lehman's Equity Interest pursuant to the terms of the Put Option
without breaching the terms of such Indenture.
<PAGE>
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LEHMAN:
LBI GROUP INC.
By: /S/ STEVEN L. BERKENFELD
------------------------------------
Printed Name: Steven L. Berkenfeld
Title: Managing Director
Address:
3 World Financial Center
200 Vesey St.
New York, New York 10285
Attention: Steven L. Berkenfeld
Telephone Number: 212-526-2557
Fax Number: 212-526-2198
COMPANY:
CROSS TIMBERS OIL COMPANY
By: /s/ JOHN M. O'REAR
------------------------------------
Printed Name: John M. O'Rear
Title: Vice President and
Treasurer
Address:
810 Houston St., Suite 2000
Fort Worth, TX 76102-6298
Attention: General Counsel
Telephone Number: 817-870-2800
Fax Number: 817-882-7278
<PAGE>
EXHIBIT 99.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of September 15, 1999 between Cross
Timbers Oil Company, a Delaware corporation (the "Cross Timbers"), and Whitewine
Holding Company, a Texas corporation ("Whitewine").
Cross Timbers and Whitewine have entered into this Agreement for the
purpose of evidencing an agreement between the parties relating to the grant of
registration rights by Cross Timbers to Whitewine.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. For purposes of this Agreement, the following
terms have the meanings set forth below:
"LB I Group" means LB I Group, Inc.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Put and Call Agreement" means the Put and Call Agreement dated the date
hereof between Cross Timbers and LB I Group.
"Registrable Securities" means (a) any XTO Shares held by Whitewine and (b)
any securities issued or issuable with respect to the securities referred to in
clause (a) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
will cease to be Registrable Securities when they have been distributed to the
public pursuant to an offering registered under the Securities Act or sold to
the public in compliance with Rule 144 under the Securities Act (or any similar
rule then in force) or upon the expiration of the holding period that would
permit a non-affiliate to sell XTO Shares without restriction under Rule 144(k)
promulgated by the Securities and Exchange Commission.
"Registration Expenses" means all expenses incident to the registration and
disposition of the Registrable Securities pursuant to this Agreement, including
all registration, filing and applicable national securities exchange fees, all
fees and expenses of complying with state securities or blue sky laws (including
fees and disbursements of counsel to the underwriters or Whitewine in connection
with "blue sky" qualification of the Registrable Securities and determination of
their eligibility for investment under the laws of the various jurisdictions),
all
<PAGE>
word processing, duplicating and printing expenses, all messenger and delivery
expenses, the fees and disbursements of counsel for Cross Timbers and of counsel
for any other Person reasonably requested by Whitewine, the fees and expenses of
Cross Timbers's independent public accountants and any other independent public
accountants whose opinions are included in the registration statement, including
the expenses of "cold comfort" letters or any special audits required by, or
incident to, such registration, all fees and disbursements of underwriters
(other than underwriting discounts and commissions), all transfer taxes, the
reasonable fees and expenses of counsel and accountants to Whitewine and all
underwriting discounts and commissions in respect of the Registrable Securities
being registered by Whitewine. In connection with any registration pursuant to
this Agreement, Cross Timbers will not be obligated to pay the fees and expenses
for more than one counsel, other than local and special counsel, or for more
than one firm of accountants representing Whitewine.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Shelf Registration Statement" means any registration statement that
provides for the offering of Registrable Securities on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act (or any similar or successor
rule then in force).
"XTO Shares" means any shares of common stock, par value $.01 per share, of
Cross Timbers.
Except as otherwise provided herein, all capitalized terms used in this
Agreement will have the respective meanings provided in the Merger Agreement.
SECTION 2. Demand Registrations.
2.1 Requests for Demand Registrations. From and after the date of this
Agreement, Whitewine will have the right to require Cross Timbers to effect, and
Cross Timbers will be required to use its best efforts to effect, two
registrations under the Securities Act (the "Demand Registrations") of all or
part of its Registrable Securities; provided that the second Demand Registration
--------
shall be for all Registrable Securities then owned by Whitewine. Each Demand
Registration will be on Form S-2 or S-3 or any similar or successor shortform
registration, if available, or if such forms are not available to effect a
Demand Registration, such other form of the Securities and Exchange Commission
as is available. If requested by Whitewine, and Cross Timbers is then eligible
to use such a registration, the Demand Registration will be made on a Shelf
Registration Statement. Each request for a Demand Registration will specify the
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering.
2
<PAGE>
2.2 Priority on Demand Registrations; Right to Withdraw. Cross Timbers
will not include in any Demand Registration any securities which are not
Registrable Securities without the prior written consent of Whitewine. If a
Demand Registration is an underwritten offering and the managing underwriters
advise Cross Timbers that in their opinion the number of Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities, if
any, which can be sold in an orderly manner in such offering within a price
range acceptable to Whitewine, Cross Timbers will include in such registration
prior to the inclusion of any securities which are not Registrable Securities
the number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold in an orderly manner within the
acceptable price range of such offering.
2.3 Registration Expenses. All Registration Expenses incurred in
connection with any Demand Registration will be borne by Cross Timbers.
2.4 Selection of Underwriters. Whitewine will have the right to select the
investment bankers and managers to administer each underwritten Demand
Registration. Such investment bankers and managers will be of national
prominence.
2.5 Effective Registration Statement. A registration requested pursuant
to Section 2.1 will not be deemed to have been effected (a) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least 180 days (or such shorter
period terminating when all the Registrable Securities covered by such
registration statement have been sold pursuant thereto), (b) if after it has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Securities and Exchange
Commission or other governmental agency or court for any reason not attributable
to the holders registering Registrable Securities and has not thereafter become
effective or (c) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived.
2.6 Right to Withdraw. If the managing underwriter of any underwritten
offering advises Whitewine that the Registrable Securities covered by the
registration statement cannot be sold in an orderly manner in such offering
within a price range acceptable to Whitewine, then Whitewine will have the right
to notify Cross Timbers in writing that it has determined that the registration
statement be abandoned or withdrawn, in which event Cross Timbers will abandon
or withdraw such registration statement. In the event of such abandonment or
withdrawal, the Demand Registration pursuant to which the registration was
abandoned or withdrawn will not count for purposes of the requests for Demand
Registrations to which Whitewine are entitled under this Agreement, provided
that there will be no more than two withdrawals made pursuant to this Section
2.6.
2.7 Cross Timbers' Purchase Option in Lieu of Demand Registration.
Notwithstanding Section 2.1 above, and in lieu of effecting registration
pursuant to the Demand Registration,
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Cross Timbers will have the right to purchase all of the Registrable Securities
that Whitewine has requested be registered at a price equal to the average
closing price of the Registrable Securities for the 15 trading days immediately
succeeding the date on which the Demand Registration is made as officially
reported by the principal securities exchange on which the XTO Shares are listed
or admitted to trading or, if not so listed or admitted, on the NASDAQ/NMS or,
if not approved for quotation on the NASDAQ/NMS, the average closing bid price
as furnished by the NASD through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information or, if such security is not quoted on
NASDAQ, the price established pursuant to an appraisal conducted by a third
party selected by Whitewine who reasonably is acceptable to Cross Timbers. Cross
Timbers must notify Whitewine whether it intends to exercise its purchase right
within 30 days after the Demand Registration is made. Cross Timbers' failure to
notify Whitewine that Cross Timbers intends to exercise its purchase right
within the time period specified in the immediately-preceding sentence shall
constitute Cross Timbers' election to proceed with registration in accordance
with the Demand Registration and the other provisions of this Agreement. If the
Company exercises its purchase right as outlined above, the closing of the
purchase will occur within five business days following the date on which Cross
Timbers has notified Whitewine that it intends to exercise its purchase right in
accordance with this Section 2.7, with the purchase price payable in immediately
available funds by federal wire transfer.
2.8 Restriction on Demand Registration. Whitewine shall not be able to
deliver notice of a Demand Registration within 90 days following the effective
date of a registration statement filed by Cross Timbers pursuant to Section 2.1.
SECTION 3. Piggyback Registrations.
3.1 Right to Piggyback. From and after any failure by Cross Timbers to
purchase LB I Group's equity interest in Whitewine upon exercise of its put
option pursuant to the terms of the Put and Call Agreement, whenever Cross
Timbers proposes to register any XTO Shares under the Securities Act (other than
pursuant to a Demand Registration and other than registrations relating to a
Rule 145 or other business combination transaction, an offering solely to
employees and/or directors, or registrations on Form S-4, Form S-8 or any
similar or successor forms) and the registration form to be used may be used for
the registration of Registrable Securities (a "Piggyback Registration"), Cross
Timbers will give prompt written notice to Whitewine of its intention to effect
such a registration and of such holders' rights under this Section 3 and will
include in such registration all Registrable Securities with respect to which
Cross Timbers has received a written request for inclusion therein no later than
10 days prior to the effective date of the registration statement. Subject to
the provisions of this Section 3, Cross Timbers will use its best efforts to
effect the registration under the Securities Act of all Registrable Securities
which Cross Timbers has been so requested to register by Whitewine. No
registration effected under this Section 3.1 will relieve Cross Timbers of its
obligation to effect any registration upon request under Section 2.1.
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3.2 Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of Cross Timbers, and the managing
underwriters advise Cross Timbers that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in an orderly manner in such offering within a price range acceptable to
Cross Timbers, Cross Timbers will include in such registration (a) first, the
securities Cross Timbers proposes to sell and the securities requested to be
included therein by the holders that have registration rights with respect to
such securities existing as of the date hereof, (b) second, the Registrable
Securities requested to be included in such registration, and (c) third, other
securities requested to be included in such registration.
3.3 Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of Cross Timbers's
securities, and the managing underwriters advise Cross Timbers that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the holders initially requesting such
registration, Cross Timbers will include in such registration (a) first, the
securities requested to be included therein by the holders requesting such
registration and the Registrable Securities requested to be included in such
registration, and (b) second, other securities requested to be included in such
registration; provided that any securities requested to be included therein by
the holders that have registration rights with respect to such securities
existing as of the date hereof shall receive priority in such registration with
respect to the Registrable Securities to the extent required by such pre-
existing registration rights.
3.4 Piggyback Expenses. All Registration Expenses incurred in connection
with any Piggyback Registration will be borne by Cross Timbers.
3.5 Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of investment bankers and managers for the
offering must be approved by Whitewine; provided that Registrable Securities
constitute at least 10 percent of the securities to be sold pursuant to such
Piggyback Registration. Such approval will not be unreasonably withheld.
3.6 Right to Withdraw. Whitewine will have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to Section 4.1 at any time prior to the execution of any
underwriting agreement with respect thereto by giving written notice to Cross
Timbers of its request to withdraw. Any such request for withdrawal will be
irrevocable.
SECTION 4. Holdback Agreement of Cross Timbers. Cross Timbers agrees not
to effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and during the 180-day period beginning on the
effective date of any underwritten Demand Registration or underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant
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to registrations relating to a Rule 145 or other business combination
transaction, an offering solely to employees and/or directors, or registrations
on Form S-4, Form S-8 or any similar or successor forms), unless the
underwriters managing the registered public offering otherwise agree in writing.
SECTION 5. Registration Procedures. Whenever Whitewine has requested that
any Registrable Securities be registered pursuant to this Agreement, Cross
Timbers will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto Cross Timbers, except as otherwise
provided in this Agreement, will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, Cross Timbers will furnish copies of all
such documents proposed to be filed to the counsel selected by Whitewine
("Whitewine's Counsel") and, in an underwritten offering, to counsel for
the underwriters;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and prospectus as
may be necessary to keep such registration statement effective for a period
of not less than 180 days and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish, without charge, Whitewine and each underwriter such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as Whitewine or such underwriter may
reasonably request in order to facilitate the disposition of the
Registrable Securities;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as Whitewine reasonably requests, keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition
in such jurisdictions of the Registrable Securities; provided that Cross
Timbers will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
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(e) promptly notify Whitewine (i) when the registration statement
covering such Registrable Securities, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to such registration statement has been filed, and, with respect
to such registration statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Securities and
Exchange Commission for amendments or supplements to such registration
statement or the prospectus related thereto or for additional information,
(iii) of the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by
Cross Timbers of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose and (v), at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
discovery or happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact required to be stated therein or necessary
to make the statements therein not misleading, and, at the request of
Whitewine, Cross Timbers will prepare and furnish to Whitewine a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact required
to be stated therein or necessary to make the statements therein not
misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by Cross Timbers are
then listed;
(g) enter into such customary agreements (including underwriting
agreements in customary form) in accordance with the provisions of Sections
5.4 and 7.1;
(h) otherwise comply with all applicable rules and regulations of the
Securities and Exchange Commission;
(i) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement
for sale in any jurisdiction, Cross Timbers will use its best efforts
promptly to obtain the withdrawal of such order; and
(j) obtain a cold comfort letter from Cross Timbers's independent
public accountants, and any other accountants whose opinions are included
in such registration statement, in customary form and covering such matters
of the type customarily covered by cold comfort letters as Whitewine
reasonably requests.
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(k) make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement will satisfy
the provisions of Section 11 (a) of the Securities Act and Rule 158
promulgated thereunder, and promptly furnish to Whitewine a copy of any
amendment or supplement to such registration statement or prospectus;
(l) obtain an opinion of Cross Timbers's and any other counsel
reasonably requested by Whitewine in customary form and covering such
matters of the type customarily covered by opinions of counsel as Whitewine
reasonably requests; provided that such Registrable Securities constitute
at least 10 percent of the securities covered by such registration
statement;
(m) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to Cross Timbers and Whitewines'
Counsel to consummate the disposition of such Registrable Securities;
(n) deliver promptly to Whitewines' Counsel and each underwriter, if
any, participating in the offering of the Registrable Securities, copies of
all correspondence between the Securities and Exchange Commission and Cross
Timbers, its counsel or auditors and all memoranda relating to (and allow
the Whitewines' Counsel and any underwriters counsel to participate in)
discussions with the Securities and Exchange Commission or its staff with
respect to such registration statement; and
(o) make available its employees and personnel and otherwise provide
reasonable assistance to the underwriters (including by participating in
meetings, drafting sessions, due diligence sessions and road shows) in
their marketing of Registrable Securities.
5.1 Unlegended Certificates. In connection with the offering of any
Registrable Securities registered pursuant to this Agreement, Cross Timbers will
promptly after the sale of such Registrable Securities (a) facilitate the timely
preparation and delivery to Whitewine and the underwriters, if any,
participating in such offering, of unlegended certificates representing
ownership of such Registrable Securities being sold in such denominations and
registered in such names as requested by such holders or such underwriters and
(b) instruct any transfer agent and registrar of such Registrable Securities to
release any stop transfer orders with respect to any such Registrable
Securities.
5.2 No Required Sale. Nothing in this Agreement will be deemed to create
an independent obligation on the part of Whitewine to sell any Registrable
Securities pursuant to any effective registration statement.
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5.3 Rule 144. Cross Timbers will take all actions reasonably necessary to
enable Whitewine to sell such securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 or
any similar rule or regulation hereafter adopted by the Securities and Exchange
Commission including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed by the Securities Exchange
Act. Upon the request of Whitewine, Cross Timbers will deliver to such holder a
written statement as to whether it has complied with such requirements.
5.4 Underwriting Agreement. If any Demand Registration is an underwritten
offering, Cross Timbers will enter into a customary underwriters agreement with
a managing underwriter or underwriters which will be reasonably satisfactory in
form and substance to Whitewine and will contain such representations and
warranties by, and such other agreements on the part of, Cross Timbers and such
other terms as are generally prevailing in agreements of that type, including
customary provisions relating to indemnification and contribution. Whitewine
may, at its option, be a party to such underwriting agreement and require that
any or all of the representations and warranties by, and other agreements on
behalf of, Cross Timbers to and for the benefit of the underwriters also be made
to and for the benefit of Whitewine and that any and all of the conditions
precedent to the obligations of such underwriters be conditions precedent to the
obligations of Whitewine.
SECTION 6. Indemnification.
6.1 Parent Corporation Indemnification. Cross Timbers agrees to indemnify,
to the fullest extent permitted by law, Whitewine, its directors, officers,
stockholders, agents and affiliates and each Person who controls Whitewine
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses, joint or several, caused by (a) any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus, summary prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, (b) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (c) any violation by Cross Timbers of any federal,
state or common law, rule or regulation applicable to Cross Timbers or relating
to action required of or inaction by Cross Timbers in connection with such
registration, except insofar as such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, prospectus,
summary prospectus, preliminary prospectus, amendment or supplement which is
contained in written information furnished to Cross Timbers through an
instrument duly executed by or on behalf of Whitewine, specifically stating that
it is for use in the preparation thereof, or by Whitewine's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after Cross Timbers has furnished Whitewine with a
sufficient number of copies of the same. In connection with an underwritten
offering, Cross Timbers will indemnify the underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same
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extent as provided above with respect to the indemnification of the holders of
Registrable Securities.
6.2 Whitewine Indemnification. In connection with any registration
statement in which Whitewine is participating, Whitewine will furnish to Cross
Timbers in writing such information and affidavits as Cross Timbers reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify Cross Timbers,
its directors and officers and each Person who controls Cross Timbers (within
the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus, summary
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished by Whitewine through an instrument duly
executed by or on behalf of Whitewine, specifically stating that it is for use
in the preparation thereof, or resulting from Whitewine's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after Cross Timbers has furnished Whitewine with a
sufficient number of copies of the same; provided that the liability of
Whitewine will be limited to the amount of proceeds (net of expenses and
underwriting discounts and commissions) received by Whitewine in the offering
giving rise to such liability.
6.3 Resolution of Claims. Any Person entitled to indemnification
hereunder will (a) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
of any indemnified party to give notice as provided herein will not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and will not relieve the indemnifying
party from any liability which it may have to the indemnified party otherwise
than under this Section 6) and (b) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel, other than local and special counsel, for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. No indemnifying party will, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
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6.4 Survival. The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any director, officer, stockholder, agent,
affiliate or controlling Person of such indemnified party and will survive the
transfer of securities.
6.5 Contribution. If the indemnification provided for in this Section 6
is for any reason held by a court to be unavailable to an indemnified party
under Section 6.1 or 6.2 hereof in respect of any loss, claim, damage, liability
and expenses, or any action in respect thereof, then, in lieu of the amount paid
or payable under Section 6.1 or 6.2 hereof, the indemnified party and the
indemnifying party under Section 6.1 or 6.2 hereof will contribute to the
aggregate losses, claims, damages, liabilities and expenses (including legal or
other expenses reasonably incurred in connection with investigating the same),
(a) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and the indemnified party on the other,
which resulted in such loss, claim, damage, liability or expense, or action in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage, liability or expense, or action in respect thereof, as
well as any other relevant equitable considerations, or (b) if the allocation
provided by clause (a) above is not permitted by applicable, law, in such
proportion as is appropriate to reflect not only the relative fault but also the
relative benefits received by the indemnifying party and the indemnified party
from the offering of the securities covered by such registration statement as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 6.5 were to be determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations
referred to in the preceding sentence of this Section 6.5. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In addition, no Person will be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such Person's consent, which consent will
not be unreasonably withheld. Notwithstanding anything in this Section 6.5 to
the contrary, no indemnifying party (other than Cross Timbers) will be required
to contribute any amount in excess of the proceeds (net of expenses and
underwriting discounts and commissions) received by such party from the sale of
the Registrable Securities in the offering to which the losses, claims, damages,
liabilities or expenses of the indemnified parties relate.
6.6 Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subsections of this Section 6 (with appropriate
modifications) will be given by Cross Timbers and Whitewine with respect to any
required registration or other qualification of securities under any federal,
state or blue sky law or regulation of any governmental authority other than the
Securities Act. The indemnification agreements contained in this Section 6 will
be in addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract.
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6.7 Indemnification Payments. The indemnification and contribution
required by this Section 6 will be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
SECTION 7. Participation in Registrations.
7.1 Required Actions. No Person may participate in any registration
hereunder which is underwritten unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents consistent
with the terms of this Agreement; provided that no holder of Registrable
Securities included in any underwritten registration will be required to make
any representations or warranties to Cross Timbers or the underwriters other
than representations and warranties regarding such holder and such holder's
intended method of distribution and any liability of such holder to any
underwriter or other Person under such underwriting agreement will be limited to
liability arising from breach of its representations and warranties and will be
limited to an amount equal to the proceeds (net of expenses and underwriting
discounts and commissions) that it derives from such registration.
7.2 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, Cross Timbers will give Whitewine, its underwriters,
if any, and its counsel, accountants and other representatives and agents the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Securities and Exchange
Commission, and each amendment thereof or supplement thereto, and give each of
them such reasonable access to its books and records and such reasonable
opportunities to discuss the business of Cross Timbers with its officers and
employees and the independent public accountants who have certified its
financial statements, and supply all other information reasonably requested by
each of them, as is necessary or appropriate, in the opinion of Whitewine and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 8. Miscellaneous.
8.1 No Inconsistent Agreements. The rights granted to Whitewine hereunder
do not in any way conflict with and are not inconsistent with any other
agreements to which Cross Timbers is a party or by which it is bound. Cross
Timbers is not a party to and will not hereafter enter into any agreement with
respect to its securities which is inconsistent with or violates the rights
granted to Whitewine in this Agreement.
8.2 Remedies. The parties agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with their specific terms. It is
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accordingly agreed that the parties will be entitled to specific performance of
the terms of this Agreement, without posting a bond or other security, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.3 Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and Cross Timbers may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if Cross Timbers has obtained the written consent of
Whitewine. No other course of dealing between Cross Timbers and Whitewine or
any delay in exercising any rights hereunder or under the Certificate of
Incorporation will operate as a waiver of any rights of Whitewine.
8.4 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for Whitewine's benefit as a holder of
Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of such Registrable Securities, each of which will be deemed a
party to this Agreement.
8.5 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
8.6 Counterparts; Effectiveness. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
8.7 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.8 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to the
recipient or when sent to the recipient by telecopy (receipt confirmed), one
business day after the date when sent to the recipient by reputable express
courier service (charges prepaid) or three business days after the date when
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
will be sent to Cross Timbers and Whitewine at the addresses indicated below:
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If to Cross Timbers:
Cross Timbers Oil Company
818 Houston St., Ste. 2000
Fort Worth, Texas 76102-6298
Attention: Frank G. McDonald, Vice President
Facsimile No: (817) 882-7278
If to Whitewine:
Whitewine Holding Company
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Attention:
Facsimile No: (212)
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
8.9 No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than Cross Timbers and Whitewine and
their respective successors and permitted assigns.
8.10 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, that may have related in any way to the subject matter hereof.
8.11 Consent to Jurisdiction. Each of the parties to this Agreement
submits to the jurisdiction of any state or federal court sitting in the
Southern District of New York any action or proceeding arising out of or
relating to this Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the parties to this Agreement waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
party with respect thereto.
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8.12 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
CROSS TIMBERS OIL COMPANY
By /S/ FRANK G. MCDONALD
-------------------------------------
Name: Frank G. McDonald
Title: Vice President
WHITEWINE HOLDING COMPANY
By: /S/ JOHN M. O'REAR
-------------------------------------
Name: John M. O'Rear
Title: Vice President and Treasurer
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