UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
For the Quarterly Period Ended September 30, 2004
Commission file number 000-50175
DORCHESTER MINERALS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 81-0551518
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
3838 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 559-0300
Dorchester Minerals, L.P.
3738 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219
(Former address of principal executive offices) (Zip Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
As of November 5, 2004, 28,240,431 common units of partnership interest
were outstanding.
1
TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS................................3
PART I - FINANCIAL INFORMATION.................................................3
ITEM 1. FINANCIAL STATEMENTS................................................3
CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2004 (UNAUDITED) AND
DECEMBER 31, 2003......................................................4
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)................................5
CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30,2004 AND 2003 (UNAUDITED).................................6
NOTES TO THE CONDENSED FINANCIAL STATEMENTS...............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS...............................................9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........14
ITEM 4. CONTROLS AND PROCEDURES............................................14
PART II - OTHER INFORMATION...................................................15
ITEM 1. LEGAL PROCEEDINGS..................................................15
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS........15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................15
ITEM 5. OTHER INFORMATION..................................................15
ITEM 6. EXHIBITS...........................................................15
SIGNATURES....................................................................15
INDEX TO EXHIBITS.............................................................16
CERTIFICATIONS................................................................17
2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this report which are not historical facts
(including any statements concerning plans and objectives of management for
future operations or economic performance, or assumptions or forecasts related
thereto), are forward-looking statements. These statements can be identified by
the use of forward-looking terminology including "may," "believe," "will,"
"expect," "anticipate," "estimate," "continue" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information. In this report, the term "Partnership", as well as the terms "us,"
"our," "we," and "its," are sometimes used as abbreviated references to
Dorchester Minerals, L.P. itself or Dorchester Minerals, L.P. and its related
entities.
These forward-looking statements are made based upon management's current
plans, expectations, estimates, assumptions and beliefs concerning future events
impacting us and therefore involve a number of risks and uncertainties. We
caution that forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied in the
forward-looking statements for a number of important reasons. Examples of such
reasons include, but are not limited to, changes in the price or demand for oil
and natural gas, changes in the operations on or development of the
Partnership's properties, changes in economic and industry conditions and
changes in regulatory requirements (including changes in environmental
requirements) and the Partnership's financial position, business strategy and
other plans and objectives for future operations. These and other factors are
set forth in the Partnership's filings with the Securities and Exchange
Commission.
You should read these statements carefully because they discuss our
expectations about our future performance, contain projections of our future
operating results or our future financial condition, or state other
"forward-looking" information. Before you invest, you should be aware that the
occurrence of any of the events herein described in this report could
substantially harm our business, results of operations and financial condition
and that upon the occurrence of any of these events, the trading price of our
common units could decline, and you could lose all or part of your investment.
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dorchester Minerals, L.P. is a publicly traded Delaware limited partnership
that commenced operations on January 31, 2003, upon the combination of
Dorchester Hugoton, Ltd., which was a publicly traded Texas limited partnership,
and Republic Royalty Company and Spinnaker Royalty Company, L.P., both of which
were privately held Texas partnerships. The amounts and results of operations of
Dorchester Minerals included in these financial statements as historical amounts
prior to February 1, 2003 reflect the results of operations of Dorchester
Hugoton. The effect of the combination is reflected in the balance sheet and in
the results of operations and cash flows since January 31, 2003. The combination
was accounted for using the purchase method of accounting.
3
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 30, December 31,
2004 2003
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents....................... $ 14,450 $ 10,881
Trade receivables............................... 9,048 7,658
Note receivable - related party................. 167 205
Prepaid expenses................................ 27 69
--------- ---------
Total current assets........................ 23,692 18,813
Oil and natural gas properties - at cost (full
cost method)..................................... 291,804 268,189
Less accumulated depletion................... (103,477) (88,051)
--------- ---------
Net oil and natural gas properties............ 188,327 180,138
--------- ---------
Total assets................................ $212,019 $198,951
========= =========
LIABILITIES AND PARTNERSHIP CAPITAL
Current liabilities:
Accounts payable and other current liabilities.. $ 1,293 $ 512
--------- ---------
Total current liabilities.................. 1,293 512
Commitments and contingencies - -
Partnership capital:
General partner ................................ 7,958 8,246
Unitholders..................................... 202,768 190,193
--------- ---------
Total partnership capital.................. 210,726 198,439
--------- ---------
Total liabilities and partnership capital............ $212,019 $198,951
========= =========
The accompanying condensed notes are an integral part
of these financial statements.
4
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2004 2003 2004 2003
------- --------- -------- ---------
Net operating revenues:
Net profits interest.................. $ 5,775 $ 5,583 $18,061 $ 15,789
Natural gas sales..................... - - - 2,401
Royalties............................. 7,822 6,936 21,677 19,392
Other................................. 836 29 1,516 222
------- --------- -------- ---------
Total net operating revenues.......... 14,433 12,548 41,254 37,804
Cost and expenses:
Operating, including production taxes. 687 592 1,767 1,908
Depreciation, depletion and amort..... 5,103 6,600 15,426 18,243
Impairment of full cost properties.... - 21,590 - 43,804
General and administrative expenses... 800 590 2,390 2,184
Management fees....................... - - - 524
Combination costs and related expenses - - - 3,080
------- --------- -------- --------
Total costs and expenses.............. 6,590 29,372 19,583 69,743
------- --------- -------- ---------
Operating income .......................... 7,843 (16,824) 21,671 (31,939)
Other income (expense)
Investment income..................... 33 83 69 108
Other income (expense), net........... 17 55 112 160
------- --------- -------- ---------
Total other income (expense).......... 50 138 181 268
Net earnings (loss)........................ $ 7,893 $(16,686) $21,852 $(31,671)
======= ========= ======== =========
Allocation of net earnings:
General partner....................... $ 211 $ (425) $ 557 $ (773)
======= ========= ======== =========
Unitholders........................... $ 7,682 $(16,261) $21,295 $(30,898)
======= ========= ======== =========
Net earnings per common
unit (in dollars)......................... $ 0.29 $ (0.60) $ .79 $ (1.22)
======= ========= ======== =========
Wtd. avg. common units outstanding (000's) 27,053 27,040 27,044 25,230
======= ========= ======== =========
The accompanying condensed notes are an integral part
of these financial statements.
5
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------
2004 2003
--------- ---------
Net cash provided by operating activities. ........... $ 36,836 $ 28,216
--------- ---------
Cash flows from investing activities:
Adjustment related to acquistion of
royalty interests............................. 1,068 68
Capital expenditures........................... (446) (5)
--------- ---------
Net cash provided by (used in) investing activities... 622 63
--------- ---------
Cash flows from financing activities:
Distributions paid to Partners................ (33,889) (39,072)
--------- ---------
Increase (decrease) in cash and cash equivalents...... 3,569 (10,793)
Cash and cash equivalents at January 1................ 10,881 23,129
--------- ---------
Cash and cash equivalents at September 30............. $ 14,450 $ 12,336
========= =========
Non cash investing and financing activities:
Acquisition of assets for units
Oil and gas properties...................... $ 24,324 $233,466
Receivables................................. - 3,660
Payables.................................... - -
Cash........................................ - 68
--------- ---------
Value assigned to assets acquired........... $ 24,324 $237,194
========= =========
The accompanying condensed notes are an integral part
of these financial statements.
6
DORCHESTER MINERALS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION: Dorchester Minerals, L.P. (the "Partnership")
is a publicly traded Delaware limited partnership that was formed in December
2001 in connection with the combination, which was completed on January 31,
2003, of Dorchester Hugoton, Ltd., which was a publicly traded Texas limited
partnership, and Republic Royalty Company (Republic) and Spinnaker Royalty
Company, L.P. (Spinnaker) both of which were privately held Texas partnerships.
The condensed financial statements reflect all adjustments (consisting only
of normal and recurring adjustments unless indicated otherwise) that are, in the
opinion of management, necessary for the fair presentation of the Partnership's
financial position and operating results for the interim period. Interim period
results are not necessarily indicative of the results for the calendar year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information. Per-unit information is calculated by
dividing the income applicable to holders of the Partnership's common units by
the weighted average number of units outstanding.
The accompanying financial statements reflect the combination completed on
January 31, 2003 and accounted for using the purchase method of accounting. In
accordance with the purchase method of accounting, Dorchester Hugoton was
designated as the accounting acquiror. Under the purchase method of accounting,
the Partnership used the market price of Dorchester Hugoton's partnership units
on the last day of trading, adjusted for the liquidating distribution to
Dorchester Hugoton Unitholders, to determine the value of the Republic and
Spinnaker oil and gas properties merged into the Partnership. Such method
increased the historic book values of the oil and gas properties of Republic and
Spinnaker by approximately $192,000,000, which increased the Partnership's
quarterly depletion. See the Partnership's Form 8-K filed on April 15, 2003 and
Note 3 and Critical Accounting Policies for more details.
Prior to January 31, 2003, the Partnership had no combined operations. In
these circumstances, the Partnership is required to present, discuss and analyze
the financial condition and results of operations of our Partnership for the
three and nine month periods ended September 30, 2004 and 2003 by including the
financial condition and results of Dorchester Hugoton, the accounting acquiror,
for the one month period ended January 31, 2003.
Effective September 30, 2004, the Partnership through Dorchester Minerals
Acquisition LP, its wholly owned subsidiary, acquired assets related to oil and
gas properties consisting of producing and perpetual mineral and royalty
interests located in 104 counties and parishes in six states. As consideration,
an aggregate of 1,200,000 common units of Dorchester Minerals, L.P. were issued.
Consequently, the Condensed Balance Sheets presented include $23,256,000 in
property additions.
2. CONTINGENCIES: In January 2002, some individuals and an association
called Rural Residents for Natural Gas Rights, referred to as RRNGR, sued
Dorchester Hugoton, Ltd., Anadarko Petroleum Corporation, Conoco, Inc., XTO
Energy Inc., ExxonMobil Corporation, Phillips Petroleum Company, Incorporated
and Texaco Exploration and Production, Inc. Dorchester Minerals Operating LP,
owned directly and indirectly by our general partner, now owns and operates the
properties formerly owned by Dorchester Hugoton. These properties contribute a
major portion of the Net Profits Interests amounts paid to the Partnership. The
suit is currently pending in the District Court of Texas County, Oklahoma and
discovery is underway by the plaintiffs and defendants. The individuals and
RRNGR consist primarily of Texas County, Oklahoma residents who, in residences
located on leases use natural gas from gas wells located on the same leases, at
their own risk, free of cost. The plaintiffs seek declaration that their
domestic gas use is not limited to stoves and inside lights and is not limited
to a principal dwelling as provided in the oil and gas lease agreements with
defendants in the 1930s to the 1950s. Plaintiffs' claims against defendants
include failure to prudently operate wells, violation of rights to free domestic
gas, violation of irrigation gas contracts, underpayment of royalties, a request
for accounting, and fraud. Plaintiffs also seek certification of class action
against defendants. In July 2002, the defendants were granted a motion for
summary judgment removing RRNGR as a plaintiff. On October 1, 2004, the
plaintiffs severed claims against Dorchester Minerals Operating LP regarding
royalty underpayments. Dorchester Minerals Operating LP believes plaintiffs'
claims, including severed claims, are completely without merit. Based upon past
measurements of such domestic gas usage, Dorchester Minerals Operating LP
believes the domestic gas damages sought by plaintiffs to be minimal. An
7
adverse decision could reduce amounts the Partnership receives from the Net
Profits Interests.
The Partnership and Dorchester Minerals Operating LP are involved in other
legal and/or administrative proceedings arising in the ordinary course of their
businesses, none of which have predictable outcomes and none of which are
believed to have any significant effect on financial position or operating
results.
3. COMBINATION TRANSACTIONS: On January 31, 2003, Dorchester Hugoton
transferred certain assets to Dorchester Minerals Operating LP in exchange for a
net profits interest, contributed the net profits interest and other assets to
the Partnership and subsequently liquidated. Republic and Spinnaker transferred
certain assets to Dorchester Minerals Operating LP in exchange for net profits
interests and subsequently merged with the Partnership. For accounting purposes
Dorchester Hugoton is deemed the acquiror. The value assigned to the assets of
Republic and Spinnaker was based on the market capitalization of Dorchester
Hugoton and the share of the total common units of the Partnership received by
the former partners of Republic (10,953,078 common units) and Spinnaker
(5,342,973 common units). The assets of Republic and Spinnaker were valued at
$237,194,000 which was allocated as follows:
Cash.................................. $ 68,000
Oil and gas properties................ 233,466,000
Receivables........................... 3,660,000
-------------
Total................................. $ 237,194,000
The following reflects unaudited pro forma data related to the combination
discussed herein. The unaudited pro forma data assumes the combination had taken
place as of the beginning of each period. The pro forma amounts are not
necessarily indicative of the results that may be reported in the future. Pro
forma adjustments have been made to depletion, depreciation, and amortization to
reflect the new basis of accounting for the assets of Spinnaker and Republic as
of January 31, 2003, and to January 2003 revenues to reflect the revenues of
Dorchester Hugoton as Net Profits Interests.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2003
------------------ -----------------
Revenues $ 12,548,000 $ 39,693,000
Depletion $ 6,600,000 $ 19,994,000
Impairment $ 21,590,000 $ 43,804,000
Net earnings (loss) $ (16,686,000) $ (31,820,000)
Earnings (loss) per common unit $ (0.60) $ (1.14)
Nonrecurring items:
Severance and related costs --- $ 3,003,000
Combination-related costs $ --- $ 670,000
On September 30, 2004, we acquired through Dorchester Minerals
Acquisition LP assets shown on our current balance sheet at $24,324,000 in
exchange for 1,200,000 common units of Dorchester Minerals. See Note 1 for
additional information.
4. IMPAIRMENT OF OIL AND GAS PROPERTIES: During the second and third
quarter of 2003, the Partnership recorded non-cash charges against earnings of
$43,804,000. The write-downs represent impairment of assets that results
primarily from the difference between the discounted present value of the
Partnership's proved natural gas and oil reserves using quarter ended gas and
oil prices as compared to the book value assigned to former Republic and
Spinnaker assets in accordance with purchase accounting rules which value
significantly exceeded historic book value. The write-downs were a function of
such increased value and changes in prevailing oil and gas prices since the
consummation of the combination transaction. Cash flow from operations and cash
distributions to unitholders were not affected by the write-downs. See Note 1
and Note 3 and Critical Accounting Policies.
8
5. DISTRIBUTION TO HOLDERS OF COMMON UNITS: Since the Partnership's
combination on January 31, 2003, unitholder cash distributions per common
unit have been:
Year Quarter Record Date Payment Date Amount
------ ------------ ---------------- ----------------- ---------
2003 1st (partial) April 28, 2003 May 8, 2003 $0.206469
2003 2nd July 28, 2003 August 7, 2003 $0.458087
2003 3rd October 31, 2003 November 10, 2003 $0.422674
2003 4th January 26, 2004 February 5, 2004 $0.391066
2004 1st April 30, 2004 May 10, 2004 $0.415634
2004 2nd July 26, 2004 August 5, 2004 $0.415315
2004 3rd October 25, 2004 November 4, 2004 $0.476196
Third quarter 2004 distributions were paid on 28,240,431 units; previous
distributions were paid on 27,040,431 units. The next cash distribution will
be paid by February 15, 2005.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Dorchester Minerals, L.P. is a publicly traded Delaware limited partnership
that was formed in December 2001 in connection with the combination, which was
completed on January 31, 2003, of Dorchester Hugoton, which was a publicly
traded Texas limited partnership, and Republic and Spinnaker, both of which were
privately held Texas partnerships.
Dorchester Minerals Operating LP, a Delaware limited partnership owned
directly and indirectly by our general partner, holds the working interest
properties previously owned by Dorchester Hugoton and a minor portion of mineral
interest properties previously owned by Republic and Spinnaker. We refer to
Dorchester Minerals Operating LP by the term "operating partnership". Our
Partnership directly and indirectly holds a 96.97% net profits overriding
royalty interest in these properties. We refer to our net profits overriding
royalty interest in these properties as the Net Profits Interests. After the
close of each month, we receive a payment equaling 96.97% of the net proceeds
actually received during that month from the properties subject to the Net
Profits Interests.
In addition to the Net Profits Interests, we also hold producing and
non-producing mineral, royalty, overriding royalty, net profits and leasehold
interests, which we acquired as part of the combination upon the mergers of
Republic and Spinnaker into our Partnership and by merger of one of our
subsidiaries effective September 30. We currently own Royalty Properties in
571 counties and parishes in 25 states.
BASIS OF PRESENTATION
In the combination completed on January 31, 2003 and accounted for as a
purchase, Dorchester Hugoton was designated as the accounting acquiror. Prior to
January 31, 2003, our Partnership had no combined operations. IN THESE
CIRCUMSTANCES, WE ARE REQUIRED TO PRESENT, DISCUSS AND ANALYZE THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF OUR PARTNERSHIP FOR THE THREE AND NINE
MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003 BY INCLUDING THE FINANCIAL
CONDITION AND RESULTS OF DORCHESTER HUGOTON, THE ACCOUNTING ACQUIROR, FOR THE
ONE MONTH PERIOD ENDED JANUARY 31, 2003. FOR THE PURPOSES OF THIS PRESENTATION,
THE TERM COMBINATION MEANS THE TRANSACTIONS CONSUMMATED IN CONNECTION WITH THE
COMBINATION OF THE BUSINESS AND PROPERTIES OF DORCHESTER HUGOTON, REPUBLIC AND
SPINNAKER.
Effective September 30, 2004, the Partnership through Dorchester Minerals
Acquisition LP, its wholly owned subsidiary, acquired assets related to oil and
gas properties consisting of producing and non-producing perpetual mineral and
royalty interests located in 104 counties and parishes in six states. As
consideration an aggregate of 1,200,000 common units of Dorchester Minerals,
L.P. were issued. Consequently, the Condensed Balance Sheets presented include
$23,256,000 in property additions. No income statement impact was recorded
during this period.
COMMODITY PRICE RISKS
Our profitability is affected by volatility in prevailing oil and natural
gas prices. Oil and natural gas prices have been subject to significant
volatility in recent years in response to changes in the supply and demand for
oil and natural gas in the market and general market volatility.
9
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AS COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2003
Normally, our period-to-period changes in net earnings and cash flows
from operating activities are principally determined by changes in natural
gas and crude oil sales volumes and prices. Our portion of gas and oil sales
and weighted average prices were:
Three Months Ended Nine Months Ended
-------------------- -----------------
June
September 30, 30, September 30,
------------ ------ ------- ------
ACCRUAL BASIS SALES VOLUMES: 2004 2003 2004 2004 2003
----- ----- ------ ------- ------
Dorchester Hugoton Gas Sales (mmcf)(1) -- -- -- -- 448
Net Profits Interests Gas Sales(mmcf) 1,343 1,441 1,352 4,042 3,586
Net Profits Interests Oil Sales (mbbls) 2 2 2 6 5
Royalty Props. Gas Sales(mmcf) 831 897 822 2,541 2,372
Royalty Props. Oil Sales (mbbls 73 83 67 220 224
WEIGHTED AVERAGE SALES PRICE:
Dorchester Hugoton Gas Sales ($/mcf) -- -- -- -- $ 5.20
Net Profits Interests Gas Sales($/mcf) $ 5.42 $ 4.94 $ 5.81 $ 5.56 $ 5.55
Net Profits Interests Oil Sales ($/bbl) $38.14 $29.51 $35.25 $34.16 $29.32
Royalty Properties Gas Sales ($/mcf) $ 5.89 $ 5.08 $ 5.28 $ 5.40 $ 5.46
Royalty Properties Oil Sales ($/bbl) $40.10 $28.68 $36.90 $36.17 $28.75
Production Costs Deducted Under
the Net Profits Interests ($/mcfe)(2) $ 1.21 $ 1.12 $ 1.23 $ 1.18 $ 1.21
______________________________________
(1) For purposes of comparison the January 2003 Dorchester Hugoton volumes have
been reduced to reflect our 96.97% Net Profits Interest in production from
the underlying properties.
(2) Provided to assist in determination of revenues; applies only to Net
Profits Interests sales volumes and prices.
Oil sales volumes attributable to our Royalty properties during the third
quarter decreased 12% from 83,000 bbls during 2003 to 73,000 bbls during 2004 as
a result of our receipt of retroactive volume adjustments in the third quarter
of 2003. Gas sales volumes attributable to our Royalty Properties during the
third quarter decreased 7.4% from 897 mmcf during 2003 to 831 mmcf during 2004.
Oil sales volumes attributable to our Net Profits Interests during the
third quarter were unchanged from 2003. Gas sales volumes attributable to our
Net Profits Interests during the third quarter decreased 6.8% from 1,441 mmcf
during 2003 to 1,343 mmcf during 2004 due to initial increased production
resulting from 2003 start-up of additional field compression on the Oklahoma
properties previously owned by Dorchester Hugoton. New activity on the Net
Profits Interest properties contributed minor amounts to third quarter 2004
production volumes.
Weighted average oil sales prices attributable to the Partnership's
interest in Royalty Properties increased 39.8% from $28.68 per bbl during the
third quarter 2003 to $40.10 per bbl during the third quarter 2004. Similarly,
third quarter weighted average Partnership natural gas sales prices from Royalty
Properties increased 15.9% from $5.08 per mcf during 2003 to $5.89 per mcf
during 2004. Both oil and gas price increases resulted from changing market
conditions.
Third quarter weighted average oil sales prices from the Net Profits
Interests' properties increased 29.2% from $29.51 per bbl in 2003 to $38.14 per
bbl in 2004. Third quarter weighted average natural gas sales prices from the
Net Profits Interests' properties increased 9.7% from $4.94 per mcf in 2003 to
$5.42 per mcf in 2004. Such oil and gas price increases are due to changing
market conditions.
Oil and natural gas sales volumes attributable to the Royalty Properties
and oil and natural gas sales volumes attributable to the Net Profits Interests
from Republic and Spinnaker are included in our results for the nine month
period ended September 30, 2004 and are included for only the eight months ended
September 30, 2003. See "Basis of Presentation" and Note 1 of the Notes to the
Condensed Financial Statements.
Weighted average prices for oil and natural gas sales volumes attributable
to the Royalty Properties and also to the Net Profits Interests from Republic
and Spinnaker are included in our results for the nine months ended
September 30, 2004 and are included for only the eight months ended
September 30, 2003. See "Basis of Presentation" and Note 1 of the Notes to the
Condensed Financial Statements.
Our third quarter net operating revenues increased 15% from $12,548,000
during 2003 to $14,433,000 during 2004 due primarily to increased natural gas
prices and crude oil prices. Comparing the nine month periods, net operating
revenue rose 9.1% from $37,804,000 during 2003 to $41,254,000 during 2004,
primarily as a result of improvement of natural gas and crude oil prices as well
as significant lease bonus income. Management cautions
10
the reader in the comparison of results for the nine month periods because
operations attributable to properties formerly owned by Republic and Spinnaker
are not included for January in the nine-month period ending September 30, 2003.
See "Basis of Presentation" and Note 1 of the Notes to the Condensed Financial
Statements.
Costs and expenses during the third quarter of 2004 decreased 77.6% from
$29,372,000 during the third quarter of 2003 to $6,590,000. Similarly, costs and
expenses during the nine months ended September 30, 2004 of $19,583,000 were
71.9% lower than costs in the nine months ended September 30, 2003 of
$69,743,000. Such decrease in costs is primarily due to second and third quarter
2003 non-cash charges against earnings of $43,804,000 representing an impairment
of assets during 2003. See Note 4 of the Notes to the Condensed Financial
Statements.
Several categories of costs during the first nine months of 2004 were lower
than the first nine months of 2003 due to non-recurring expenses associated with
the 2003 liquidation of Dorchester Hugoton. Such 2003 costs are mostly
combination and related expenses of $2,907,000, consisting primarily of
$2,500,000 in severance payments and related costs. Similarly, management fees
in 2003 include a one-time $496,000 charge.
Other income during the three and nine month period ended September 30
decreased from $138,000 and $268,000, respectively, during 2003 to $50,000 and
$181,000, respectively, during the same periods in 2004. Through September 30 we
have received partial payments including interest of a legal judgment in the
amount $107,000 and accrued an additional $78,000 including interest
attributable to the same matter. The first nine months of 2004 include expenses
of $87,000 attributable to unsuccessful property acquisition attempts in the
first quarter. Note that lease bonus revenue is included in Other net operating
revenue and is not reflected as Other income.
Depletion, depreciation and amortization during the three and nine month
period ended September 30 decreased from $6,600,000 and $18,243,000,
respectively, during 2003 to $5,103,000 and $15,426,000, respectively, during
2004, primarily as a result of a reduced depletable asset base, mainly due to
impairments and prior quarterly depletion. The recent asset acquisition, while
included in the current balance sheet, will not be depleted until fourth quarter
2004. Management cautions the reader in the comparison of results for these
periods, because operations of the properties formerly owned by Republic and
Spinnaker are not included for January in the nine-month period ending
September 30, 2003 and due to the application of purchase accounting methods.
See "Basis of Presentation," "Critical Accounting Policies," and Notes 1, 3 and
4 of the Notes to the Condensed Financial Statements.
We received cash payments in the amount of $931,000 from various sources
during the third quarter of 2004 including lease bonus attributable to seven
leases and four pooling elections located in ten counties in three states. Each
of the leases reflected royalty terms of 25% and lease bonuses ranging up to
$500/acre. We retained the option in two of the leases to convert a portion of
our royalty interest to a working interest at payout, and in the event
subsequent wells are drilled on such lands, we retain the right to participate
in each such well with as much as 50% of our original interest. We retained the
option in one of the leases which covered multiple tracts to participate for as
much as 10% of our original interest in all wells drilled on lands in which we
own an interest. This option may be exercised after the initial well on each
tract is drilled, logged and the operator thereof recommends attempting a
completion. In each instance in which we retain the option to participate, or to
convert a portion of our royalty interest to a working interest, we intend to
assign that option to the operating partnership subject to our reservation of a
96.97% net profits interest.
We received division orders for, or otherwise identified 60 new wells
completed on our Royalty Properties and Net Profits Interests in 26 counties and
parishes in six states during the third quarter of 2004. Selected new wells and
the royalty interests owned therein by us and the working interests and net
revenue interests owned therein by the operating partnership are summarized in
the following table:
Test Rates
per day
------------
Ownership
County/ ------------ Gas Oil
State Parish Operator Well Name WI(1) NRI(1) mcf bbls
- ------ --------- --------- ----------------- ----- ----- ------ ------
Royalty Properties
- ---------------------
Louisiana Claiborne Marathon Seegers 1-11 Alt -- 8.0% 2,400 140
Texas Starr Ascent Garza-Hitchcock #5 -- 2.6% 4,103 110
Texas Hidalgo Shell Woods Christian #45 -- 2.7% 7,833 183
Net Profits Interests
- ---------------------
Oklahoma Roger Mills Bravo Perry 1-30 1.5% 1.5% 1,447 22
Oklahoma Roger Mills JMA Hutson Farms 1-18 1.6% 1.6% 3,608 9
Oklahoma Washita Cimarex Kamphaus 7-2 BPO(2) 7.0% 8.8% 1,000 0
____________________________________
(1) WI and NRI mean working interest and net revenue interest, respectively.
(2) BPO and APO mean before payout and after payout, respectively.
11
Third quarter net earnings allocable to common units increased from a
$16,261,000 loss during 2003 to $7,682,000 during 2004, due primarily to
increased quarterly natural gas and crude oil sales prices and due to the
non-cash charge against earnings during 2003. Generally for the same reasons,
net earnings allocable to common units during the first nine months of 2004 were
$21,295,000 compared to a $30,898,000 loss in the same period in 2003.
Net cash provided by operating activities increased 11.6% from $11,930,000
during the third quarter 2003 to $13,318,000 during the third quarter 2004,
principally due to timing of collection of accounts receivable along with
improved oil and natural gas sales prices. Net cash provided by operating
activities increased 30.6% from $28,216,000 during the nine months ended
September 30, 2003 to $36,836,000 during the nine months ended September 30,
2004 as a result of the combination along with improved oil sales prices.
Management cautions the reader in the comparison of results for the nine month
periods because operations of the properties formerly owned by Republic and
Spinnaker are not included for January in the nine-month period ending
September 30, 2003. See "Basis of Presentation" and Notes 1 and 3 of the Notes
to the Condensed Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES
Our primary sources of capital are our cash flow from the Net Profits
Interests and the Royalty Properties. Our only cash requirements are the
distributions to our unitholders, the payment of oil and gas production and
property taxes not otherwise deducted from gross production revenues and general
and administrative expenses incurred on our behalf and properly allocated in
accordance with our partnership agreement. Since the distributions to our
unitholders are, by definition, determined after the payment of all expenses
actually paid by us, the only cash requirements that may create liquidity
concerns for us are the payments of expenses. Since most of these expenses vary
directly with oil and natural gas prices and sales volumes, we anticipate that
sufficient funds will be available at all times for payment of these expenses.
See Note 5 of the Notes to the Condensed Financial Statements for the amounts
and dates of cash distributions to unitholders.
We are not directly liable for the payment of any exploration, development
or production costs. We do not have any transactions, arrangements or other
relationships that could materially affect our liquidity or the availability of
capital resources. We have not guaranteed the debt of any other party, nor do we
have any other arrangements or relationships with other entities that could
potentially result in unconsolidated debt.
Pursuant to the terms of our Partnership Agreement, we cannot incur
indebtedness other than trade payables, (i) in excess of $50,000 in the
aggregate at any given time or (ii) which would constitute "acquisition
indebtedness" (as defined in Section 514 of the Internal Revenue Code of 1986,
as amended).
EXPENSES AND CAPITAL EXPENDITURES
During the third quarter 2004, for $200,000, the operating partnership
acquired two of fourteen overriding royalty interests in three wells it owns and
operates near Guymon, Oklahoma. The overriding royalty interests receive
approximately 75% of the working interest and bear 100% of the costs. The
operating partnership believes the undeveloped Council Grove formation
underlying the existing wells to be excluded from the overriding royalty
interests. The operating partnership filed a declaratory judgment in Texas
County, Oklahoma seeking a finding on this matter.
The operating partnership does not currently anticipate drilling additional
wells as a working interest owner in the Fort Riley zone or the Council Grove
formation or elsewhere in the Oklahoma properties previously owned by Dorchester
Hugoton. Successful activities by others in these formations or other
developments could prompt a reevaluation of this position. Any such drilling is
estimated to cost $250,000 to $300,000 per well. Such activities by the
operating partnership could influence the amount we receive from the Net Profits
Interests. Activities, including legal costs, by the operating partnership
influence the amount we receive from the Net Profits Interests. The operating
partnership anticipates continuing additional fracture treating in the Oklahoma
properties previously owned by Dorchester Hugoton. During the third quarter of
2004, two wells were fracture treated at a cost of $55,000 and $37,000. The
wells increased production from 154 to 250 mcf per day and from 107 to 138 mcf
per day, respectively.
The operating partnership owns and operates the wells, pipelines and gas
compression and dehydration facilities located in Kansas and Oklahoma previously
owned by Dorchester Hugoton. The operating partnership anticipates gradual
increases in expenses as repairs to these facilities become more frequent, and
anticipates gradual
12
increases in field operating expenses as reservoir pressure declines. The
operating partnership does not anticipate incurring significant expense to
replace these facilities at this time. These capital and operating costs are
reflected in the Net Profits Interests payments we receive from the operating
partnership.
In 1998, Oklahoma regulations removed production quantity restrictions in
the Guymon-Hugoton field, and did not address efforts by third parties to
persuade Oklahoma to permit infill drilling in the Guymon-Hugoton field. Both
infill drilling and removal of production limits could require considerable
capital expenditures. The outcome and the cost of such activities are
unpredictable. Such activities by the operating partnership could influence the
amount we receive from the Net Profits Interests. No additional compression
affecting the wells formerly owned by Dorchester Hugoton has been installed
since 2000 by operators on adjoining acreage. The operating partnership believes
it now has sufficient field compression to remain competitive with adjoining
operators for the foreseeable future.
LIQUIDITY AND WORKING CAPITAL
Cash and cash equivalents totaled $14,450,000 at September 30, 2004
and $10,881,000 at December 31, 2003.
CRITICAL ACCOUNTING POLICIES
We utilize the full cost method of accounting for costs related to our oil
and gas properties. Under this method, all such costs (productive and
nonproductive) are capitalized and amortized on an aggregate basis over the
estimated lives of the properties using the units-of-production method. These
capitalized costs are subject to a ceiling test however, which limits such
pooled costs to the aggregate of the present value of future net revenues
attributable to proved oil and gas reserves discounted at 10% plus the lower of
cost or market value of unproved properties. In accordance with applicable
accounting rules, Dorchester Hugoton was deemed to be the accounting acquiror of
the Republic and Spinnaker assets. Our Partnership's acquisition of these assets
was recorded at a value based on the closing price of Dorchester Hugoton's
common units immediately prior to consummation of the combination transaction,
subject to certain adjustments. Consequently, the acquisition of these assets
was recorded at values that exceed the historical book value of these assets
prior to consummation of the combination transaction. Our Partnership did not
assign any book or market value to unproved properties, including non-producing
royalty, mineral and leasehold interests. The full cost ceiling is evaluated at
the end of each quarter. For 2003, our unamortized costs of oil and gas
properties exceeded the ceiling test. As a result, in 2003, our Partnership
recorded full cost write-downs of $43,804,000. No additional impairments have
been recorded since the quarter ended September 30, 2003.
The discounted present value of our proved oil and gas reserves is a major
component of the ceiling calculation and requires many subjective judgments.
Estimates of reserves are forecasts based on engineering and geological
analyses. Different reserve engineers may reach different conclusions as to
estimated quantities of natural gas reserves based on the same information. Our
reserve estimates are prepared by independent consultants. The passage of time
provides more qualitative information regarding reserve estimates, and revisions
are made to prior estimates based on updated information. However, there can be
no assurance that more significant revisions will not be necessary in the
future. Significant downward revisions could result in an impairment
representing a non-cash charge to earnings. In addition to the impact on
calculation of the ceiling test, estimates of proved reserves are also a major
component of the calculation of depletion.
While the quantities of proved reserves require substantial judgment, the
associated prices of oil and gas reserves that are included in the discounted
present value of our reserves are objectively determined. The ceiling test
calculation requires use of prices and costs in effect as of the last day of the
accounting period, which are generally held constant for the life of the
properties. As a result, the present value is not necessarily an indication of
the fair value of the reserves. Oil and gas prices have historically been
volatile and the prevailing prices at any given time may not reflect our
Partnership's or the industry's forecast of future prices.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. For example, estimates of uncollected
revenues and unpaid expenses from royalties and net profits interests in
properties operated by non-affiliated entities are particularly subjective due
to inability to gain accurate and timely information. Therefore, actual results
could differ from those estimates.
13
NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations". SFAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. We adopted SFAS No. 143 on January 1, 2003, which
did not have a material effect on our financial statements.
The FASB's Emerging Issues Task Force (EITF) reached a consensus that
mineral rights are tangible assets in EITF Issue 04-2, "Whether Mineral Assets
Are Tangible or Intangible Assets". The FASB ratified the EITF consensus,
subject to amendment of SFAS No. 141 and No. 142 through a FASB Staff Position
(FSP). Therefore, no changes would be required in the way the Partnership
classifies its mineral rights.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following information provides quantitative and qualitative information
about our potential exposures to market risk. The term "market risk" refers to
the risk of loss arising from adverse changes in oil and natural gas prices,
interest rates and currency exchange rates. The disclosures are not meant to be
precise indicators of expected future losses, but rather indicators of
reasonably possible losses.
MARKET RISK RELATED TO OIL AND NATURAL GAS PRICES
Essentially all of our assets and sources of income are from the Net
Profits Interests and the Royalty Properties, which generally entitle us to
receive a share of the proceeds based on oil and natural gas production from
those properties. Consequently, we are subject to market risk from fluctuations
in oil and natural gas prices. Pricing for oil and natural gas production has
been volatile and unpredictable for several years. We do not anticipate entering
into financial hedging activities intended to reduce our exposure to oil and
natural gas price fluctuations.
ABSENCE OF INTEREST RATE AND CURRENCY EXCHANGE RATE RISK
We do not anticipate having a credit facility or incurring any debt, other
than trade debt. Therefore, we do not expect interest rate risk to be material
to us. We do not anticipate engaging in transactions in foreign currencies which
could expose us to foreign currency related market risk.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our Partnership's
principal executive officer and principal financial officer carried out an
evaluation of the effectiveness of our disclosure controls and procedures. Based
on their evaluation, they have concluded that our Partnership's disclosure
controls and procedures effectively ensure that the information required to be
disclosed in the reports the Partnership files with the Securities and Exchange
Commission is recorded, processed, summarized and reported, within the time
periods specified by the Securities and Exchange Commission.
CHANGES IN INTERNAL CONTROLS
There were no changes in our Partnership's internal controls or in other
factors that have materially affected, or are reasonably likely to materially
affect, our Partnership's internal controls subsequent to the date of their
evaluation of our disclosure controls and procedures.
14
PART II
Item 1. LEGAL PROCEEDINGS
None.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS
Exhibits: See the attached Index to Exhibits.
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 thereunto duly authorized.
DORCHESTER MINERALS, L.P.
By: Dorchester Minerals Management LP
its General Partner,
By: Dorchester Minerals Management GP LLC,
its General Partner
/s/ William Casey McManemin
------------------------------------------------
William Casey McManemin
Date: November 5, 2004 Chief Executive Officer
/s/ H.C. Allen, Jr.
------------------------------------------------
H.C. Allen, Jr.
Date: November 5, 2004 Chief Financial Officer
PAGE 15
INDEX TO EXHIBITS
Number Description
3.1 Certificate of Limited Partnership of Dorchester Minerals, L.P.
(incorporated by reference to Exhibit 3.1 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.2 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals, L.P. (incorporated by reference to Exhibit 3.2 to Dorchester
Minerals' Report on Form 10-K filed for the year ended December
31, 2002)
3.3 Certificate of Limited Partnership of Dorchester Minerals Management
LP (incorporated by reference to Exhibit 3.4 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.4 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals Management LP (incorporated by reference to Exhibit 3.4 to
Dorchester Minerals' Report on Form 10-K for the year ended December
31, 2002)
3.5 Certificate of Formation of Dorchester Minerals Management GP LLC
(incorporated by reference to Exhibit 3.7 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.6 Amended and Restated Limited Liability Company Agreement of Dorchester
Minerals Management GP LLC (incorporated by reference to Exhibit 3.6
to Dorchester Minerals' Report on Form 10-K for the year ended
December 31, 2002).
3.7 Certificate of Formation of Dorchester Minerals Operating GP LLC
(incorporated by reference to Exhibit 3.10 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.8 Limited Liability Company Agreement of Dorchester Minerals Operating
GP LLC (incorporated by reference to Exhibit 3.11 to Dorchester
Minerals' Registration Statement on Form S-4, Registration Number
333-88282)
3.9 Certificate of Limited Partnership of Dorchester Minerals Operating LP
(incorporated by reference to Exhibit 3.12 to Dorchester Minerals'
Registration Statement on Form S-4, Registration Number 333-88282)
3.10 Amended and Restated Agreement of Limited Partnership of Dorchester
Minerals Operating LP. (incorporated by reference to Exhibit 3.10 to
Dorchester Minerals' Report on Form 10-K for the year ended December
31, 2002)
3.11 Certificate of Limited Partnership of Dorchester Minerals Oklahoma LP
(incorporated by reference to Exhibit 3.11 to Dorchester Minerals'
Report on Form 10-K for the year ended December 31, 2002)
3.12 Agreement of Limited Partnership of Dorchester Minerals Oklahoma LP
(incorporated by reference to Exhibit 3.12 to Dorchester Minerals'
Report on Form 10-K for the year ended December 31, 2002)
3.13 Certificate of Incorporation of Dorchester Minerals Oklahoma GP, Inc.
(incorporated by reference to Exhibit 3.13 to Dorchester Minerals'
Report on Form 10-K for the year ended December 31, 2002)
3.14 Bylaws of Dorchester Minerals Oklahoma GP, Inc. (incorporated by
reference to Exhibit 3.14 to Dorchester Minerals' Report on Form 10-K
for the year ended December 31, 2002)
3.15 Certificate of Limited Partnership for Dorchester Minerals
Acquisition LP
3.16 Agreement of Limited Partnership of Dorchester Minerals
Acquisition LP
3.17 Certificate of Incorporation of Dorchester Minerals
Acquisition GP, Inc.
3.18 Bylaws of Dorchester Minerals Acquisition GP, Inc.
10.1 Agreement and Plan of Merger among Dorchester Minerals, L.P.,
Dorchester Minerals Acquisition LP and Bradley Royalty Partners
LLC dated September 24, 2004
10.2 Form of Registration Rights Agreement dated September 30, 2004
31.1 Certification of Chief Executive Officer of the Partnership pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2 Certification of Chief Financial Officer of the Partnership pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1 Certification of Chief Executive Officer of the Partnership pursuant
to 18 U.S.C. Sec. 1350
32.2 Certification of Chief Financial Officer of the Partnership pursuant
to 18 U.S.C. Sec. 1350
PAGE 16
Exhibit 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Quarterly Report of Dorchester
Minerals, L.P., (the "Partnership") on Form 10-Q for the period ended September
30, 2004 (the "Report"), I, H.C. Allen, Jr., Chief Financial Officer of
Dorchester Minerals Management GP LLC, General Partner of Dorchester Minerals
Management LP, General Partner of the Partnership, hereby certify that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ H.C. Allen, Jr.
-----------------------------------
H.C. Allen, Jr.
Date: November 3, 2004 Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Quarterly Report of Dorchester
Minerals, L.P., (the "Partnership") on Form 10-Q for the period ended September
30, 2004 (the "Report"), I, William Casey McManemin, Chief Executive Officer of
Dorchester Minerals Management GP LLC, General Partner of Dorchester Minerals
Management LP, General Partner of the Partnership, hereby certify that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ William Casey McManemin
-----------------------------------
William Casey McManemin
Date: November 5, 2004 Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, H.C. Allen, Jr., Chief Financial Officer of Dorchester Minerals Management GP
LLC, General Partner of Dorchester Minerals Management LP, General Partner of
Dorchester Minerals, L.P., (the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dorchester Minerals,
L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the Registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal
control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of the Registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
control over financial reporting.
/s/ H.C. Allen, Jr.
-----------------------------------
H.C. Allen, Jr.
Date: November 5, 2004 Chief Financial Officer
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of September 30, 2004, by and among Dorchester Minerals, L.P., a
Delaware limited partnership (the "Company"), and the parties listed on Annex A
hereto and each party to whom rights under this Agreement are assigned as
permitted by Section 8 of this Agreement (each, a "Holder," and collectively,
the "Holders");
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
September 24, 2004 by and among the Company, Dorchester Minerals Acquisition LP
and Bradley Royalty Partners, LLC, a Florida limited liability company (the
"Merger Agreement"), the Company is obligated to enter into this Agreement in
order to provide the Holders with certain registration rights regarding
Registrable Securities;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
The Company and the Holders covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) The term "Best Efforts" means a Person's reasonable best efforts
without the incurrence of unreasonable expense.
(b) The term "Commission" means the Securities and Exchange Commission.
(c) The term "Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2.1, including, without
limitation, all registration, filing and National Association of
Securities Dealers fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities;
provided, however, that "Expenses" shall not include underwriting
discounts and commissions and the fees and disbursements of special
counsel to the Holder or Holders.
(d) The term "Person" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization,
or government or agency or political subdivision thereof.
(e) The terms "register," "registered" and "registration" refer to a
registration of securities effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act (as defined below), and the declaration or ordering
of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means the Common Units received by
a Holder pursuant to the Merger Agreement. As to any Registrable
Security, once issued such security shall cease to be a Registrable
Security upon the earliest to occur of the following events: (i) it has
been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering it, (ii) such
Registrable Securities are eligible for sale to the public pursuant to
Rule 144 (or any similar provision then in force) under the
Securities Act without being subject to the volume and manner of
sale restrictions contained therein, or (iii) such Registrable
Securities have been otherwise transferred by Holder and new
certificates for such securities not bearing a legend restricting
further transfer have been delivered by the Company or its transfer
agent and the subsequent disposition of such securities do not require
registration or qualification under the Securities Act or any similar
state law then in force.
(g) The term "Securities Act" means the Securities Act of 1933, as amended,
and the term "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) Capitalized terms not defined herein have the meaning given to them in
the Merger Agreement.
2. Piggyback Registration.
2.1 Right to Include Registrable Securities.
(a) The holders of Registrable Securities are entitled to "piggyback"
on a registration by the Company (i) for an offering of equity
securities of the Company for cash (other than an offering relating
solely to an employee benefit plan), (ii) requested by the Partnership
GP and its affiliates pursuant to demand registration rights granted
pursuant to the Partnership Agreement or (iii) requested by the
Holders named in that certain Registration Rights Agreement dated
January 31, 2003 (the "2003 Agreement") pursuant to demand
registration rights granted pursuant to that agreement, provided that
the Company or the party exercising the demand registration rights
may, at any time, abandon or delay any such registration initiated by
it and the Company may have to certain rights to postpone such
registration requested by a party exercising demand registration
rights; and provided further, that the right of the Holders to
exercise rights under this Section 2.1 with respect to a "shelf"
registration requested pursuant to the 2003 Agreement and to be made
under Rule 415 of the Securities Act shall in all respects be subject
to the prior written consent of (i) the parties to the 2003 Agreement
and (ii) the Partnership GP and its affiliates. Upon request for such
registration the Company will each such time give prompt written
notice to all holders of Registrable Securities of its intention to
register such securities and of such holders' rights under this
Section 2.1. Upon the written request of any such holder made within
thirty (30) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by
such holder and the
Page 2
intended method of disposition thereof), the Company
will use its Best Efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has
been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided, that if, at any time after giving written notice
of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the party exercising the demand registration rights or
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election,
give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Expenses in
connection therewith), and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in
registering such other securities.
(b) Priority in Piggyback Registration. If the proposed offering
upon which the holders of Registrable Securities exercise their
piggyback rights shall be an underwritten offering or a shelf
registration under Rule 415 of the Securities Act, then, in the
event that the managing underwriter or managing underwriters of
such offering or the party or parties requesting such shelf
registration advise the Company and the Holders electing to
exercise piggyback rights in writing that in their opinion the
inclusion of all of such Holder's Registrable Securities would
adversely and materially affect the success of the offering, the
securities that shall be included in such offering shall be,
first, all securities proposed by the Company or parties
exercising demand registration rights, as applicable, to be sold
for its own account, second, in the event that any Person
entitled to "piggyback" registration rights under the Partnership
Agreement or the 2003 Agreement is not the party exercising
demand registration rights or in the event of a Company
registration described in Section 2.1(a)(i) and has requested to
include securities, the securities to be so included, third, such
Registrable Securities requested by the Holders to be included in
such registration pro rata on the basis of the number of such
securities so proposed to be sold and so requested to be
included, and fourth, all other securities of the Company
requested to be included in such registration pro rata on the
basis of the number of such securities so proposed to be sold and
so requested to be included.
2.2 Termination of Registration Rights. The Holders will have no rights
to request registration under this Section 2 after September 30, 2006.
3. Registration Procedures.
(a) The Company will furnish to each Holder requesting
registration pursuant to this Agreement a copy of the requisite
registration statement, each amendment and supplement to such
registration statement and a reasonable number of copies of the
prospectus included in such registration statement (including
each preliminary prospectus), as each such Holder may reasonably
request in order to facilitate such Holder's disposition of its
securities covered by such registration statement.
(b) The Company represents and covenants that any registration statement
covering sales of Registrable Securities by a Holder pursuant to
this Agreement will not contain
Page 3
an untrue statement of fact or omit to
state any material fact required to be stated in the
prospectus or that is necessary to make the statements in the
prospectus, in light of the circumstances then existing, not
misleading. The Company will notify the Holders requesting
registration pursuant to this Agreement, at any time when a
prospectus relating to the requisite registration statement is
required to be delivered under the Securities Act (within the
period that the Company is required to keep such registration
statement effective), of the happening of any event as a result
of which the prospectus included in the requisite registration
statement (as then in effect) contains an untrue statement of a
material fact or omits to state any material fact required to be
stated in the prospectus or that is necessary to make the
statements in the prospectus, in light of the circumstances then
existing, not misleading. The Company will prepare (and, as soon
as reasonably practicable, file) a supplement or amendment to
that prospectus so that, as thereafter delivered to the
purchasers of those securities covered by such registration
statement, that prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to
be stated in the prospectus or that is necessary to make the
statements in the prospectus, in light of the circumstances then
existing, not misleading. However, if the Board of Managers of
the Company determines in its good faith judgment that filing any
supplement or amendment to such registration statement to keep
such registration statement available for use by such Holders for
resales of the securities covered by such registration statement
would require the Company to disclose material information that
the Company has a bona fide business purpose for preserving as
confidential, then, upon the Company's notice to each Holder (the
"Suspension Notice"), the Company's obligation to supplement or
amend such registration statement will be suspended. That
suspension will remain in effect until the Company notifies such
Holders in writing that the reasons for suspending those
obligations no longer exist and the Company amends or supplements
such registration statement as may be required. As soon as a
Holder receives a Suspension Notice from the Company under this
Section 3(b), that Holder will immediately discontinue disposing
of securities covered by such registration statement until that
Holder receives copies of the supplemented or amended prospectus
referred to in this Section 3(b). At the Company's request, each
Holder will deliver to the Company all copies of the prospectus
covering such securities current at the time of that request.
(c) After receiving notice of any stop order issued or threatened by the
Commission with respect to the requisite registration
statement, the Company will use its Best Efforts to (i) advise the
Holders and (ii) take all actions required to prevent the
Commission from entering that stop order or and to remove it if it
has been entered.
(d) The Company will use its Best Efforts to cause all securities
included in the requisite registration statement to be listed, by
the date of the first sale of such securities pursuant to such
registration statement, on the principal securities exchange that
the Company's Common Units are then listed on. The Company agrees
to facilitate the delivery of the Registrable Securities upon any
sale by a Holder pursuant to this Agreement. The Company agrees
to enter into customary underwriting agreements (which may
require representations, covenants or indemnification), cooperate
in any due diligence conducted by underwriters, and deliver or
cause to be delivered to the Holders and the underwriters, if
any, any certificates, opinions or comfort letters customarily
required.
Page 4
(e) Each Holder will sell its Registrable Securities registered in
accordance with Section 2 in compliance the prospectus delivery
requirements under the Securities Act.
(f) The Company may require the Holders to furnish to the Company
information regarding the Holders and the distribution of the
securities covered by the requisite registration statement as the
Company may from time to time request in writing. Each Holder
represents and covenants that any such information provided by such
Holder with respect to a registration statement covering Registrable
Securities by such Holder pursuant to this Agreement will not contain
an untrue statement of fact or omit to state any material fact
required to be stated in the prospectus regarding the Holder or that
is necessary to make the statements in the prospectus regarding the
Holder, in light of the circumstances then existing, not misleading.
Each Holder will (i) notify the Company as promptly as practicable of
any inaccuracy or change in information that Holder previously
furnished to the Company or of the occurrence of any event that would
cause any prospectus relating to such securities to (A) contain an
untrue statement of a material fact regarding that Holder or its
resale of such securities or (B) omit to state any material fact
regarding that Holder or its resale of such securities required to be
stated in that prospectus or necessary to make the statements in that
prospectus not misleading in light of the circumstances then existing
and (ii) promptly furnish to the Company any additional information so
that the prospectus will not contain, with respect to that Holder or
its distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated in it or
necessary to make the statements in that prospectus, in light of the
circumstances then existing, not misleading.
4. Expenses. Except as set forth in Section 6, the Company will pay all
Expenses of the Holders in connection with any registration pursuant to
Section 2 and the Holders shall pay any other expenses of Holders.
5. Market-Standoff Agreement
(a) Market-Standoff Period; Agreement. In connection with the first
follow-on offering of the Company's securities by the Company for cash
and upon request of the Company or managing underwriter(s) of such
offering of the Company's securities, each Holder agrees not to sell,
make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any securities of the Company (other than those
included in the registration) without the prior written consent of the
Company or the managing underwriter(s), as the case may be, for such
period of time (not to exceed one hundred eighty (180 days) from the
date of such request by the Company or the managing underwriter(s) and
to execute an agreement reflecting the foregoing as may be requested
by the managing underwriter(s) at the time of the Company's follow-on
offering. The managing underwriter(s) are intended third party
beneficiaries of this Section 5 and shall have the right, power and
authority to enforce the provisions of this Section 5 as though they
were a party hereto.
(b) Limitations. The obligations described in Section 5(a) shall not
apply to a registration relating solely to employee benefit plans, or
to a registration relating solely to a transaction pursuant to Rule
145 under the Securities Act, and shall only be applicable to the
Holders if all executive officers and managers of the general partner
of the Partnership GP and holders of similar amounts of Company
securities enter into similar agreements.
Page 5
(c) Stop-Transfer Instructions. In order to enforce the foregoing
covenants, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder.
(d) Transferees Bound. Each Holder agrees that it will not transfer
securities of the Company unless each transferee agrees in writing to
be bound by all of the provisions of this Section 6.
6. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Agreement:
(e) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, the officers and directors of the
Holder, each Person that serves as an investment manager of the
Holder with respect to the Registrable Securities and each other
Person, if any, who controls the Holder within the meaning of
Section 15 of the Securities Act (each, a "Holder Indemnified
Party" and, collectively, the "Holder Indemnified Parties"),
against any losses, claims, damages, liabilities or expenses,
joint or several, to which any such Holder Indemnified Party may
become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement under which such
Registrable Securities were registered under the Securities Act
pursuant hereto, or any post-effective amendment thereof, or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus, if used prior to the effective date of the
registration statement and not corrected in the final prospectus,
or contained in the final prospectus (as amended or supplemented,
if the Company shall have filed with the Commission any amendment
thereof or supplement thereto), or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or (iii) any violation or alleged violation by the
Company of the Securities Act or the Exchange Act, any state
securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities laws
asserted by a third party in connection with a registration
statement under which Registrable Securities were registered
under the Securities Act pursuant hereto; and will reimburse any
such Holder Indemnified Party for any legal or other expenses
reasonably incurred by such Holder Indemnified Party in
connection with investigating or defending any such loss, claim,
damage, liability or expense; provided, however, that the
indemnity agreement contained in this Section 6(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld); and provided further that the Company
shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is
based upon any such untrue statement or omission or alleged
untrue statement or omission which has been made in said
registration statement, preliminary prospectus, prospectus or
amendment or supplement or omitted therefrom in reliance upon and
in conformity with information furnished in writing to the
Company by the Holder specifically for use in the preparation
thereof.
Page 6
(f) To the extent permitted by law, each Holder will indemnify and
hold harmless the Company, the Partnership GP, the general partner of
the Partnership GP and their respective officers and each other
Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act (each, a "Company Indemnified Party" and
collectively, the "Company Indemnified Parties"; a Holder Indemnified
Party and Company Indemnified Party are sometimes referred to as an
"Indemnified Party" and the Holder Indemnified Parties and the Company
Indemnified Parties are sometimes collectively referred to as the
"Indemnified Parties"), against any losses, claims, damages,
liabilities or expenses, joint or several, to which any such Company
Indemnified Party may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act
pursuant hereto, or any post-effective amendment thereof, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, if used prior
to the effective date of the registration statement and not corrected
in the final prospectus, or contained in the final prospectus (as
amended or supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statement therein not
misleading or (iii) any violation or alleged violation by the Company
or the Holders of the Securities Act or the Exchange Act, any state
securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities laws asserted
by a third party in connection with a registration statement under
which Registrable Securities were registered under the Securities Act
pursuant hereto; and will reimburse any such Company Indemnified Party
for any legal or other expenses reasonably incurred by such Company
Indemnified Party in connection with investigating or defending any
such loss, claim, damage, liability or expense; provided that such
Holder shall not be liable in any such case unless any such loss,
claim, damage, liability or expense arises out of or is based upon any
information furnished in writing to the Company by the Holder
specifically for use in the preparation thereof.
(g) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including
any governmental action), such Indemnified Party will, if a claim
in respect thereof is to be made against the Company under this
Section 6, notify the Company in writing of the commencement
thereof and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume the defense
thereof with counsel mutually satisfactory to the parties;
provided, however, that an Indemnified Party shall have the right
to retain its own counsel, with the fees and expenses to be paid
by the Company, if representation of such Indemnified Party by
the counsel retained by the Company would be inappropriate due to
actual or potential differing interests between such Indemnified
Party and any other party represented by such counsel in such
proceeding. The failure to so notify the Company within a
reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve
the Company of any liability to the Indemnified Party under this
Section 6, but the omission so to notify the Company will not
relieve it of any liability that it may have to any Indemnified
Party otherwise than under this Section 6.
Page 7
(h) If the indemnification provided for in this Section 6
from an indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then an
indemnifying party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by an
indemnifying party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of an indemnifying
party and Indemnified Parties in connection with the actions
which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable
considerations. The relative fault of an indemnifying party
and Indemnified Parties shall be determined by reference to,
among other things, whether any action in question,
including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information
supplied by, an indemnifying party or Indemnified Parties,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the
limitations set forth in Section 6 hereof, any legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6 were
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 immediately preceding
paragraph. In no event shall any selling Holder be required to
contribute any amounts pursuant to this Section 6 in excess of
the net proceeds received by such Holder in connection with such
sale less any amounts paid by such Holder pursuant to the
indemnification provisions of this Section 6. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
7. Reports Under Exchange Act. With a view to making available to the
Holder the benefits of Rule 144 under the Securities Act and any other
rule or regulation of the Commission that may at any time permit the
Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(i) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act
and the Exchange Act, and the rules and regulations adopted by
the Commission thereunder; and
(j) furnish to the Holder such information as may be reasonably
requested in availing the Holder of any rule or regulation of the
Commission that permits the sale of any securities without
registration.
Upon the written request of any Holder in connection with a proposed
sale of Registrable Securities pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, the Company will
deliver promptly to such Holder a written statement as to whether the
Company has complied with the requirements of this Section 7(a).
8. Assignment of Registration Rights. The right to cause the Company
to register Registrable Securities pursuant to this Agreement may not
be assigned, in whole or in part, by any party listed on Annex A
hereto without the prior written consent of the Company, provided that
any party on Annex A hereto may assign its rights under this Agreement
in whole or in part to another party listed on Annex A without the
prior written consent of the Company.
9. Condition to the Obligation of the Parties. The effectiveness of
this Agreement and the respective obligations of each party to effect
the transactions contemplated by this Agreement shall be subject to
the fulfillment of the condition that the Combination shall have been
consummated in accordance with the terms of the Combination Agreement.
Page 8
10. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be deemed to
have been duly given or made if (i) delivered personally, (b)
expedited delivery service or (c) certified or registered mail,
postage prepaid. Any such notice shall be deemed given upon its
receipt at the following address:
If to any Holder, initially at
Bradley Resources Company
1151 SW 30th Street, Suite E
Palm City, Florida 34991-6938
Attention: James R. McGoogan
and thereafter at such other address, notice of which is given to the
Company in accordance with this Section 10; and
If to the Company, initially at
Dorchester Minerals, L.P.
c/o Dorchester Minerals Management GP LLC
3738 Oak Lawn Avenue, Suite 300
Dallas, Texas 75219
Attention: William Casey McManemin
Fax: (214) 559-0301
and thereafter at such other address, notice of which is given in
accordance with this Section 10.
11. Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same
agreement and will become effective when one or more counterparts
have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign
the same counterpart.
12. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter of this Agreement. No provision of this Agreement
will be construed as the basis for any liability of the Company
in connection with the Combination
Page 9
Agreement or any of the transactions contemplated thereby (other than
the registration of the Registrable Securities pursuant to this
Agreement).
13. Governing Law; Jurisdiction. THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW REQUIRING THE APPLICATION OF THE LAW OF ANOTHER STATE, EXCEPT
TO THE EXTENT THE DGCL EXPRESSLY APPLIES TO A PARTICULAR MATTER.
14. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures
from the provisions hereof (which may be generally or in a
particular instance and either retroactively or prospectively)
may not be given, except pursuant to a writing signed by the
Company and the holders of at least a majority of the Registrable
Securities.
[Signatures Appear on Following Pages]
Page 10
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Company:
DORCHESTER MINERALS, L.P.
By: Dorchester Minerals Management, L.P., its general partner
By: Dorchester Minerals Management GP LLC,
its general partner
By: _______________________________
Name: William Casey McManemin
Title: Chief Executive Officer
Holders:
ANNEX A
LIST OF HOLDERS
Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
among
DORCHESTER MINERALS, L.P.,
DORCHESTER MINERALS ACQUISITION LP
and
BRADLEY ROYALTY PARTNERS, LLC
September 24, 2004
TABLE OF CONTENTS
ARTICLE 1 THE MERGER...........................................................1
1.1 Merger; Effective Time of the Merger.........................1
1.2 Closing......................................................1
1.3 Effects of the Merger........................................2
1.4 Surviving Entity.............................................2
1.5 Merger Consideration and Conversion of Securities............2
1.6 Exchange Agent; Payment......................................2
1.7 Dissenting Members...........................................3
1.8 Tax Consequences.............................................4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP....................4
2.1 Organization.................................................4
2.2 Governing Documents..........................................4
2.3 Capitalization of the Partnership............................4
2.4 Authority Relative to This Agreement.........................5
2.5 Noncontravention.............................................6
2.6 Governmental Approvals.......................................6
2.7 Financial Statements.........................................6
2.8 Absence of Undisclosed Liabilities...........................7
2.9 Absence of Certain Changes...................................7
2.10 Compliance With Laws.........................................7
2.11 Brokerage Fees...............................................8
2.12 Listing......................................................8
2.13 SEC Filings..................................................8
2.14 Ownership....................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BRADLEY............................9
3.1 Organization and Existence...................................9
3.2 Authority Relative to This Agreement.........................9
3.3 Noncontravention.............................................9
3.4 Governmental Approvals......................................10
3.5 Capitalization..............................................10
3.6 Title to Properties.........................................10
3.7 Financial Statements........................................11
3.8 Absence of Undisclosed Liabilities..........................11
3.9 Absence of Certain Changes..................................11
3.10 Tax Matters.................................................12
3.11 Compliance with Laws........................................12
3.12 Legal Proceedings...........................................12
3.13 Permits.....................................................13
3.14 Environmental Matters.......................................13
3.15 Revenue and Expense Information; Records....................13
3.16 Commitments.................................................13
3.17 No Alienation...............................................14
3.18 Make-Up Rights..............................................14
3.19 Imbalance...................................................14
3.20 Preferential Rights and Consents to Assign..................14
3.21 No Participating Minerals...................................14
3.22 Brokerage Fees..............................................14
3.23 Investment Intent...........................................15
3.24 Disclosure..................................................15
3.25 Insurance...................................................15
3.26 Employees...................................................15
3.27 Agreements, Contracts and Commitments.......................15
ARTICLE 4 CONDUCT OF BRADLEY PENDING MERGER; CERTAIN ACTIONS
RELATING TO CLOSING................................................16
4.1 Conduct and Preservation of Business of Bradley.............16
4.2 Restrictions on Certain Actions of Bradley..................16
ARTICLE 5 ADDITIONAL AGREEMENTS...............................................18
5.1 Access to Information; Confidentiality......................18
5.2 Notification of Certain Matters.............................19
5.3 Reasonable Best Efforts.....................................19
5.4 Public Announcements........................................19
5.5 Amendment of Schedules......................................20
5.6 Fees and Expenses...........................................20
5.7 Tax Reporting...............................................20
5.8 Listing of Units............................................21
5.9 Post-Closing Assurances and Access to Records...............21
5.10 Management Contract.........................................21
5.11 Bradley Members.............................................21
ARTICLE 6 CONDITIONS..........................................................22
6.1 Conditions to Obligations of the Parties....................22
6.2 Conditions to Obligation of Bradley.........................22
6.3 Conditions to Obligation of the Partnership and Sub.........23
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER...................................24
7.1 Termination.................................................24
7.2 Effect of Termination.......................................25
7.3 Amendment...................................................25
7.4 Waiver......................................................25
ARTICLE 8 SURVIVAL MATTERS....................................................26
8.1 Survival of Representations and Warranties..................26
ii
ARTICLE 9 MISCELLANEOUS.......................................................26
9.1 Notices.....................................................26
9.2 Entire Agreement............................................27
9.3 Binding Effect; Assignment; Third Party Benefit.............28
9.4 Severability................................................28
9.5 Governing Law; Consent to Jurisdiction......................28
9.6 Descriptive Headings........................................28
9.7 Disclosure..................................................28
9.8 Gender......................................................29
9.9 References..................................................29
9.10 Counterparts................................................29
9.11 Injunctive Relief...........................................29
ARTICLE 10 DEFINITIONS........................................................30
10.1 Certain Defined Terms.......................................30
10.2 Certain Additional Defined Terms............................34
iii
INDEX TO EXHIBITS AND SCHEDULES
Exhibits
Exhibit 3.23 Investor Questionnaire
Exhibit 6.2(f) Registration Rights Agreement
Schedules
Partnership Schedules
Schedule 2.3(c) Capitalization
Schedule 2.5 Noncontravention
Schedule 2.7 Financial Statements
Schedule 2.8 Absence of Undisclosed Liabilities
Schedule 2.9 Absence of Certain Changes
Schedule 2.10 Compliance With Laws
Bradley Schedules
Schedule A Properties
Schedule 3.3 Noncontravention
Schedule 3.4 Governmental Approvals
Schedule 3.5 Capitalization
Schedule 3.6 Encumbrances
Schedule 3.7 Financial Statements
Schedule 3.8 Absence of Undisclosed Liabilities
Schedule 3.9 Absence of Certain Changes
Schedule 3.10 Tax Matters
Schedule 3.11 Compliance With Laws
Schedule 3.12 Legal Proceedings
Schedule 3.13 Permits
Schedule 3.14 Environmental Matters
Schedule 3.15 Revenue and Expense Information
Schedule 3.26 Employee Benefit Plans
Schedule 3.27 Agreements, Contracts and Commitments
1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of September 24, 2004,
and effective as of the Effective Time (as hereinafter defined), among
Dorchester Minerals, L.P., a Delaware limited partnership (the "Partnership"),
Dorchester Minerals Acquisition LP, an Oklahoma limited partnership ("Sub") and
Bradley Royalty Partners, LLC, a Florida limited liability company ("Bradley").
W I T N E S S E T H:
WHEREAS, management of each of Bradley, the Partnership and Sub have
determined to engage in a business combination, whereby Bradley shall be merged
with and into Sub (the "Merger").
WHEREAS, subject to the approval of the members of Bradley, and further
subject to the terms and conditions set forth herein, management of each of the
parties hereto has determined to enter into the Merger in accordance with this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. Merger; Effective Time of the Merger.
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time, Bradley shall be merged with and into Sub in accordance with the
Oklahoma Revised Uniform Limited Partnership Act (the "ORLPA") and the Florida
Limited Liability Company Act ("FLLCA"), and Sub shall continue its existence as
the surviving entity in the Merger (the "Surviving Entity"). At the closing of
the Merger (the "Closing"), certificates of merger, prepared and executed in
accordance with the relevant provisions of the ORLPA and the FLLCA, with respect
to the Merger (the "Certificates of Merger") shall be filed with the Oklahoma
Secretary of State and the Florida Secretary of State. The Merger shall become
effective at such time as the Certificates of Merger are duly filed with the
Oklahoma Secretary of State or at such later time on the day of the Closing as
is specified in the Certificates of Merger pursuant to the mutual agreement of
the Partnership and Bradley (the "Effective Time").
1.2 Closing.
The Closing shall take place (i) at the offices of Thompson & Knight
L.L.P., 1700 Pacific Avenue, Suite 3300, Dallas, Texas 75201, at 9:00 a.m.,
local time, on the day which is five (5) consecutive Business Days after the day
on which the last of the conditions to the obligations of the parties set forth
in Article 6 is fulfilled or waived (subject to Applicable Law) or is capable of
being fulfilled at the Closing, or (ii) at such other time or place or on such
other date as the parties hereto shall agree; provided, however, that the
parties shall use their
1
reasonable best efforts to cause the closing to occur prior to or on September
30, 2004. The date on which the Closing is required to take place is herein
referred to as the "Closing Date."
1.3 Effects of the Merger.
The Merger shall have the effects specified in the ORLPA and FLLCA, each as
amended. This Agreement shall constitute a plan of merger with respect to the
Merger.
1.4 Surviving Entity.
The Certificate of Limited Partnership of Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Limited Partnership of
the Surviving Entity, until thereafter amended in accordance with the terms and
as provided by the ORLPA. The Agreement of Limited Partnership of Sub shall be
the limited partnership agreement of the Surviving Entity, until thereafter
amended in accordance with its terms and as provided by the ORLPA. The general
partner of the Surviving Entity is Dorchester Minerals Acquisition GP, Inc. and
its address is 3738 Oak Lawn Avenue, Dallas, Texas 75219.
1.5 Merger Consideration and Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on
the part of the Partnership, Sub, Bradley or any holder of the following
interests, the membership interests in Bradley shall be converted into and
become an aggregate number of Common Units equal to 1,200,000 Common Units (the
"Merger Consideration"). Each member of Bradley at the Effective Time shall
receive a proportionate share of such Common Units, in the same respective
percentages as the membership interests of such member bears to the aggregate
membership interests of all of the members of Bradley. For the purposes of the
preceding sentence, "membership interests" shall have the meaning assigned to
such term in the Regulations of Bradley Royalty Partners, L.L.C. dated as of
January 1, 1999, as amended, and in effect immediately prior to the Effective
Time, and shall be determined as of immediately prior to the Effective Time. All
membership interests in Bradley (the "Converted Securities"), when converted as
provided herein, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist.
1.6 Exchange Agent; Payment.
(a) Prior to the Closing Date, the Partnership shall designate EquiServe
Trust Company, N.A. (the "Exchange Agent") for the purpose of payment of the
Merger Consideration.
(b) As soon as practicable after the Effective Time, the Partnership will
make available to the Exchange Agent, for the benefit of the members of Bradley,
for exchange in accordance with Section 1.6, certificates representing the
number of whole Common Units issuable pursuant to Section 1.5 in exchange for
the Converted Securities. Promptly after the Effective Time, the Partnership
will send, or will cause the Exchange Agent to send, to each member of Bradley
at the Effective Time (i) a certificate representing that number of whole Common
Units that such member has a right to
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receive pursuant to the provisions of this Article 1 and (ii) a Transfer
Application for use in admission of such members as limited partners in the
Partnership.
(c) Each holder of Converted Securities that have been converted into the
Merger Consideration, upon delivery to the Partnership of a properly completed
Transfer Application, will be admitted into the Partnership as a limited partner
in accordance with the Partnership Agreement. Prior to such time, each such
party shall have the rights of an "Assignee" under the Partnership Agreement.
(d) All Common Units issued as Merger Consideration in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such exchanged Converted Securities.
(e) None of the Partnership, Sub, Bradley, their general partners, their
managers or their transfer agents shall be liable to a member of Bradley for any
amount paid in good faith to a public official pursuant to applicable property,
escheat or similar laws.
(f) No certificates or scrip evidencing fractional Common Units shall be
issued upon the Merger, and such fractional interests shall not entitle the
owner thereof to any rights of a limited partner of the Partnership. In lieu of
fractional interests, each member of Bradley shall receive a number of Common
Units rounded to the nearest whole Common Unit, with half Common Units being
rounded up to the nearest whole Common Unit.
(g) Promptly following the date which is six months after the Effective
Time, the Exchange Agent shall deliver to the Surviving Entity all cash,
certificates and other documents and instruments in its possession relating to
the transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Converted Security shall (subject
to applicable abandoned property, escheat, and similar laws) look only to the
Surviving Entity for payment of the applicable Merger Consideration, but such
holder shall have no greater rights against the Surviving Entity than may be
accorded to general creditors of the Surviving Entity under Applicable Law.
1.7 Dissenting Members.
Notwithstanding anything in this Agreement to the contrary, in the event
that dissenters' rights are available in connection with the Merger pursuant to
the FLLCA, each membership interest of Bradley immediately prior to the
Effective Time and held by a member who has not voted in favor of the Merger and
this Agreement and who complies with all of the relevant provisions of the FLLCA
for the exercise of dissenters' rights shall not be convertible into or
exchangeable for the right to receive the Merger Consideration. If such member
fails to perfect or effectively withdraws or loses such dissenters' rights, such
holder's membership interests shall thereupon be deemed to have been converted
into and exchangeable for the right to receive, as of the Effective Time, the
Merger Consideration.
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1.8 Tax Consequences.
Bradley, the Partnership, and Sub agree that for federal income tax
purposes the Merger will be treated as a contribution of all of Bradley's assets
and liabilities to the Partnership in exchange for the Merger Consideration,
followed by a liquidating distribution of the Merger Consideration to the
members of Bradley. Bradley will terminate under Section 708 of the Code as a
result of the liquidating distribution.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to Bradley that:
2.1 Organization.
The Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware. Sub is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Oklahoma. The Partnership has full power and authority to own,
lease or otherwise hold and operate its properties and assets and to carry on
its business as presently conducted. The Partnership is duly qualified and in
good standing to do business as a foreign limited partnership in each
jurisdiction in which the conduct or nature of its business or the ownership,
leasing, holding or operating of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not have a Material
Adverse Effect.
2.2 Governing Documents.
The Partnership Agreement has been, and prior to the Closing the
Partnership Agreement will be, duly authorized, executed and delivered by the
Partnership and is, and will be, a valid and legally binding agreement,
enforceable against the Partnership in accordance with its terms; provided,
however, that the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
2.3 Capitalization of the Partnership.
(a) All of the outstanding Common Units have been duly authorized and
validly issued in accordance with the Partnership Agreement, are fully paid and
nonassessable, and, as of the respective dates of the SEC Filings and the
Partnership Financial Statements, were issued and held as described therein.
Dorchester Minerals Management LP (the "Partnership GP"), a Delaware limited
partnership, is the sole general partner of the Partnership. On the date hereof,
the issued and outstanding limited partner interests of the Partnership consist
of 27,040,431 Common Units.
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(b) The Common Units to be issued pursuant to this Agreement (and the
limited partner interests represented thereby), will be duly authorized in
accordance with the Partnership Agreement, and, when issued and delivered
pursuant to this Agreement in accordance with the terms hereof, will be validly
issued, fully paid (to the extent required under the Partnership Agreement) and
nonassessable and will be issued free and clear of any lien, claim or
Encumbrance.
(c) Except for the Common Units to be issued pursuant to this Agreement, as
described in the Partnership Agreement or as set forth on Schedule 2.3(c), there
are no preemptive rights or other rights to subscribe for or to purchase, nor
any restriction upon the voting or transfer of, any interests in the Partnership
pursuant to the Partnership Agreement or any other agreement or instrument to
which the Partnership is a party or by which it may be bound. Neither the
offering nor the sale of the Common Units, as contemplated by this Agreement,
gives rise to any rights for or relating to the registration of any Common Units
or other securities of the Partnership. Except for the Common Units to be issued
pursuant to this Agreement or as described in the Partnership Agreement, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any securities
for, Common Units or other securities of the Partnership are outstanding.
(d) The Common Units when issued and delivered against payment therefor as
provided herein, will conform in all material respects to the description
thereof contained in the Partnership Agreement. The Partnership has all
requisite power and authority to issue, sell and deliver the Common Units in
accordance with and upon the terms and conditions set forth in this Agreement
and the Partnership Agreement. As of the Closing Date, all partnership action
for the authorization, issuance, sale and delivery of the Common Units shall
have been validly taken, and no other authorization by any of such parties is
required therefore.
2.4 Authority Relative to This Agreement.
The Partnership and Sub have full partnership power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Partnership
and Sub of this Agreement, and the consummation by them of the transactions
contemplated hereby, have been duly authorized by the Partnership GP (for itself
in its capacity as the general partner of Partnership, for itself or on behalf
of Sub), and no other partnership proceedings on the part of the Partnership and
Sub are necessary to authorize the execution, delivery and performance by the
Partnership and Sub of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Partnership and Sub and constitutes, and each other agreement,
instrument or document executed or to be executed by the Partnership and Sub in
connection with the transactions contemplated hereby has been, or when executed
will be, duly executed and delivered by the Partnership or Sub and constitutes,
or when executed and delivered will constitute, a valid and legally binding
obligation of the Partnership or Sub enforceable against the Partnership or Sub
in accordance with their respective terms, except that such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and (ii) equitable
principles
5
which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances
2.5 Noncontravention.
Except as otherwise indicated on Schedule 2.5, the execution, delivery and
performance by the Partnership or the Sub of this Agreement and the consummation
by it of the transactions contemplated hereby do not and will not (i) conflict
with or result in a violation of any provision of the Partnership Agreement or
the certificate of limited partnership of the Partnership, (ii) conflict with or
result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, contract, agreement or other instrument or
obligation to which the Partnership or Sub is a party or by which the
Partnership or Sub or any of their properties may be bound, (iii) result in the
creation or imposition of any Encumbrance upon the properties of the Partnership
or Sub or (iv) assuming compliance with the matters referred to in Section 2.6,
violate any Applicable Law binding upon the Partnership or Sub, except, in the
case of clauses (ii), (iii) and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations or Encumbrances which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Partnership or Sub.
2.6 Governmental Approvals.
To the Knowledge of the Partnership, no consent, approval, order or
authorization of, or declaration, filing or registration with, any Governmental
Entity is required to be obtained or made by the Partnership or Sub in
connection with the execution, delivery or performance by the Partnership of
this Agreement or the consummation by it of the transactions contemplated
hereby, other than (i) compliance with any applicable federal or state
securities or takeover laws, (ii) filings of the Certificates of Merger and
filings with Governmental Entities to occur in the ordinary course following the
consummation of the transactions contemplated hereby, and (iii) such consents,
approvals, orders or authorizations which, if not obtained, and such
declarations, filings or registrations which, if not made, would not,
individually or in the aggregate, have a Material Adverse Effect on the
Partnership.
2.7 Financial Statements.
Attached as Schedule 2.7 or filed with the SEC Filings are copies of (i)
the Partnership's unaudited consolidated balance sheet as of June 30, 2004 (the
"Partnership Latest Balance Sheet"), and the related unaudited consolidated
statements of income, partners' equity and cash flows for the six-month period
then ended (the "Partnership Unaudited Financial Statements"), and (ii) the
Partnership's audited consolidated balance sheet as of December 31, 2003, and
the related audited consolidated statements of income, stockholders' equity and
cash flows for the year then ended, and the notes and schedules thereto,
together with the report thereon of Grant Thornton LLP, independent certified
public accountants (the "Partnership Audited Financial Statements")
(collectively, the "Partnership Financial Statements"). The Partnership
Financial Statements (A) have been prepared from the books and records of the
6
Partnership in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years throughout the periods involved, and
(B) accurately and fairly present the Partnership's consolidated financial
position as of the respective dates thereof and its consolidated results of
operations and cash flows for the periods then ended, except that the
Partnership Unaudited Financial Statements are subject to audit adjustments,
which in the Partnership's reasonable judgment should not be material in the
aggregate.
2.8 Absence of Undisclosed Liabilities.
To the Knowledge of the Partnership, as of the date of this Agreement, the
Partnership does not have any liability or obligation (whether accrued,
absolute, contingent, unliquidated or otherwise), except (i) liabilities
reflected on the Partnership Latest Balance Sheet, (ii) liabilities described in
the notes accompanying the Partnership Audited Financial Statements,
(iii) liabilities which have arisen since the date of the Partnership Latest
Balance Sheet in the ordinary course of business (none of which is a material
liability for breach of contract, tort or infringement), (iv) liabilities
arising under executory provisions of contracts entered into in the ordinary
course of business (none of which is a material liability for breach of
contract), (v) liabilities disclosed on Schedule 2.8 and (vi) other liabilities
which, in the aggregate, are not material to the Partnership.
2.9 Absence of Certain Changes.
As of the date of this Agreement, except as disclosed on Schedule 2.9,
since the date of the Partnership Unaudited Financial Statements, (i) there has
not been any material adverse change in, or any event or condition that might
reasonably be expected to result in any Material Adverse Effect in, the assets
or financial condition of the Partnership, (ii) the businesses of the
Partnership have been conducted only in the ordinary course consistent with past
practice, (iii) the Partnership has not incurred any material liability, engaged
in any material transaction or entered into any material agreement outside the
ordinary course of business consistent with past practice, and (iv) the
Partnership has not suffered any material loss, damage, destruction or other
casualty to any of its assets (whether or not covered by insurance).
2.10 Compliance With Laws.
Except as disclosed on Schedule 2.10, to the Knowledge of the Partnership,
the Partnership has complied in all material respects with all Applicable Laws,
except for noncompliance with such Applicable Laws which, individually or in the
aggregate, does not and will not have a Material Adverse Effect on the
Partnership. Except as disclosed on Schedule 2.10, the Partnership has not
received any written notice from any Governmental Entity, which has not been
dismissed or otherwise disposed of, that the Partnership has not so complied.
The Partnership is not charged or, to the Knowledge of the Partnership,
threatened with, or under investigation with respect to, any violation of any
Applicable Law relating to any aspect of the business of the Partnership, other
than violations which, individually or in the aggregate, do not and in the
reasonable judgment of the Partnership will not have a Material Adverse Effect
on the Partnership.
7
2.11 Brokerage Fees.
Neither the Partnership nor Sub has retained any financial advisor, broker,
agent or finder or paid or agreed to pay any financial advisor, broker, agent or
finder on account of this Agreement or any transaction contemplated hereby.
2.12 Listing.
The outstanding Common Units are listed for trading on the NASDAQ National
Market System.
2.13 SEC Filings.
The Partnership has filed with the Securities and Exchange Commission all
forms, reports, schedules, statements, and other documents required to be filed
by it since October 31, 2002 under the Securities Act, the Exchange Act, and all
other federal securities laws. All forms, reports, schedules, statements, and
other documents (including all amendments thereto) filed by the Partnership with
the Securities and Exchange Commission since such date are herein collectively
referred to as the "SEC Filings." The Partnership has delivered or made
available to Bradley accurate and complete copies of all the SEC Filings in the
form filed by the Partnership with the Securities and Exchange Commission. The
SEC Filings, at the time filed, complied in all material respects with all
applicable requirements of federal securities laws. To the Knowledge of the
Partnership, none of the SEC Filings, including, without limitation, any
financial statements or schedules included therein, at the time filed, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. All material contracts of the Partnership have been included in the
SEC Filings, except for those contracts not required to be filed pursuant to the
rules and regulations of the Securities and Exchange Commission. The Partnership
shall deliver or make available to Bradley as soon as they become available
accurate and complete copies of all forms, reports, and other documents
furnished by it to its limited partners generally or filed by it with the
Securities and Exchange Commission subsequent to the date hereof and prior to
the Closing Date.
2.14 Ownership.
All of the ownership interests of Sub are held, directly and indirectly, by
the Partnership and Sub will be treated as a disregarded entity for federal
income tax purposes.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF BRADLEY
Bradley represents and warrants to the Partnership and Sub that:
3.1 Organization and Existence.
Bradley is a limited liability company, duly organized, validly existing
and in good standing under the laws of the State of Florida. Bradley has full
power and authority to own, lease or otherwise hold and operate its properties
and assets and to carry on its business as presently conducted. Bradley is duly
qualified and in good standing to do business as a foreign limited liability
company in each jurisdiction in which the conduct or nature of its business or
the ownership, leasing, holding or operating of its properties makes such
qualification necessary.
3.2 Authority Relative to This Agreement.
Bradley has full power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Bradley of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by all necessary
action. The managers of Bradley have approved the Merger and this Agreement, and
declared the Merger and this Agreement to be in the best interests of the
members of Bradley. Bradley has obtained approval of the Merger and this
Agreement by at least ninety-five percent (95%) of the outstanding membership
interests of Bradley, entitled to vote upon such matters, by means a Consent and
First Amendment to the Regulations of Bradley Royalty Partners, L.L.C.,
effective as of July 1, 2004. This Agreement has been duly executed and
delivered by Bradley and constitutes, and each other agreement, instrument or
document executed or to be executed by Bradley in connection with the
transactions contemplated hereby has been, or when executed will be, duly
executed and delivered by Bradley and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of Bradley
enforceable against Bradley in accordance with their respective terms, except
that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
3.3 Noncontravention.
Except as otherwise indicated on Schedule 3.3, the execution, delivery and
performance by Bradley of this Agreement and the consummation by it of the
transactions contemplated hereby, do not and will not (i) conflict with or
result in a violation of any provision of the respective charter or other
governing instruments of Bradley, (ii) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation or acceleration under, any bond,
9
debenture, note, mortgage, indenture, lease, contract, agreement or other
instrument or obligation to which Bradley is a party or by which Bradley or any
of the Properties may be bound, (iii) result in the creation or imposition of
any Encumbrance upon the Properties or (iv) assuming compliance with the matters
referred to in Section 3.4, violate any Applicable Law binding upon Bradley.
3.4 Governmental Approvals.
No consent, approval, order or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be obtained or made by
Bradley in connection with the execution, delivery or performance by Bradley of
this Agreement or the consummation by it of the transactions contemplated
hereby, other than (i) compliance with any applicable state securities or
takeover laws, and (ii) filings of the Certificates of Merger or filings with
Governmental Entities to occur in the ordinary course following the consummation
of the transactions contemplated hereby.
3.5 Capitalization.
The issued and outstanding membership interests of Bradley are held of
record by those persons listed in Schedule 3.5 and are all of the issued and
outstanding interests in Bradley. All outstanding membership interests of
Bradley are validly issued, fully paid and non-assessable, and are not subject
to preemptive rights. Except as set forth in this Section 3.5 or in Schedule
3.5, there are outstanding: (i) no membership interests, voting debt or other
voting securities of Bradley; (ii) no securities of Bradley convertible into or
exchangeable for membership interests, or other voting securities of Bradley;
and (iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which Bradley is a party or by which it is bound in
any case obligating Bradley to issue, deliver, sell, purchase, redeem or
acquire, or cause to be issued, delivered, sold, purchased, redeemed or
acquired, additional membership interests or any or other securities of either
Bradley or any other person or obligating Bradley to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
outstanding options, warrants or other rights to subscribe for or to purchase
from Bradley any security of Bradley or securities convertible into or
exchangeable for membership interests or other voting securities of Bradley.
There are not as of the date hereof and there will not be at the Effective Time
any stockholder agreements, voting trusts or other agreements or understandings
to which Bradley is a party or by which it is bound relating to the voting of
any membership interests or voting securities of Bradley from, or the casting of
votes by, the members of Bradley with respect to the Merger.
3.16 Title to Properties.
Bradley has one hundred percent (100%) of the beneficial interest in the
Properties and Bradley Nominee Corporation, a New York corporation, has one
hundred percent (100%) of the legal title to the Properties. At the Closing, by
virtue of the merger of Bradley Nominee Corporation with and into Bradley
between the date of this Agreement and the Closing, Bradley will have one
hundred percent (100%) of both the legal title to and the beneficial interest in
the Properties. At the Closing, Bradley will have good and marketable title to,
or valid
10
leasehold and right-of-way interests in, all of the Properties, free
and clear of all Encumbrances other than Encumbrances set forth on Schedule 3.6.
3.7 Financial Statements.
Bradley has delivered to the Partnership accurate and complete copies of
(i) an unaudited consolidated balance sheet as of June 30, 2004 (the "Bradley
Latest Balance Sheet"), and the related unaudited consolidated statements of
income and members' equity for the seven-month period then ended (the "Bradley
Latest Financial Statements"), and (ii) an unaudited consolidated balance sheet
as of November 30, 2003, and the related consolidated statements of income and
members' equity for the year then ended, (the "Bradley Annual Financial
Statements") (collectively, the "Bradley Financial Statements"). The Bradley
Financial Statements (A) have been prepared from the books and records of
Bradley in conformity with generally accepted accounting principles applied on a
basis consistent with preceding years throughout the periods involved, except
that the Bradley Latest Financial Statements are not accompanied by notes or
other textual disclosures required by generally accepted accounting principles,
and (B) accurately and fairly present Bradley consolidated financial position as
of the respective dates thereof and its consolidated results of operations and
cash flows for the periods then ended, except that the Bradley Latest Financial
Statements are subject to audit adjustments, which in Bradley's reasonable
judgment should not be material in the aggregate.
3.8 Absence of Undisclosed Liabilities.
To the Knowledge of Bradley, as of the date of this Agreement, Bradley has
no liability or obligation with respect to the Properties (whether accrued,
absolute, contingent, unliquidated or otherwise), except (i)liabilities
reflected on Bradley Latest Balance Sheet, (ii) liabilities described in the
notes accompanying Bradley Annual Financial Statements, (iii) liabilities which
have arisen since the date of the Bradley Latest Balance Sheet in the ordinary
course of business (none of which is a material liability for breach of
contract, tort or infringement), (iv) liabilities arising under executory
provisions of contracts entered into in the ordinary course of business (none of
which is a material liability for breach of contract), (v) liabilities disclosed
on Schedule 3.8.
3.9 Absence of Certain Changes.
As of the date of this Agreement, except as disclosed on Schedule 3.9,
since the date of the Bradley Latest Balance Sheet, (i) there has not been any
material adverse change in, or any event or condition that might reasonably be
expected to result in any material adverse change in, the assets or financial
condition of Bradley or any of the Properties, (ii) the business of Bradley has
been conducted only in the ordinary course consistent with past practice,
(iii) Bradley has not incurred any material liability, engaged in any material
transaction or entered into any material agreement outside the ordinary course
of business consistent with past practice with respect to the Properties,
(iv) Bradley has not suffered any material loss, damage, destruction or other
casualty to any of the Properties (whether or not covered by insurance) and
(v) Bradley has not taken any of the actions set forth in Section 4.2 except as
permitted thereunder.
11
3.10 Tax Matters.
Bradley has filed all federal, state and local Tax Returns required to be
filed by it, including those relating to real and personal property taxes, ad
valorem taxes, severance taxes and any other Taxes imposed on or with respect to
the Properties and any production therefrom. All Tax Returns have been timely
filed with the applicable taxing authority, except as set forth on Schedule
3.10, and all Taxes required to be shown thereon have been paid. There are no
liens for Taxes (other than for taxes not yet due and payable) upon Bradley or
any of the Properties. There has been no issue raised or adjustment proposed
(and to the Knowledge of Bradley, none is pending) by the IRS or any other
taxing authority in connection with any of such Tax Returns, nor has Bradley
received any written notice from the IRS or any such other taxing authority that
any such Tax Return is being audited or may be audited or examined. Bradley has
not received a written notice of a claim made by any Taxing authority in a
jurisdiction where Bradley does not file Tax Returns that it is or may be
subject to Tax in such jurisdiction. Bradley has not agreed to the extension of
any statute of limitations on the assessment or collection of any such Tax or
with respect to any such Tax Return. There are no Tax rulings, requests for
rulings or closing agreements with any taxing authority with respect to Bradley.
Bradley has no current or potential contractual obligation, through Tax sharing
agreement or otherwise, to indemnify any other person with respect to Taxes or
to make any distribution to its members with respect to any current or future
tax liability of such members. Neither Bradley nor any of its members has filed
an election on IRS Form 8832, Entity Classification Election, causing Bradley to
be classified as an association taxable as a corporation for U.S. federal income
tax purposes. No direct or indirect member of Bradley is a "foreign person" as
defined in Section 1445 of the Code. Bradley has delivered to the Partnership a
Form W-9 completed and executed by each Bradley Member.
3.11 Compliance with Laws.
Except as disclosed on Schedule 3.11, Bradley has complied in all material
respects with all Applicable Laws relating to the ownership or operation of the
Properties, except for noncompliance with such Applicable Laws which,
individually or in the aggregate, do not and will not have a Material Adverse
Effect on Bradley or the Properties. Except as disclosed on Schedule 3.11,
Bradley has not received any written notice from any Governmental Entity, which
has not been dismissed or otherwise disposed of, that Bradley has not so
complied. Bradley has not been charged or, threatened with, or under
investigation with respect to, any violation of any Applicable Law relating to
any aspect of the ownership or operation of the Properties.
3.12 Legal Proceedings.
Except for the Lawsuits and as set forth on Schedule 3.12, there are no
Proceedings pending or, to the Knowledge of Bradley, threatened against or
involving Bradley or rights of Bradley with respect to the Properties. Bradley
is not subject to any judgment, order, writ, injunction, or decree of any
Governmental Entity which has had or is reasonably likely to materially affect
title to or the value of any of the Properties. There are no Proceedings pending
or, to the Knowledge of Bradley, threatened against Bradley or the Properties,
seeking to restrain, prohibit, or obtain damages or other relief in connection
with this Agreement or the
12
transactions contemplated hereby or which could reasonably be expected to affect
Bradley's ability to consummate the transactions contemplated hereby.
3.13 Permits.
Bradley holds all Permits necessary or required for the conduct of its
business as currently conducted, except for Permits the absence of which do not
and will not have a Material Adverse Effect on Bradley or the Properties. Each
of such Permits is in full force and effect and Bradley is in compliance with
each such Permit, except in such respects as would not reasonably be expected to
have a Material Adverse Effect on Bradley or the Properties. Except as disclosed
on Schedule 3.13, Bradley has not received any written notice from any
Governmental Entity and no Proceeding is pending or, to the Knowledge of
Bradley, threatened with respect to any alleged failure by Bradley to have any
Permit the absence of which would have a Material Adverse Effect on Bradley or
the Properties.
3.14 Environmental Matters.
Except as disclosed on Schedule 3.14, Bradley has not received any written
notice of any investigation or inquiry regarding the Properties from any
Governmental Entity under any Applicable Law pertaining to the environment,
Hazardous Substances or Hazardous Wastes ("Applicable Environmental Laws"),
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by, inter alia, the
Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), and the
Resource Conservation and Recovery Act of 1976, as amended by, inter alia, the
Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
and the Hazardous and Solid Waste Amendments of 1984 ("RCRA"). To the Knowledge
of Bradley, as of the date hereof, the Properties have not been used for
Disposal of any Hazardous Substance and no condition otherwise exists on any
such property, such that such property would be subject to any material remedial
obligations under any Applicable Environmental Laws which obligations would have
a Material Adverse Effect on Bradley or the Properties. The term "Hazardous
Substance" as used herein shall have the meaning specified in CERCLA, and the
terms "Hazardous Waste" and "Disposal" shall have the meanings specified in
RCRA.
3.15 Revenue and Expense Information; Records.
The property list, cash receipts, disbursements and production volumes with
respect to the Properties described on Schedule 3.15 are true and correct and
Bradley has good and marketable title to the Properties to which such receipts,
disbursements and production volumes relate. Bradley has not received any
written notice of and does not have knowledge of any adverse claim against
Bradley's title to the Properties. The Records are true and correct in all
material respects and accurately reflect the ownership and operation of the
Properties by Bradley. Bradley has not distributed to the Bradley Members any
cash received by Bradley on or after July 1, 2004.
3.16 Commitments.
To Bradley's Knowledge, Bradley has incurred no expenses, and has made no
commitments to make expenditures (and Bradley has not entered into any
agreements that would
13
obligate Partnership to make expenditures), in connection with (and no other
obligations or liabilities have been incurred which would adversely affect) the
ownership or operation of the Properties after the Effective Time.
3.17 No Alienation.
Within 120 days of the date hereof, Bradley has not sold, assigned,
conveyed, or transferred or contracted to sell, assign, convey or transfer any
right or title to, or interest in, the Properties.
3.18 Make-Up Rights.
To Bradley's Knowledge, Bradley has not, nor has any other party, received
prepayments (including but not limited to, payments for gas not taken pursuant
to "take-or-pay" or similar arrangements) for any oil or gas produced from the
Properties as a result of which the obligation does or may exist to deliver oil
or gas produced from the Properties after the Effective Time without then
receiving payment (or without then receiving full payment) therefor or to make
repayments in cash, and the working interest owners have not so delivered any
oil or gas from the Properties or so made any such repayment in cash.
3.19 Imbalance.
To Bradley's Knowledge, any imbalance among the owners of the interests in
the wells and units included in the Properties are consistent with those that
are normal and customary in the oil and gas industry.
3.20 Preferential Rights and Consents to Assign.
To Bradley's Knowledge, there are no consents to assignment or waivers of
preferential rights to purchase that must be obtained from third parties in
order for Bradley to consummate the transactions contemplated by this Agreement
without violating or breaching a duty or obligation of Bradley.
3.21 No Participating Minerals.
To Bradley's Knowledge, the Properties do not include any unleased mineral
interest where Bradley has agreed to bear a share of drilling, operating or
other costs as a participating mineral owner.
3.22 Brokerage Fees.
Bradley has not retained any financial advisor, broker, agent or finder or
paid or agreed to pay any financial advisor, broker, agent or finder on account
of this Agreement or any transaction contemplated hereby.
14
3.23 Investment Intent.
Bradley has delivered to the Partnership an Investor Questionnaire in the
form attached as Exhibit 3.23 completed and executed by each member of Bradley.
3.24 Disclosure.
(a) No representation or warranty of Bradley in this Agreement and no
statement in the Schedules hereto omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
(b) There is no fact known to Bradley that has specific application to
Bradley or the Properties (other than general economic or industry conditions)
as far as Bradley can reasonably foresee, that materially threatens, the assets,
business, prospects, financial condition, or results of operations of Bradley or
the Properties that has not been set forth in this Agreement or the Schedules
hereto.
3.25 Insurance.
Bradley has insurance in such amounts and against such risks and losses as
are customary for companies engaged in the business of the ownership of mineral
and royalty interests.
3.26 Employees.
Bradley does not have and never has had any employees or employee benefit
plans.
3.27 Agreements, Contracts and Commitments.
Schedule 3.27 lists all leases, contracts, agreements and instruments to
which it is a party as of the date hereof and which are in any single case of
material importance to the conduct of the business of Bradley (true and correct
copies of each such document requested by the Partnership have been previously
delivered to the Partnership and a written description of each oral arrangement
so listed). Except as set forth in Schedule 3.27, Bradley does not have as of
the date hereof (i) any collective bargaining agreements or any agreements that
contain any severance pay liabilities or obligations, (ii) any bonus, deferred
compensation, pension, profit-sharing or retirement plans, programs or other
similar employee benefit arrangements, (iii) any employment agreement, contract
or commitment with an employee, or agreements to pay severance, (iv) any
agreement of guarantee or indemnification running from Bradley to any person or
entity, (v) any agreement, indenture or other instrument for borrowed money and
any agreement or other instrument which contains restrictions with respect to
payment of dividends or any other distribution in respect of the Converted
Securities or any other outstanding securities, (vi) any agreement, contract or
commitment containing any covenant limiting the freedom of Bradley to engage in
any line of business or compete with any person, (vii) any agreement, contract
or commitment relating to capital expenditures in excess of $25,000 and
involving future payments, (viii) amy agreement, contract or commitment relating
to the
15
acquisition of assets or capital stock of any business enterprise, or
(ix) any agreement, contract or commitment not made in the ordinary course of
business. Except as set forth in Schedule 3.27, Bradley has not breached, nor to
Bradley's Knowledge is there any claim or any legal basis for a claim that
Bradley has breached, any of the terms or conditions of any agreement, contract
or commitment set forth in the Schedules or of any other agreement, contract or
commitment, which breach would have a Material Adverse Effect on Bradley or the
Properties.
ARTICLE 4
CONDUCT OF BRADLEY PENDING MERGER;
CERTAIN ACTIONS RELATING TO CLOSING
4.1 Conduct and Preservation of Business of Bradley.
Bradley hereby covenants and agrees with the Partnership that, except as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, Bradley (i) shall conduct its operations according to the
ordinary course of business consistent with past practice and in material
compliance with all Applicable Laws, (ii) shall use its reasonable best efforts
to preserve, maintain and protect its Properties and business organizations,
keep available the services of its current officers and employees, and endeavor
to preserve its relationship with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be impaired in any material respect at the Effective Time.
4.2 Restrictions on Certain Actions of Bradley.
Except as otherwise expressly provided in this Agreement, prior to the
Effective Time, Bradley shall not, without the consent of the Partnership (which
consent shall not be unreasonably withheld):
(a) amend its certificate of formation, limited liability company agreement
or similar governing documents;
(b) (i) create, incur, guarantee or assume any indebtedness for borrowed
money or otherwise become liable or responsible for the obligations of any other
person, (ii) make any loans, advances or capital contributions to, or
investments in, any other person, or (iii) mortgage or pledge any of the
Properties or any interests therein or any of its material assets, tangible or
intangible, or create any material lien thereupon (except for statutory liens
(including materialmen's, mechanic's, repairmen's, landlord's and other similar
liens) arising in connection with the ordinary course of business securing
payments not yet due and payable or, if due and payable, the validity of which
is being contested in good faith by appropriate legal proceedings and for which
adequate reserves have been set aside);
(c) (i) enter into, adopt or (except as may be required by law) amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase, pension, retirement, deferred compensation, employment, severance or
other employee
16
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee, (ii) except for normal
increases in the ordinary course of business consistent with past practice that,
in the aggregate, do not result in a material increase in benefits or
compensation expense to Bradley, increase in any manner the compensation or
fringe benefits of any manager, officer or employee of Bradley or (iii) pay to
any manager, officer or employee of Bradley any benefit not required by any
employee benefit agreement, trust, plan, fund or other arrangement as in effect
on the date hereof;
(d) acquire, sell, lease, transfer or otherwise dispose of, directly or
indirectly, any assets or any of the Properties or any interests therein or;
(d) amend, modify or change any existing lease, contract or other
agreement, other than in the ordinary course of the business consistent with
past practice;
(f) waive, release, grant or transfer any rights of value, other than in
the ordinary course of business consistent with past practice;
(g) delay payment of any account payable or any known or accrued liability
beyond the earlier of thirty (30) days or its due date or the date when such
liability would have been paid in the ordinary course of business consistent
with past practice, unless such delay is due to a good faith dispute as to
liability or amount;
(h) permit any current insurance or reinsurance or continuation coverage to
lapse if such policy insures risks, contingencies or liabilities (including
product liability) related to the Properties other than in connection with any
advance renewal or replacement of an existing insurance policy;
(i) make any capital expenditure;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(whether accrued, absolute, contingent, unliquidated or otherwise, and whether
asserted or unasserted), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice, or in accordance
with their terms, of liabilities reflected or reserved against in the Bradley
Financial Statements, or incurred since the date of the Bradley Latest Balance
Sheet in the ordinary course of business consistent with past practice;
provided, however, that expenses incurred in connection with the transactions
contemplated by this Agreement shall not be deemed to be in the ordinary course
of business and shall be borne by the members of Bradley in accordance with
Section 5.6 of this Agreement;
(k) enter into any material lease, contract, agreement, commitment,
arrangement or transaction;
(l) change any of the accounting principles or practices used by it, except
for any change required by reason of a concurrent change in GAAP and notice of
which is given in writing to the Partnership;
17
(m) enter into any hedging, swap, fixed price sale or purchase or other
derivative contract;
(n) accelerate collection of any notes or accounts receivable generated by
Bradley or its business by using collections efforts beyond what would have been
used in the ordinary course of business;
(o) (i) declare or pay any dividends on or make other distributions in
respect of any of its membership interests, other than dividends or
distributions of cash received or royalty payment checks received on or prior to
June 30, 2004 (it being the intention of the parties that at Closing Bradley
will have all cash relating to receipts since July 1, 2004 less any allowable
disbursements made in accordance with this Section 4.2 (the "Contributed
Cash")); (ii) split, combine or reclassify any of its membership interests or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for such membership interests; (iii)
repurchase, redeem or otherwise acquire, any of its securities;
(p) issue, deliver or sell, or authorize or propose to issue, deliver or
sell, any of its securities of any class, any voting debt or other securities or
any securities convertible into, or any rights, warrants or options to acquire,
any such securities, voting debt, other securities or convertible securities;
(q) authorize, recommend, propose or announce an intention to adopt a plan
of complete or partial liquidation or dissolution of Bradley;
(r) merge into or with or consolidate with any other corporation or acquire
all or substantially all of the business or assets of any corporation or other
Person;
(s) except as set forth in this Section 4.2, take any action which would
make any of the representations or warranties of Bradley untrue as of any time
from the date of this Agreement to the date of the Closing, or would result in
any of the conditions set forth in this Agreement not being satisfied; or
(t) agree in writing or otherwise take any of the actions described in this
Section 4.2.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Access to Information; Confidentiality.
From the date hereof through the Effective Time, Bradley shall afford the
Partnership and their representatives reasonable access to the offices and
personnel of Bradley, and to the Properties and the books and records relating
to Bradley and the Properties during normal business hours, in order that the
Partnership may have a full opportunity to make such investigations as it
desires with respect to Bradley and the Properties; provided, however, that such
investigation shall be upon reasonable notice and shall not unreasonably disrupt
the
18
personnel and operations of Bradley or impede the efforts of Bradley to comply
with their other obligations under this Agreement. Such books and records
shall include all books, contracts, commitments, files and Records, including
but not limited to, all abstracts of title, title opinions, title files,
ownership maps, lease files, assignments, division orders, operating records and
agreements, well files, minute books, financial and accounting records,
geological, geophysical and engineering records, in each case pertaining to
Bradley and the Properties insofar as same may now be in existence and in the
possession of Bradley or their affiliates, excluding, however, any information
that Bradley or its affiliates are prohibited from disclosing by third party
confidentiality restrictions. Each party shall hold in confidence all such
information on the terms and subject to the conditions contained in the
Confidentiality Agreement dated November 17, 2003 (the "Confidentiality
Agreement").
5.2 Notification of Certain Matters.
Each party shall give prompt notice to the other party of (i) the discovery
of any fact or circumstance which would be likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect and (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 5.2 shall
not be deemed to (i) modify the representations or warranties hereunder of the
party delivering such notice, (ii) modify the conditions set forth in Article 6
or (iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.3 Reasonable Best Efforts.
Each party hereto agrees that it will not voluntarily undertake any course
of action inconsistent with the provisions or intent of this Agreement and will
use its reasonable best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under Applicable Laws to consummate the transactions contemplated by this
Agreement, including, without limitation, (i) cooperation in determining whether
any other consents, approvals, orders, authorizations, waivers, declarations,
filings or registrations of or with any Governmental Entity or third party are
required in connection with the consummation of the transactions contemplated
hereby, (ii) using its reasonable best efforts to obtain any such consents,
approvals, orders, authorizations and waivers and to effect any such
declarations, filings and registrations, (iii) using its reasonable best efforts
to cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (iv) using its reasonable best efforts to
defend, and to cooperate in defending, all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby and (v) the execution of any additional instruments necessary to
consummate the transactions contemplated hereby.
2.4 Public Announcements.
Except as may be required by Applicable Law or by obligations pursuant to
any listing agreement with any national securities exchange or interdealer
quotation system, no party shall issue any press release or otherwise make any
public statement with respect to this
19
Agreement or the transactions contemplated hereby without the prior written
consent of the other party. Any such press release or public statement required
by Applicable Law or any such listing agreement shall only be made after
reasonable notice to the other party.
5.5 Amendment of Schedules.
Each party hereto agrees that, with respect to the representations and
warranties of such party contained in this Agreement, such party shall have the
continuing obligation until the Closing to supplement or amend the Schedules
hereto with respect to any matter hereafter discovered which, if known at the
date of this Agreement, would have been required to be set forth or described in
the Schedules. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 6.2(a)
and 6.3(a) have been fulfilled, the Schedules hereto shall be deemed to include
only that information contained therein on the date of this Agreement and shall
be deemed to exclude all information contained in any supplement or amendment
thereto.
5.6 Fees and Expenses.
Except as otherwise expressly provided in this Agreement, all fees and
expenses, including fees and expenses of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby ("Closing Costs") shall be paid by the party incurring such
fee or expense, whether or not the Closing shall have occurred; provided,
however, that the Closing Costs of Bradley shall be borne and paid by the
members of Bradley (or out of cash receipts of Bradley received prior to June
30, 2004). The Partnership shall pay all costs of recording and filing (i) the
Certificates of Merger, (ii) all state, federal and Indian transfer and
assignment documents, (iii) all applications and other documents required for
the transfer of permits and operatorship of the Properties, and (iv) all other
instruments.
5.7 Tax Reporting.
(a) Pre-Closing Tax Periods. Bradley and the Partnership agree that for
U.S. federal income tax purposes the merger of Bradley with and into the Sub
will result in the termination of Bradley under Section 708 of the Code as of
the Effective Time. The members of Bradley shall be solely liable for and shall
pay all federal, state and local income taxes and any franchise or excise taxes
based on net income, including any interest, penalties or additions attributable
thereto of Bradley (and any costs or expenses connected therewith) due for all
Pre-Closing Tax Periods. The managers of Bradley will prepare and file or cause
to be prepared and filed all Tax Returns for Bradley that are required to be
filed with the appropriate Governmental Entities for any Pre-Closing Tax Period,
including the final federal income tax return on IRS Form 1065 for the
Pre-Closing Tax Period that ends as of the Effective Time.
(b) Post-Closing Tax Periods. Except as provided in Section 5.7(a), Bradley
shall have no liability for, and the Partnership and Sub shall be solely liable
for and shall pay, all Taxes of Bradley (and any costs or expenses connected
therewith) due for any taxable year or taxable period.
20
(c) Cooperation on Tax Matters. The Partnership, Sub, Bradley, and the
members of Bradley shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section 5.7 and in connection with any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention, and (upon the other party's request) the provision, of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Partnership, Bradley and members of Bradley further agree, upon
request, to use, or cause to be used, commercially reasonable efforts to obtain
any certificate or other document from any Taxing authority or any other person
as may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed.
5.8 Listing of Units.
The Partnership shall use its reasonable efforts to cause the Common Units
to be issued pursuant to this Agreement to be approved for listing on the NASDAQ
National Market.
5.9 Post-Closing Assurances and Access to Records.
After the Closing, Bradley, Sub and the Partnership shall execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any exhibit, document,
certificate or other instrument delivered pursuant hereunto. After the Closing,
the Partnership and its authorized representatives shall have reasonable access
(including copying privileges at Bradley's sole cost and expense) during
Bradley's normal business hours to all Records of Bradley pertaining to the
Properties and not included in the Properties, wheresoever such Records may be
located for the purpose of prosecuting or defending claims, lawsuits or other
proceedings, for audit purposes, or to comply with legal process, rules,
regulations or orders of any board, agency, tribunal or government.
5.10 Management Contract.
On or prior to the Closing, Bradley shall terminate the Management Contract
dated April 1, 1999 between Bradley and James R. McGoogan as amended by
amendment dated April 1, 2002 (the "Management Contract").
5.11 Bradley Members.
Following the Closing, the Partnership shall indemnify, save and hold
harmless each of the Bradley Members from, against and in respect of and will
pay to such Persons, whether or not involving a third party claim, any and all
losses suffered or incurred by the Bradley Members by reason of any untrue
representation or breach of warranty contained in Section 2.14 of this
Agreement. It is expressly understood that each of the Bradley Members is
intended to be a third party beneficiary of the provisions of this Section 5.11.
21
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of the Parties.
The obligations of the parties to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
(a) Legal Proceedings. No preliminary or permanent injunction or other
order, decree, or ruling issued by a Governmental Entity, and no statute, rule,
regulation, or executive order promulgated or enacted by a Governmental Entity,
shall be in effect which restrains, enjoins, prohibits, or otherwise makes
illegal the consummation of the transactions contemplated hereby; and no
Proceeding by a Governmental Entity shall have been commenced or threatened (and
be pending or threatened on the Closing Date) against the Partnership, Bradley
or the Properties, or any of their respective affiliates, associates, directors,
or officers seeking to prevent or challenging the transactions contemplated
hereby.
(b) Consents. All consents, approvals, orders, authorizations and waivers
of, and all declarations, filings and registrations with, third parties
(including Governmental Entities) required to be obtained or made by or on the
part of the parties hereto, or otherwise reasonably necessary for the
consummation of the transactions contemplated hereby, shall have been obtained
or made, and all thereof shall be in full force and effect at the time of
Closing, unless the failure to obtain or make any such consent, approval, order,
authorization, waiver, declaration, filing or registration would not have a
Material Adverse Effect on the Partnership.
6.2 Conditions to Obligation of Bradley.
The obligation of Bradley to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
(a) Representations and Warranties. All the representations and warranties
of the Partnership contained in this Agreement and in any agreement, instrument
or document delivered pursuant hereto or in connection herewith on or prior to
the Closing Date, shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date, except as affected by
transactions permitted by this Agreement and except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects as of such specified date.
(b) Covenants and Agreements. The Partnership and Sub shall have performed
and complied with in all material respects all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
22
(c) No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect with respect to the
Partnership, and Bradley shall have received a certificate signed by an officer
of the Partnership GP, in each case to his Knowledge, to such effect.
(d) Certificates. Bradley shall have received a certificate from the
Partnership, in form and substance mutually acceptable to Bradley and the
Partnership, dated the Closing Date, representing and certifying that the
conditions set forth in Sections 6.1 and 6.2 have been fulfilled and a
certificate as to the incumbency of the officers executing this Agreement
on behalf of the Partnership.
(e) Opinion of Counsel. Bradley shall have received an opinion of counsel
for the Partnership in form and substance mutually acceptable to Bradley and
the Partnership.
(f) Registration Rights Agreement. The Partnership shall have executed and
delivered the Registration Rights Agreement, in substantially the form set
forth as Exhibit 6.2(f).
6.3 Conditions to Obligation of the Partnership and Sub. The obligation of
the Partnership and Sub to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
(a) Representations and Warranties. All the representations and warranties
of Bradley contained in this Agreement and in any agreement, instrument or
document delivered pursuant hereto or in connection herewith on or prior to
the Closing Date, shall be true and correct in all material respects (other
than any representation or warranty that is qualified by materiality or a
Material Adverse Effect, which shall be true and correct in all respects)
on and as of the Closing Date as if made on and as of such date, except as
affected by transactions permitted by this Agreement and except to the
extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true
and correct in all material respects as of such specified date.
(b) Covenants and Agreements. Bradley shall have performed and complied
with in all material respects all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) No Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect with respect to Bradley or
the Properties, and the Partnership shall have received a certificate
signed by an officer of Bradley, in each case to his Knowledge, to such
effect.
(d) Certificates. The Partnership shall have received a certificate from
Bradley, in form and substance mutually acceptable to the Partnership and
Bradley, dated the Closing Date, representing and certifying that the
conditions set forth in Sections 6.1
23
and 6.3 have been fulfilled, a certificate as to the incumbency of the officers
executing this Agreement on behalf of Bradley and a certificate that the
Contributed Cash constitutes all cash received by Bradley with respect to the
Properties, less any disbursements with respect to the Properties, on or after
July 1, 2004 through the Closing Date.
(e) Due Diligence. The due diligence investigation of Partnership with
respect to Bradley and the Properties shall have been completed to the
satisfaction of the Partnership, including but not limited to confirmation of
the accuracy of information described in Section 3.14 of this Agreement.
(f) Opinion of Counsel. The Partnership shall have received an opinion of
counsel for Bradley in form and substance mutually acceptable to the
Partnership and Bradley.
(g) Dissenters' Rights. Bradley shall have fully complied with the
applicable provisions of the FLLCA with respect to dissenters' rights and no
members of Bradley shall have perfected dissenters' rights, and the Partnership
shall have received a certificate signed by an officer of Bradley, in each
case to his Knowledge, to such effect.
(h) Management Contract.The Management Contract shall have been terminated.
(i) Record Title. Bradley shall have good and marketable title to, or valid
leasehold and right of way interests in, all of the Properties, free and
clear of all Encumbrances other than the Encumbrances set forth on Schedule 3.6.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Effective Time, whether before or after
the approval of the Merger and this Agreement by the members of Bradley in
the following manner:
(a) By mutual written consent of the parties hereto;
(b) By Bradley, the Partnership or Sub, if:
(i) The Merger shall not have been consummated on or before December 31,
2004, unless such failure to close shall be due to a material breach of
this Agreement by the party seeking to terminate this Agreement pursuant to
this clause (i);
(ii) There shall be any Applicable Law that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or a
24
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(c) By Bradley, if (i) any of the representations and warranties of the
Partnership contained in this Agreement shall not be true and correct such
that the condition set forth in Section 6.2(a) would not be satisfied, or
(ii) the Partnership shall have failed to fulfill in any material respect
any of its material obligations under this Agreement, which failure is
material to the obligations of such party under this Agreement, and, in the
case of each of clauses (i) and (ii), such misrepresentation, breach of
warranty or failure (provided it can be cured) has not been cured within 30
days of notice thereof by Bradley.
(d) By the Partnership and Sub, if (i) any of the representations and
warranties of any of Bradley contained in this Agreement shall not be true
and correct such that the condition set forth in Section 6.3(a) would not
be satisfied or (ii) Bradley shall have failed to fulfill in any material
respect any of their material obligations under this Agreement, which
failure is material to the obligations of such party under this Agreement,
and, in the case of each of clauses (i) and (ii), such misrepresentation,
breach of warranty or failure (provided it can be cured) has not been cured
within 30 days of notice thereof by the Partnership.
7.2 Effect of Termination.
In the event of the termination of this Agreement pursuant to Section 7.1
by any party, written notice thereof shall forthwith be given to the other
parties specifying the provision hereof pursuant to which such termination
is made, and this Agreement shall become void and have no effect, and there
shall be no liability hereunder on the part of any party hereto or the
general partner of the Partnership, or any of their respective directors,
officers, employees, unitholders or representatives, except that the
agreements contained in this Section 7.2, in Sections 5.1 and 5.6, Article
8 and in Article 9 shall survive the termination hereof. Nothing contained
in this Section 7.2 shall otherwise relieve any party from liability for
damages actually incurred as a result of any breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
pursuant to the Confidentiality Agreements referred to in Section 5.1.
7.3 Amendment.
Any provision of this Agreement (including the Exhibits hereto) may be
amended, to the extent permitted by law, prior to the Effective Time if,
and only if, such amendment is in writing and signed, in the case of an
amendment, by the parties hereto.
7.4 Waiver.
Each of the parties to this Agreement may (i) waive any inaccuracies in the
representations and warranties of the other contained herein or in any
document, certificate or writing delivered pursuant hereto or (ii) waive
compliance by the other with any of the other's
25
agreements or fulfillment of any conditions to its own obligations contained
herein. Any agreement on the part of a party hereto to any such waiver shall be
valid only if set forth in an instrument in writing signed by or on behalf of
such party. No failure or delay by a party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
ARTICLE 8
SURVIVAL MATTERS
8.1 Survival of Representations and Warranties.
The representations and warranties contained in this Agreement shall expire
with, and be extinguished by, the Closing, and thereafter no party hereto
or any shareholder, director, officer, employee or affiliate of such party
shall have any liability whatsoever (whether pursuant to this Agreement or
otherwise) with respect to any such representation or warranty. This
Section 8.1 shall have no effect upon any other obligations of the parties
hereto under this Agreement, whether to be performed before, at or after
the Closing. This Section 8.1 shall have no effect upon any other
obligations of the parties hereto under this Agreement, whether to be
performed before, at or after the Closing.
ARTICLE 9
MISCELLANEOUS
9.1 Notices.
All notices, requests, demands and other communications required or
permitted to be given or made hereunder by any party hereto shall be in
writing and shall be deemed to have been duly given or made if
(i) delivered personally, (ii) transmitted by first class registered or
certified mail, postage prepaid, return receipt requested, (iii) sent by
prepaid overnight courier service or (iv) sent by telecopy or facsimile
transmission, answer back requested, to the parties at the following
addresses (or at such other addresses as shall be specified by the parties
by like notice):
26
(a) If to Bradley or to the Members:
Bradley Royalty Partners, LLC
c/o James R. McGoogan
765 SW Wisper Bay Drive
Palm City, Florida 34990-1429
with a copy to:
Hodgson Russ LLP
1800 One M&T Plaza, Suite 2000
Buffalo, New York 14203
Attention: Richard F. Campbell, Esq.
Telefax: (716) 849-0349
and to:
George C. Bradley
1215 Sadler Drive
Carlisle, Pennsylvania 17013
(b) If to the Partnership or Sub:
3738 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219
Attention: William Casey McManemin
Telefax: (214) 559-0933
with a copy to:
Thompson & Knight LLP
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Attention: Joe Dannenmaier
Telefax: (214) 969-1751
Such notices, requests, demands and other communications shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (ii) if mailed, the date of delivery as shown by the
return receipt therefor or (iii) if sent by telecopy or facsimile transmission,
when the answer back is received.
9.2 Entire Agreement.
This Agreement, together with the Schedules, Exhibits and other writings
referred to herein or delivered pursuant hereto, including the
Confidentiality Agreement referenced in Section 5.1, constitute the entire
agreement between the parties hereto with respect to the subject
27
matter hereof and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
9.3 Binding Effect; Assignment; Third Party Benefit.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns;
provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (by operation of law or otherwise) without the prior written consent
of the other parties. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than the parties hereto
any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
9.4 Severability.
If any provision of this Agreement is held to be unenforceable, this
Agreement shall be considered divisible and such provision shall be deemed
inoperative to the extent it is deemed unenforceable, and in all other
respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by Applicable Law.
9.5 Governing Law; Consent to Jurisdiction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas. Each of the parties submits
to the jurisdiction of any state or federal court sitting in the State of
Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Texas, in any
action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding shall be heard and
determined only 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 waives any defense of inconvenient forum to maintenance
of any action or proceeding so brought.
9.6 Descriptive Headings.
The descriptive headings herein are inserted for convenience of reference
only, do not constitute a part of this Agreement and shall not affect in
any manner the meaning or interpretation of this Agreement.
9.7 Disclosure.
Each of the Schedules to this Agreement shall be deemed to include and
incorporate all disclosures made on the other Schedules to this Agreement.
Certain information set forth in the Schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to
this Agreement. It is understood and agreed that the specification of any
dollar amount in the representations and warranties contained in this
Agreement or the inclusion of any specific item in the Schedules is not
intended to imply that such amounts or
28
higher or lower amounts, or the items so included or other items, are or are not
material, and no party shall use the fact of the setting of such amounts or the
fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in a Schedule is or is not material for
purposes of this Agreement.
9.8 Gender.
Pronouns in masculine, feminine and neuter genders shall be construed to
include any other gender, and words in the singular form shall be construed
to include the plural and vice versa, unless the context otherwise
requires.
9.9 References.
All references in this Agreement to Articles, Sections and other
subdivisions refer to the Articles, Sections and other subdivisions of this
Agreement unless expressly provided otherwise. The words "this Agreement,"
"herein," "hereof," "hereby," "hereunder" and words of similar import refer
to this Agreement as a whole and not to any particular subdivision unless
expressly so limited. Whenever the words "include," "includes" and
"including" are used in this Agreement, such words shall be deemed to be
followed by the words "without limitation." Each reference herein to a
Schedule or Exhibit refers to the item identified separately in writing by
the parties hereto as the described Schedule or Exhibit to this Agreement.
All Schedules and Exhibits are hereby incorporated in and made a part of
this Agreement as if set forth in full herein.
9.10 Counterparts.
This Agreement may be executed by the parties hereto in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
9.11 Injunctive Relief.
The parties hereto acknowledge and agree that irreparable damage would
occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of
this Agreement, in any court of the United States or any state thereof
having jurisdiction, in addition to any other remedy to which the parties
may be entitled under this Agreement or at law or in equity.
29
ARTICLE 10
DEFINITIONS
10.1 Certain Defined Terms.
As used in this Agreement, each of the following terms has the meaning
given it below:
"Affiliate" shall mean, with respect to any person, any other person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such person.
"Applicable Law" shall mean any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified person or property is subject.
"Bradley Members" shall mean those members of Bradley identified in
Schedule 3.5.
"Business Day" shall mean a day on which banks are open for the transaction
of business in Dallas, Texas.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Unit" shall mean a Common Unit, as defined in the Partnership
Agreement.
"Encumbrances" shall mean liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on
voting, sale, transfer, disposition or otherwise), easements and other
encumbrances of every type and description, whether imposed by law,
agreement, understanding or otherwise.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental Entity" shall mean any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body,
agency, department, commission, board, bureau or other authority or
instrumentality (domestic or foreign).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean that an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is
actually aware of such
30
fact or other matter; or a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter. The Partnership will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as chief
executive officer or chief operating officer of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter. Any
person other than an individual or the Partnership will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"Lawsuits" shall mean Case Nos. CJ-93-348 (Dist. Court for Grady County,
Oklahoma) and CJ-97-68 (Dist. Court for Washita County, Oklahoma) in which
Bradley Nominee Corporation is a class action plaintiff the details of
which have been previously delivered to the Partnership and any other class
action lawsuit that may arise which similarly relate to improperly
calculated royalty payments made prior to June 30, 2004.
"Material Adverse Effect" shall mean with respect to any person, property
or asset any adverse change or adverse condition in or relating to the
financial condition of such person, including its subsidiaries, property or
asset that is material to such person, its subsidiaries, property or asset
taken as a whole; provided, however, that any prospective change or changes
in the conditions listed above or relating to or resulting from (i) the
transactions contemplated by this Agreement (or the announcement of such
transactions), (ii) any change or changes in the prices of oil, gas,
natural gas liquids or other hydrocarbon products or (iii) general economic
conditions or local, regional, national or international industry
conditions, shall not be deemed to constitute a Material Adverse Effect.
"Oil and Gas" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate and all other liquid hydrocarbons,
associated gases, vaporous substances or minerals produced from a well
bore.
"Other Minerals" shall mean sulphur, lignite, coal, uranium, thorium, iron,
geothermal steam, water, carbon dioxide, helium and all other minerals,
ores or substances of value which are not generally produced from a
wellbore in conjunction with the production of Oil and Gas.
"Partnership Agreement" shall mean the Amended and Restated Partnership
Agreement of the Partnership, as currently in effect.
"Permits" shall mean licenses, permits, franchises, consents, approvals and
other authorizations of or from Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances created by Bradley, (ii)
liens for Taxes not yet due and payable, (iii) statutory liens (including
materialmen's, mechanic's, repairmen's landlord's, and other similar liens)
arising in connection with the ordinary course of business securing
payments not yet due and payable and (iv) such defects, imperfections or
irregularities of title, if any, as are not substantial in character,
amount or extent and do not materially impair the conduct of normal
operations of the Properties.
31
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
enterprise, unincorporated organization or Governmental Entity.
"Pre-Closing Tax Period" shall mean all taxable periods (or portions
thereof) ending on or before the Effective Time.
"Proceedings" shall mean all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Entity.
"Properties" shall mean:
(a) All of Bradley's interest in and to the Oil and Gas and Other Minerals
in, under and that may be produced from (or pursuant to the terms of) the
properties, rights and interests described in Schedule A;
(b) All other right, title and interest of Bradley, of whatever kind or
character, in and to (i) the Oil and Gas and Other Minerals in, under and
that may be produced from the lands described in Schedule A (including
without limitation interests in oil, gas and mineral leases, overriding
royalty interests, fee royalty interests, fee mineral interests and other
interests) and (ii) any other oil, gas and/or mineral property, right,
interest or license, whether real/immovable, personal/movable, vested,
contingent or otherwise, to the extent any such property, right, interest
or license is located, or relates to lands located, anywhere in the states
referenced in Schedule A;
(c) All of Bradley's interests in and to all Oil and Gas and/or Other
Mineral unitization, pooling and/or communitization agreements, declarations
and/or orders, and in and to the properties, rights and interests covered and
the Units created thereby, which cover, affect or otherwise relate to the
properties, rights and interests described in clause (a) or (b) above;
(d) All of Bradley's interest in and rights under all operating agreements,
production sales contracts, processing agreements, transportation
agreements, gas balancing agreements, farm-out and/or farm-in agreements,
salt water disposal agreements, area of mutual interest agreements and
other contracts and/or agreements which cover, affect, or otherwise relate
to the properties, rights and interests described in clause (a), (b), or
(c) above or to the operation of such properties, rights and interests or
to the treating, handling, storing, processing, transporting or marketing
of Oil and Gas or Other Minerals produced from (or allocated to) such
properties, rights and interests, as same may be amended or supplemented
from time to time;
(e) all of Bradley's interest in and to all improvements, fixtures, movable
or immovable property and other real and/or personal property (including,
without limitation, all wells, pumping units, wellhead equipment, tanks,
pipelines, flow lines, gathering lines, compressors, dehydration units,
separators, meters, buildings, injection facilities, salt water disposal
facilities, and power, telephone and telegraph lines), and all easements,
servitudes, rights-of-way, surface leases, licenses, permits and other
surface rights, which are now or hereafter used, or held for use, in
connection with the properties,
32
rights and interests described in clause (a), (b) or (c) above, or in connection
with the operation of such properties, rights and interests, or in connection
with the treating, handling, storing, processing, transporting or marketing of
Oil and Gas or Other Minerals produced from (or allocated to) such properties,
rights and interests;
(f) all Oil and Gas and Other Minerals produced from or allocated to the
properties, rights and interests described in clauses (a), (b) and/or (c)
above, and any products processed or obtained therefrom (herein
collectively called the "Production"), together with (i) all proceeds of
Production (regardless of whether the severance of the Production to which
such proceeds relates occurred on, before or after the Effective Time
hereof), and (ii) all liens and security interests securing payment of the
proceeds from the sale of such Production, including, but not limited to,
those liens and security interests provided for under statutes enacted in
the jurisdiction in which the Properties are located, or statutes made
applicable to the Properties under federal law (or some combination of
federal and state law);
(g) all payments received in lieu of production from the properties, rights
and interests described in clauses (a), (b) and/or (c) above (regardless of
whether such payments accrued, and/or the events which gave rise to such
payments occurred, on, before or after the Effective Time hereof,
including, without limitation, (i) "take or pay" payments and similar
payments, (ii) payments received in settlement of or pursuant to a judgment
rendered with respect to take or pay or similar obligations or other
obligations under a production sales contract, (iv) payments received under
a gas balancing agreement or similar written or oral arrangement, as a
result of (or received otherwise in settlement of or pursuant to judgment
rendered with respect to) rights held by Bradley as a result of Bradley
(and/or its predecessors in title) taking or having taken less gas from
lands covered by a property right or interest described in clauses (a), (b)
and/or (c) above, than their ownership of such property right or interest
would entitle them to receive and (v) shut-in rental or royalty payments
(the payments described in this clause (g) being herein called "Payments in
Lieu of Production");
(h) to the extent legally transferable, all favorable contract rights and
choses in action (i.e. rights to enforce contracts or to bring claims
thereunder) related to the properties, rights and interests described in
clauses (a) through (g) above (regardless of whether the same arose, and/or
the events which gave rise to the same occurred on, before or after the
Effective Time hereof, and further regardless of whether same arise under
contract, the law or in equity); and
(i) all rights, estates, powers and privileges appurtenant to the foregoing
rights, interests and properties, including without limitation executive
rights (i.e. rights to execute leases), rights to receive bonuses and delay
rentals and rights to grant pooling authority.
"Reasonable Best Efforts" shall mean a party's best efforts in
accordance with reasonable commercial practice and without the incurrence of
unreasonable expense.
33
"Records" means all data, files or records in Bradley's control or
possession pertaining to the ownership and operation of the Properties,
including but not limited to all abstracts of title, accounting records,
property tax records, financial reports and projections, escrow reports,
books, contract files, division order files, documents evidencing the
prices currently being paid for production, engineering data, geological
and geophysical reports, lease files, logs, maps, pressure data, production
records, supplemental abstracts of title, title curative materials, title
opinions, title reports and other data useful to or used in connection with
the development, exploration or operation of the Properties.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Tax" shall mean any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise or other tax imposed by any
United States federal, state or local (or any foreign or provincial) taxing
authority, including any interest, penalties or additions attributable
thereto.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
"Transfer Application" shall have the meaning assigned to it in the
Partnership Agreement.
"Unit" means, collectively, a drilling, spacing, proration, production or
enhanced recovery unit formed pursuant to a voluntary unitization,
communitization or pooling agreement, or a drilling, spacing, proration,
production or enhanced recovery unit formed under or pursuant to law, rule
or regulation or other action of a regulatory body having jurisdiction.
10.2 Certain Additional Defined Terms.
In addition to such terms as are defined in the opening paragraph of and
the recitals to this Agreement and in Section 10.1, the following terms are
used in this Agreement as defined in the Sections set forth opposite such
terms:
Defined Term Section Reference
Agreement Introduction
Applicable Environmental Laws 3.13
Bradley Introduction
Bradley Annual Financial Statements 3.7
Bradley Financial Statements 3.7
Bradley Latest Balance Sheet 3.7
Bradley Latest Financial Statements 3.7
CERCLA 3.13
Certificates of Merger 1.1
Closing 1.1
Closing Costs 5.6
34
Closing Date 1.1
Confidentiality Agreement 5.1
Contributed Cash 4.2(o)
Effective Time 1.1
FLLCA 1.1
Management Contract 5.10
Merger Recitals
Merger Consideration 1.5
ORLPA 1.1
Partnership Introduction
Partnership GP 2.3(a)
Partnership Audited Financial Statements 2.7
Partnership Financial Statements 2.7
Partnership Latest Balance Sheet 2.7
Partnership Unaudited Financial Statements 2.7
Payments in Lieu of Production
Definition of Properties
Production
Definition of Properties
RCRA 3.13
SEC Filings 2.13
Sub Introduction
[remainder of page intentionally blank]
35
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its representative thereunto duly authorized, all as
of the date first above written.
PARTNERSHIP:
DORCHESTER MINERALS, L.P.
BY: Dorchester Minerals Management LP,
General Partner
BY: Dorchester Minerals Management GP LLC,
General Partner
By: /s/ William Casey McManemin
-----------------------------
Name: William Casey McManemin
Title: Chief Executive Officer
SUB:
DORCHESTER MINERALS ACQUISTION GP, INC.
BY: Dorchester Minerals Acquisition GP, Inc.,
General Partner
By: /s/ William Casey McManemin
-----------------------------
Name: William Casey McManemin
Title: President
BRADLEY:
BRADLEY ROYALTY PARTNERS, LLC
By: /s/ James R. McGoogan
-----------------------------
James R. McGoogan, President
36
Exhibit 3.18
BYLAWS
OF
DORCHESTER MINERALS ACQUISITION GP, INC.
TABLE OF CONTENTS
ARTICLE I OFFICES....................................................1
Section 1. Registered Office......................................1
Section 2. Other Offices..........................................1
ARTICLE II MEETINGS OF STOCKHOLDERS...................................1
Section 1. Place of Meeting.......................................1
Section 2. Annual Meetings........................................1
Section 3. Special Meetings.......................................2
Section 4. Notice of Meetings.....................................2
Section 5. Quorum.................................................2
Section 6. Adjournments...........................................2
Section 7. Order of Business......................................3
Section 8. List of Stockholders...................................3
Section 9. Voting.................................................3
Section 10. Inspectors of Election...............................4
Section 11. Postponement and Cancellation of Meeting.............5
Section 12. Action Without Meeting...............................5
ARTICLE III BOARD OF DIRECTORS.........................................5
Section 1. General Powers.........................................5
Section 2. Number, Qualification and Election.....................5
Section 3. Notification of Nominations............................6
Section 4. Quorum and Manner of Acting............................6
Section 5. Place of Meeting.......................................6
Section 6. Regular Meetings.......................................6
Section 7. Special Meetings.......................................7
Section 8. Notice of Meetings.....................................7
Section 9. Rules and Regulations..................................7
Section 10. Participation in Meeting by Means of Communication
Equipment..............................................7
Section 11. Action Without Meeting...............................7
Section 12. Resignations.........................................7
Section 13. Removal of Directors.................................7
Section 14. Vacancies............................................8
Section 15. Compensation.........................................8
Section 16. Advisory Directors...................................8
ARTICLE IV EXECUTIVE AND OTHER COMMITTEES.............................8
Section 1. Executive Committee....................................9
Section 2. Other Committees.......................................9
Section 3. Procedure; Meetings; Quorum............................9
ARTICLE V OFFICERS..................................................10
Section 1. Number; Term of Office................................10
Section 2. Removal...............................................10
Section 3. Resignation...........................................10
Section 4. Vacancies.............................................11
Section 5. The President.........................................11
ii
Section 6. Chairman of the Board.................................11
Section 7. Treasurer.............................................11
Section 8. Secretary.............................................11
Section 9. Controller............................................11
Section 10. Other Officers......................................11
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS...............................................12
Section 1. Third Party Actions...................................12
Section 2. Derivative Actions....................................12
Section 3. Determination of Indemnification......................12
Section 4. Right to Indemnification..............................13
Section 5. Advancement of Expenses...............................13
Section 6. Indemnification and Advancement of Expenses Not
Exclusive............................................13
Section 7. Insurance.............................................13
Section 8. Definitions of Certain Terms..........................13
Section 9. Continuation and Successors...........................14
Section 10. Exclusive Jurisdiction..............................14
ARTICLE VII CAPITAL STOCK............................................14
Section 1. Certificates for Shares...............................14
Section 2. Transfer of Shares....................................15
Section 3. Address of Stockholders...............................15
Section 4. Lost, Destroyed and Mutilated Certificates............15
Section 5. Regulations...........................................15
Section 6. Fixing Date for Determination of Stockholders
of Record............................................16
ARTICLE VIII SEAL..................................................16
ARTICLE IX FISCAL YEAR..............................................16
ARTICLE X WAIVER OF NOTICE.........................................16
ARTICLE XI AMENDMENTS...............................................17
ARTICLE XII MISCELLANEOUS............................................17
Section 1. Execution of Documents................................17
Section 2. Deposits..............................................17
Section 3. Checks................................................17
Section 4. Proxies in Respect of Stock or Other Securities of
Other Corporations...................................17
iii
BYLAWS
OF
DORCHESTER MINERALS ACQUISITION GP, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of Dorchester
Minerals Acquisition GP, Inc. (hereinafter called the "Corporation") in the
State of Oklahoma shall be at Raley Compressor Station, Intersection of Mile 43
Road and "K" Road, 2.5 Miles southwest of Hooker, Oklahoma, Hooker, Oklahoma
73945, and the registered agent in charge thereof shall be Rodney D. Childress.
Section 2. Other Offices. The Corporation may also have an office or
offices, and keep the books and records of the Corporation, except as may
otherwise be required by law, at such other place or places, either within or
without the State of Oklahoma, as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the office of the Corporation or at such other
places, within or without the State of Oklahoma, or, if so determined by the
Board in its sole discretion, at no place (but rather by means of remote
communication) as may from time to time be fixed by the Board of Directors, the
Chairman of the Board or the President.
Section 2. Annual Meetings. Annual meetings of the shareholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before such meetings shall be held during
each calendar year on a date and at such hour as may be fixed by the Board of
Directors, the Chairman of the Board or the President. Failure to designate a
time for the annual meeting or to hold the annual meeting at the designated time
shall not work a dissolution of the Corporation.
In order for business to be properly brought before the meeting by a
shareholder, the business must be legally proper and written notice thereof must
have been filed with the Secretary of the Corporation not less than 60 nor more
than 120 days prior to the meeting. Each such notice shall set forth: (a) the
name and address of the shareholder who intends to make the proposal as the same
appears in the Corporation's records; (b) the class and number of shares of
1
stock of the Corporation that are beneficially owned, directly or indirectly, by
such shareholder; and (c) a clear and concise statement of the proposal and the
shareholder's reasons for supporting it.
The filing of a shareholder notice as required above shall not, in and of
itself, constitute the making of the proposal described therein.
If the chairman of the meeting determines that any proposed business has
not been properly brought before the meeting, he shall declare such business out
of order; and such business shall not be conducted at the meeting.
Section 3. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of the shareholders for any purpose or purposes may be called only by a
majority of the entire Board of Directors. Only such business as is specified in
the notice of any special meeting of the shareholders shall come before such
meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
notice of each meeting of the shareholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each shareholder of record entitled to notice of the meeting. If mailed, such
notice shall be deemed given when deposited in the United States mail, postage
prepaid, directed to the shareholder at such shareholder's address as it appears
on the records of the Corporation. Each such notice shall state the place, if
any, date and hour of the meeting, the means of remote communications, if any,
by which shareholders and proxy holders may be deemed to be present in person
and vote at such meeting and the purpose or purposes for which the meeting is
called. Notice of any meeting of shareholders shall not be required to be given
to any shareholder who shall attend such meeting in person or by proxy without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice to such shareholder, or who shall waive notice thereof as provided in
Article X of these Bylaws. Notice of adjournment of a meeting of shareholders
need not be given if the time and place to which it is adjourned are announced
at such meeting, unless the adjournment is for more than 30 days or, after
adjournment, a new record date is fixed for the adjourned meeting. Notice to
shareholders may be given by a form of electronic transmission if consented to
by the shareholders to whom the notice is given.
Section 5. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, the holders of a majority of
the votes entitled to be cast by the shareholders entitled to vote, which if any
vote is to be taken by classes shall mean the holders of a majority of the votes
entitled to be cast by the shareholders of each such class, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at any meeting of the shareholders.
Section 6. Adjournments. Any meeting of shareholders, annual or
special, may be adjourned solely by the chair of the meeting from time to time
to reconvene at the same or some
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other time, date and place. The shareholders present at a meeting shall not have
authority to adjourn the meeting. Notice need not be given of any such adjourned
meeting if the time, date and place, if any, thereof and the means of remote
communications, if any, by which the shareholders and proxy holders may be
deemed to be present in person and vote at such adjourned meeting are announced
at the meeting at which the adjournment is taken. If the time, date and place of
the adjourned meeting are not announced at the meeting at which the adjournment
is taken, if the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed for the adjourned meeting, then the
Secretary shall give notice of the adjourned meeting as provided in Article II,
Section 4, not less than ten (10) days prior to the date of the adjourned
meeting.
Section 7. Order of Business. At each meeting of the shareholders, the
Chairman of the Board, or, in the absence of the Chairman of the Board, the
President shall act as chairman. The order of business at each such meeting
shall be as determined by the chairman of the meeting. The chairman of the
meeting shall have the right and authority to prescribe such rules, regulations
and procedures and to do all such acts and things as are necessary or desirable
for the proper conduct of the meeting, including, without limitation, the
establishment of procedures for the maintenance of order and safety, limitations
on the time allotted to questions or comments on the affairs of the Corporation,
restrictions on entry to such meeting after the time prescribed for the
commencement thereof, and the opening and closing of the voting polls. The
chairman of the meeting shall announce at each such meeting the date and time of
the opening and the closing of the voting polls for each matter upon which the
shareholders will vote at such meeting.
Section 8. List of Shareholders. It shall be the duty of the
Secretary or other officer of the Corporation who has charge of the stock ledger
to prepare and make, at least 10 days before each meeting of the shareholders, a
complete list of the shareholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in such shareholder's name. Such list shall be produced and
kept available at the times and places required by law. If the meeting is to be
held at a place, such list shall be produced and kept open at the time and place
of the meeting during the whole time thereof, and shall be subject to the
inspection of any shareholder who may be present. If the meeting is to be held
solely by means of remote communication, then the list shall also be open to the
examination of any shareholder during the whole time of the meeting on a
reasonably accessible electronic network, and the information required to access
such list shall be provided with the notice of the meeting.
Section 9. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, each shareholder of record of
any class or series of stock having a preference over the Common Stock of the
Corporation as to dividends or upon liquidation shall be entitled at each
meeting of shareholders to such number of votes for each share of such stock as
may be fixed in the Certificate of Incorporation or in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of such
stock, and each shareholder of record of Common Stock shall be entitled at each
meeting of shareholders to one vote for each share of such stock, in each case,
registered in such shareholder's name on the books of the Corporation:
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(a) on the date fixed pursuant to Section 6 of Article VII of these Bylaws
as the record date for the determination of shareholders entitled to notice of
and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the close of
business on the day next preceding the date on which notice of such meeting is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
Each shareholder entitled to vote at any meeting of shareholders may
authorize not in excess of three persons to act for such shareholder by a proxy
signed by such shareholder or such shareholder's attorney-in-fact. Any such
proxy shall be delivered to the secretary of such meeting at or prior to the
time designated for holding such meeting but, in any event, not later than the
time designated in the order of business for so delivering such proxies. No such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
At each meeting of the shareholders, all corporate actions to be taken by
vote of the shareholders (except as otherwise required by law and except as
otherwise provided in the Certificate of Incorporation) shall be authorized by a
majority of the votes cast by the shareholders entitled to vote thereon, present
in person or represented by proxy. Where a separate vote by a class or classes
is required, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class.
Unless required by law or determined by the chairman of the meeting to be
advisable, the vote on any matter, including the election of directors, need not
be by written ballot. In the case of a vote by written ballot, each ballot shall
be signed by the shareholder voting, or by such shareholder's proxy, and shall
state the number of shares voted.
Section 10. Inspectors of Election. Either the Board of Directors or, in
the absence of an appointment of inspectors by the Board, the Chairman of the
Board or the President shall, in advance of each meeting of the shareholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. In connection with any such appointment, one or more persons may, in
the discretion of the body or person making such appointment, be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at any meeting of shareholders, the chairman of such
meeting shall appoint one or more inspectors to act at such meeting. Each such
inspector shall perform such duties as are required by law and as shall be
specified by the Board, the Chairman of the Board, the President or the chairman
of the meeting. Each such inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
Inspectors need not be shareholders. No director or nominee for the office of
director shall be appointed such an inspector.
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Section 11. Postponement and Cancellation of Meeting. Any previously
scheduled annual or special meeting of the shareholders maybe postponed, and any
previously scheduled annual or special meeting of the shareholders called by the
Board may be canceled, by resolution of the Board upon public notice given prior
to the time previously scheduled for such meeting of shareholders.
Section 12. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the shareholders may be taken without a meeting if a
consent thereto in writing or by electronic transmission is signed by the
holders of the outstanding stock not having less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation in accordance with applicable law.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation of the
Corporation directed or required to be exercised or done by the shareholders.
Section 2. Number, Qualification and Election. The number of directors of
the Corporation shall be fixed from time to time by resolution adopted by vote
of a majority of the entire Board of Directors or the shareholders, provided
that the number so fixed shall not be less than one nor more than fifteen.
The directors, other than those who may be elected by the holders of shares
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation pursuant to the terms of any resolution or
resolutions providing for the issuance of such stock adopted by the Board, shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
Each director shall be at least 21 years of age. Directors need not be
shareholders of the Corporation.
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, at each
annual meeting of the shareholders, all directors of the Corporation shall be
elected.
In any election of directors, the persons receiving a plurality of the
votes cast, up to the number of directors to be elected in such election, shall
be deemed elected.
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Section 3. Notification of Nominations. Subject to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the Board of Directors or by any shareholder entitled
to vote for the election of directors. Any shareholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation not later than (i) with
respect to an election to be held at an annual meeting of shareholders, 90 days
in advance of such meeting, and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Each such notice shall set forth: (a) the name
and address of the shareholder who intends to make the nomination of the person
or persons to be nominated; (b) a representation that the shareholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the shareholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 4. Quorum and Manner of Acting. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or these Bylaws, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board, and, except as so provided,
the vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board. In the absence of a quorum, a majority
of the directors present may adjourn the meeting to another time and place. At
any adjourned meeting at which a quorum is present, any business that might have
been transacted at the meeting as originally called may be transacted.
Section 5. Place of Meeting. The Board of Directors may hold its meetings
at such place or places within or without the State of Oklahoma as the Board may
from time to time determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board shall from time to time by
resolution determine. If any day fixed for a regular meeting shall be a legal
holiday under the laws of the place where the meeting is to be held, the meeting
that would otherwise be held on that day shall be held at the same hour on the
next succeeding business day.
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Section 7. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or the President or
by a majority of the directors.
Section 8. Notice of Meetings. Notice of regular meetings of the Board of
Directors or of any adjourned meeting thereof need not be given. Notice of each
special meeting of the Board shall be mailed or transmitted by delivery service
to each director, addressed to such director at such director's residence or
usual place of business, at least two days before the day on which the meeting
is to be held or shall be sent to such director at such place by telegraph or
facsimile telecommunication or be given personally or by telephone or by other
means of electronic transmission, not later than the day before the meeting is
to be held, but notice need not be given to any director who shall, either
before or after the meeting, submit a signed waiver of such notice or who shall
attend such meeting without protesting, prior to or at its commencement, the
lack of notice to such director. Every such notice shall state the time and
place but need not state the purpose of the meeting. Notice to directors may be
given by telegram, telecopier, telephone, or other means of electronic
transmission.
Section 9. Rules and Regulations. The Board of Directors may adopt such
rules and regulations not inconsistent with the provisions of law, the
Certificate of Incorporation of the Corporation or these Bylaws for the conduct
of its meetings and management of the affairs of the Corporation as the Board
may deem proper.
Section 10. Participation in Meeting by Means of Communication Equipment.
Any one or more members of the Board of Directors or any committee thereof may
participate in any meeting of the Board or of any such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
Section 11. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all of the members of the Board or of any such
committee consent thereto in writing or by electronic transmission, as the case
may be, and the writing or electronic transmission is filed with the minutes of
proceedings of the Board or of such committee.
Section 12. Resignations. Any director of the Corporation may at any time
resign by giving written notice to the Board of Directors, the Chairman of the
Board, the President or the Secretary of the Corporation. Such resignation shall
take effect at the time specified therein or, if the time be not specified, upon
receipt thereof; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 13. Removal of Directors. Any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors; provided, that if
a director was elected by the holders of a particular
7
class or series of stock, only the holders of that class or series shall
be entitled to remove such director.
Section 14. Vacancies. Subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, any vacancies on the Board of Directors and any newly created
directorship resulting from an increase in the authorized number of directors,
may be filled by election at an annual or special meeting of shareholders called
for that purpose or by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the entire Board, and the directors so
chosen shall hold office until the next annual meeting of shareholders and until
their successors are duly elected and shall qualify, unless sooner displaced.
Section 15. Compensation. Each director who shall not at the time also be a
salaried officer or employee of the Corporation or any of its subsidiaries
(hereinafter referred to as an "outside director"), in consideration of such
person serving as a director, shall be entitled to receive from the Corporation
such amount per annum and such fees for attendance at meetings of the Board of
Directors or of committees of the Board, or both, as the Board shall from time
to time determine. In addition, each director, whether or not an outside
director, shall be entitled to receive from the Corporation reimbursement for
the reasonable expenses incurred by such person in connection with the
performance of such person's duties as a director. Nothing contained in this
Section 15 shall preclude any director from serving the Corporation or any of
its subsidiaries in any other capacity and receiving proper compensation
therefor.
Section 16. Advisory Directors. The Board of Directors may appoint one or
more advisory directors as it shall from time to time determine. Each advisory
director appointed shall hold office at the pleasure of the Board of Directors.
An advisory director shall be entitled, but shall have no obligation, to attend
and be present at the meetings of the Board of Directors, although a meeting of
the Board of Directors may be held without notice to any advisory director and
no advisory director shall be considered in determining whether a quorum of the
Board of Directors is present. An advisory director shall advise and counsel the
Board of Directors on the business and operations of the Corporation as
requested by the Board of Directors; however, an advisory director shall not be
entitled to vote on any matter presented to the Board of Directors. An advisory
director, in consideration of such person serving as an advisory director, shall
be entitled to receive from the Corporation such fees for attendance at meetings
of the Board of Directors as the Board shall from time to time determine. In
addition, an advisory director shall be entitled to receive from the Corporation
reimbursement for the reasonable expenses incurred by such person in connection
with the performance of such person's duties as an advisory director.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
8
Section 1. Executive Committee. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate annually three or more of
its members to constitute members or alternate members of an Executive
Committee, which Committee shall have and may exercise, between meetings of the
Board, all the powers and authority of the Board in the management of the
business affairs of the Corporation, including, if such Committee is so
empowered and authorized by resolution adopted by a majority of the entire
Board, the power and authority to declare a dividend and to authorize the
issuance of stock, and may authorize the seal of the Corporation to be affixed
to all papers that may require it, except that the Executive Committee shall not
have such power or authority in reference to:
(a ) amending the Certificate of Incorporation of the Corporation;
(b ) adopting an agreement of merger or consolidation involving the
Corporation;
(c ) recommending to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of
the Corporation;
(d ) recommending to the shareholders a dissolution of the
Corporation or a revocation of a dissolution;
(e ) adopting, amending or repealing any Bylaw;
(f ) filling vacancies on the Board or on any committee of the
Board, including the Executive Committee; or
(g ) amending or repealing any resolution of the Board which by
its terms may be amended or repealed only by the Board.
The Board shall have power at any time to change the membership of the
Executive Committee, to fill all vacancies in it and to discharge it, either
with or without cause.
Section 2. Other Committees. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate from among its members one
or more other committees, each of which shall, except as otherwise prescribed by
law, have such authority of the Board as may be specified in the resolution of
the Board designating such committee. A majority of all the members of such
committee may determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. The Board shall have power at any time
to change the membership of, to fill all vacancies in and to discharge any such
committee, either with or without cause.
Section 3. Procedure; Meetings; Quorum. Regular meetings of the Executive
Committee or any other committee of the Board of Directors, of which no notice
shall be necessary, may be held at such times and places as shall be fixed by
resolution adopted by a majority of the members thereof. Special meetings of the
Executive Committee or any other committee of the Board shall be called at the
request of any member thereof. Notice of each
9
special meeting of the Executive Committee or any other committee of the Board
shall be sent by mail, delivery service, facsimile telecommunication,
telegraph or telephone, or be delivered personally to each member thereof not
later than the day before the day on which the meeting is to be held, but notice
need not be given to any member who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of such notice to such
member. Any special meeting of the Executive Committee or any other
committee of the Board shall be a legal meeting without any notice thereof
having been given, if all the members thereof shall be present thereat.
Notice of any adjourned meeting of any committee of the Board need not be
given. The Executive Committee or any other committee of the Board
may adopt such rules and regulations not inconsistent with the provisions of
law, the Certificate of Incorporation of the Corporation or these Bylaws for the
conduct of its meetings as the Executive Committee or any other committee of the
Board may deem proper. A majority of the Executive Committee or any other
committee of the Board shall constitute a quorum for the transaction of business
at any meeting, and the vote of a majority of the members thereof present at any
meeting at which a quorum is present shall be the act of such committee. The
Executive Committee or any other committee of the Board of Directors shall keep
written minutes of its proceedings and shall report on such proceedings to the
Board.
ARTICLE V
OFFICERS
Section 1. Number; Term of Office. The officers of the Corporation shall be
elected by the Board of Directors, and shall consist of a President, Secretary
and Treasurer. The Board of Directors, in its discretion, may also elect a
Chairman of the Board and such other officers as the Board of Directors may
designate, all of whom shall hold office until their successors are elected and
qualified. Any two or more offices may be held by the same person. The Board of
Directors may designate which of such officers are to be treated as executive
officers for purposes of these Bylaws or for any other purpose.
Section 2. Removal. Any officer may be removed, either with or without
cause, by the Board of Directors at any meeting thereof called for that purpose,
or, except in the case of any officer elected by the Board, by any committee or
superior officer upon whom such power may be conferred by the Board.
Section 3. Resignation. Any officer may resign at any time by giving notice
to the Board of Directors, the President or the Secretary of the Corporation.
Any such resignation shall take effect at the date of receipt of such notice or
at any later date specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
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Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term in the manner prescribed in these Bylaws for election to such
office.
Section 5. The President. The President shall be the chief executive
officer of the Corporation and as such shall have general supervision and
direction of the business and affairs of the Corporation, subject to the control
of the Board of Directors. The President shall, if present and in the absence of
the Chairman of the Board, preside at meetings of the shareholders, meetings of
the Board and meetings of the Executive Committee. The President shall perform
such other duties as the Board may from time to time determine. The President
may sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the Board or any committee thereof
empowered to authorize the same.
Section 6. Chairman of the Board. The Chairman of the Board shall, if
present, preside at meetings of the shareholders, meetings of the Board and
meetings of the Executive Committee. The Chairman of the Board shall counsel
with and advise the President and perform such other duties as the Board or the
Executive Committee may from time to time determine.
Section 7. Treasurer. The Treasurer shall perform all duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to the Treasurer by the President, the Chairman of the Board or the
Board of Directors.
Section 8. Secretary. It shall be the duty of the Secretary to act as
secretary at all meetings of the Board of Directors, of the Executive Committee
and of the shareholders and to record the proceedings of such meetings in a book
or books to be kept for that purpose; the Secretary shall see that all notices
required to be given by the Corporation are duly given and served; the Secretary
shall be custodian of the seal of the Corporation and shall affix the seal or
cause it to be affixed to all certificates of stock of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized in accordance with the
provisions of these Bylaws. The Secretary shall have charge of the stock ledger
and also of the other books, records and papers of the Corporation and shall see
that the reports, statements and other documents required by law are properly
kept and filed; and the Secretary shall in general perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to such person by the President, the Chairman of the Board or
the Board of Directors.
Section 9. Controller. The Controller, if any, shall perform all of the
duties incident to the office of the Controller and such other duties as from
time to time may be assigned to such person by the President, the Chairman of
the Board or the Board of Directors.
Section 10. Other Officers. Other officers appointed by the Board of
Directors shall perform the duties incident to their respective offices and such
other duties as from time to time may be assigned to such person by the
President, the Chairman of the Board or the Board of Directors.
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ARTICLE VI
INDEMNIFICATION
Section 1. Third Party Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 2. Derivative Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. Determination of Indemnification. Any indemnification under
Section 1 or 2 of this Article VI (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because such person has met the applicable standard of conduct
set forth in Section 1 or 2 of this Article VI. Such determination shall be made
(i) by a majority vote of the directors who are not parties to such action, suit
or proceeding,
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even though less than a quorum, or (ii) if there are no suchdirectors, or if
such directors so direct, by independent legal counsel in a written opinion,
or (iii) by the shareholders.
Section 4. Right to Indemnification. Notwithstanding the other provisions
of this Article VI, to the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or 2 of this Article VI, or
in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
Section 5. Advancement of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any civil, criminal,
administrative or investigative action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding, provided, however, that
the payment of expenses incurred by a director, officer, employee or agent in
advance of the final disposition of the action, suit or proceeding shall be made
only upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay all amounts advanced if it should be ultimately
determined that such person is not entitled to be indemnified under this Article
VI or otherwise.
Section 6. Indemnification and Advancement of Expenses Not Exclusive. The
indemnification and advancement of expenses provided by, or granted pursuant to
the other Sections of this Article VI shall not be deemed exclusive of any other
rights to which any person seeking indemnification may be entitled under any
law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office. All rights to indemnification under this
Article VI shall be deemed to be provided by a contract between the Corporation
and the director, officer, employee or agent who served in such capacity at any
time while these Bylaws and other relevant provisions of the Oklahoma General
Corporation Act and other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then existing.
Section 7. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the applicable provisions of
the Oklahoma General Corporation Act.
Section 8. Definitions of Certain Terms. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer,
13
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as
such person would have with respect to such constituent corporation if its
separate existence had continued.
For purposes of this Article VI, references to "other enterprise" shall
include employee benefit plans; references to "fines" shall include any excise
tax assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation that
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article VI.
Section 9. Continuation and Successors. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 10. Exclusive Jurisdiction. The Oklahoma District Courts are vested
with exclusive jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this Article VI or under any statute,
agreement, vote of shareholders or disinterested directors, or otherwise. The
Oklahoma District Courts may summarily determine the Corporation's obligation to
advance expenses (including attorneys' fees).
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates for Shares. Certificates representing shares of
stock of each class of the Corporation, whenever authorized by the Board of
Directors, shall be in such form as shall be approved by the Board. The
certificates representing shares of stock of each class shall be signed by, or
in the name of, the Corporation by the Chairman of the Board or the President or
by the Secretary of the Corporation, and sealed with the seal of the
Corporation, which may be by a facsimile thereof. Any or all such signatures may
be facsimiles if countersigned by a transfer agent or registrar. Although any
officer, transfer agent or registrar whose manual or facsimile signature is
affixed to such a certificate ceases to be such officer, transfer agent or
registrar before such certificate has been issued, it may nevertheless be issued
by the Corporation with the same effect as if such officer, transfer agent or
registrar were still such at the date of its issue.
14
The stock ledger and blank share certificates shall be kept by the
Secretary or by a transfer agent or by a registrar or by any other officer or
agent designated by the Board.
Section 2. Transfer of Shares. Transfer of shares of stock of each class of
the Corporation shall be made only on the books of the Corporation by the holder
thereof, or by such holder's attorney thereunto authorized by a power of
attorney duly executed and filed with the Secretary of the Corporation or a
transfer agent for such stock, if any, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The person in whose
name shares stand on the books of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation; provided, however, that
whenever any transfer of shares shall be made for collateral security and not
absolutely, and written notice thereof shall be given to the Secretary or to
such transfer agent, such fact shall be stated in the entry of the transfer. No
transfer of shares shall be valid as against the Corporation, its shareholders
and creditors for any purpose, except to render the transferee liable for the
debts of the Corporation to the extent provided by law, until it shall have been
entered in the stock records of the Corporation by an entry showing from and to
whom transferred.
Section 3. Address of Shareholders. Each shareholder shall designate to the
Secretary or transfer agent of the Corporation an address at which notices of
meetings and all other corporate notices may be served or mailed to such person,
and, if any shareholder shall fail to designate such address, corporate notices
may be served upon such person by mail directed to such person at such person's
post office address, if any, as the same appears on the share record books of
the Corporation or at such person's last known post office address.
Section 4. Lost, Destroyed and Mutilated Certificates. The holder of any
share of stock of the Corporation shall immediately notify the Corporation of
any loss, theft, destruction or mutilation of the certificate therefor; the
Corporation may issue to such holder a new certificate or certificates for
shares, upon the surrender of the mutilated certificate or, in the case of loss,
theft or destruction of the certificate, upon satisfactory proof of such loss,
theft or destruction; the Board of Directors, or a committee designated thereby,
or the transfer agents and registrars for the stock, may, in their discretion,
require the owner of the lost, stolen or destroyed certificate, or such person's
legal representative, to give the Corporation a bond in such sum and with such
surety or sureties as they may direct to indemnify the Corporation and said
transfer agents and registrars against any claim that may be made on account of
the alleged loss, theft or destruction of any such certificate or the issuance
of such new certificate.
Section 5. Regulations. The Board of Directors may make such additional
rules and regulations as it may deem expedient concerning the issue and transfer
of certificates representing shares of stock of each class of the Corporation
and may make such rules and take such action as it may deem expedient concerning
the issue of certificates in lieu of certificates claimed to have been lost,
destroyed, stolen or mutilated.
15
Section 6. Fixing Date for Determination of Shareholders of Record. In
order that the Corporation may determine the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action. A determination of shareholders entitled to notice of or to vote
at a meeting of the shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE VIII
SEAL
The Board of Directors may provide for a corporate seal bearing the name of
the Corporation in such form and bearing such other words or figures as the
Board of Directors may approve and adopt. The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatsoever is required to be given by these Bylaws, by
the Certificate of Incorporation of the Corporation or by law, the person
entitled thereto may, either before or after the meeting or other matter in
respect of which such notice is to be given, waive such notice in writing, which
writing shall be filed with or entered upon the records of the meeting or the
records kept with respect to such other matter, as the case may be, and in such
event such notice need not be given to such person and such waiver shall be
deemed equivalent to such notice.
16
ARTICLE XI
AMENDMENTS
Any Bylaw (including this Article XI) may be adopted, repealed, altered or
amended at any meeting of the Board of Directors by the affirmative vote of a
majority of the directors, provided that such proposed action in respect thereof
shall be stated in the notice of such meeting.
ARTICLE XII
MISCELLANEOUS
Section 1. Execution of Documents. The Board of Directors or any committee
thereof shall designate the officers, employees and agents of the Corporation
who shall have power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, notes, checks, drafts and other orders for the payment of money and
other documents for and in the name of the Corporation and may authorize such
officers, employees and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees or agents of the
Corporation. Such delegation may be by resolution or otherwise and the authority
granted shall be general or confined to specific matters, all as the Board or
any such committee may determine. In the absence of such designation referred to
in the first sentence of this Section 1, the officers of the Corporation shall
have such power so referred to, to the extent incident to the normal performance
of their duties.
Section 2. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation or
otherwise as the Board of Directors or any committee thereof or any officer of
the Corporation to whom power in that respect shall have been delegated by the
Board or any such committee shall select.
Section 3. Checks. All checks, drafts and other orders for the payment of
money out of the funds of the Corporation, and all notes or other evidence of
indebtedness of the Corporation, shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board
of Directors or of any committee thereof.
Section 4. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Board of Directors or any committee thereof shall designate
the officers of the Corporation who shall have authority from time to time to
appoint an agent or agents of the Corporation to exercise in the name and on
behalf of the Corporation the powers and rights that the Corporation may have as
the holder of stock or other securities in any other corporation, and to vote or
consent in respect of such stock or securities; such designated officers may
instruct the person or persons so appointed as to the manner of exercising such
powers and rights; and such designated officers may execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, such written proxies, powers of attorney or other
17
instruments as they may deem necessary or proper in order that the Corporation
may exercise its said powers and rights.
Exhibit 3.17
CERTIFICATE OF INCORPORATION
OF
DORCHESTER MINERALS ACQUISITION GP, INC.
TO: THE OKLAHOMA SECRETARY OF STATE
2300 N. Lincoln Blvd., Room 101, State Capitol Building
Oklahoma City, OK 73105-4897
(405) 522-4560
The undersigned, for the purpose of forming an Oklahoma profit corporation
pursuant to the provisions of Title 18, Section 1001, does hereby execute the
following certificate of incorporation:
FIRST: The name of the corporation is Dorchester Minerals Acquisition GP,
Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Oklahoma is Raley Compressor Station, Intersection of Mile 43 Road and "K" Road,
2.5 Miles southwest of Hooker, Oklahoma, county of Texas. The name of the
registered agent is Rodney D. Childress.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporation may be organized under the general corporation
law of Oklahoma.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is One Hundred Thousand (100,000) of the par value of $.01
each, to be designated "Common Stock."
FIFTH: The name of the incorporator of the Corporation is David G. Harris
and the mailing address of such incorporator is 1700 Pacific Avenue, Suite 3300,
Dallas, Texas 75201.
SIXTH: The name and mailing address of the persons who are to serve as the
initial directors until the first annual meeting of the holders of capital
stock of the corporation or until their successors are elected and qualified
are as follows:
Name Address
William Casey McManemin 3738 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219-4379
H.C. Allen, Jr. 3738 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219-4379
James E. Raley 3738 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219-4379
SEVENTH: The Board of Directors is expressly authorized and empowered to
make, alter or repeal Bylaws, subject to the power of the stockholders to alter
or repeal the Bylaws made by the Board of Directors.
EIGHTH: To the fullest extent permitted by the Oklahoma General Corporation
Act as the same exists or may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for breach of duty as a director. Without
limiting the foregoing in any respect, a director of the Corporation shall not
be personally liable to the Corporation or its shareholders for monetary damages
for breach of duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 1053 of the Oklahoma General
Corporation Act, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Oklahoma General Corporation Act is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Oklahoma
General Corporation Act, as so amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
NINTH: The Corporation will, to the fullest extent permitted by the
Oklahoma General Corporation Act, as the same exists or may hereafter be
amended, indemnify any and all persons it has power to indemnify under such law
from and against any and all of the expenses, liabilities or other matters
referred to in or covered by such law. Such indemnification may be provided
pursuant to any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his director or officer capacity
and as to action in another capacity while holding such office, will continue as
to a person who has ceased to be a director, officer, employee or agent, and
will inure to the benefit of the heirs, executors and administrators of such a
person.
If a claim under this Article is not paid in full by the Corporation within
thirty days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in
Page 2
whole or in part,the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Oklahoma
General Corporation Act for the Corporation to indemnify the claimant for the
amount claimed. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Oklahoma General Corporation
Act, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
TENTH: The effective date and time of the formation of the Corporation
shall be 11:58 p.m., Central Standard Time, on September 21, 2004.
EXECUTED effective this 21st day of September, 2004.
By: /s/ David G. Harris
----------------------
David G. Harris, Incorporator
Exhibit 3.16
AGREEMENT OF LIMITED PARTNERSHIP
OF
DORCHESTER MINERALS ACQUISITION LP
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of September 24, 2004 is
entered into and executed by DORCHESTER MINERALS ACQUISITION GP, INC., an
Oklahoma corporation, as General Partner, and DORCHESTER MINERALS, L.P., a
Delaware limited partnership, as Limited Partner.
I. DEFINITIONS
The following definitions shall for all purposes, unless otherwise clearly
indicated to the contrary, apply to the terms used in this Agreement.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Oklahoma as
described in the first sentence of Section 2.5 as amended or restated from time
to time.
"Oklahoma Act" means the Oklahoma Revised Uniform Limited Partnership Act,
as amended from time to time, and any successor to such act.
"General Partner" means Dorchester Minerals Acquisition GP, Inc., an
Oklahoma corporation, in its capacity as the general partner of the Partnership,
and any successor to Dorchester Minerals Acquisition GP, Inc., as general
partner.
"Limited Partner" means Dorchester Minerals, L.P. and any other limited
partner admitted to the Partnership from time to time.
"Partner" means the General Partner or any Limited Partner.
"Partnership" means Dorchester Minerals Acquisition LP, an Oklahoma limited
partnership.
"Percentage Interest" means, with respect to any Partner, the percentage of
cash contributed by such Partner to the Partnership as a percentage of all cash
contributed by all the Partners to the Partnership.
II. ORGANIZATIONAL MATTERS
2.1 Formation. Subject to the provisions of this Agreement, the General
Partner and the Limited Partner have formed the Partnership as a limited
partnership pursuant to the provisions of the Oklahoma Act. The General Partner
and the Limited Partner hereby enter into this Agreement to set forth the rights
and obligations of the Partners and certain matters related thereto. Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration, dissolution, and termination of the Partnership
shall be governed by the Oklahoma Act.
2.2 Name. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, "Dorchester Minerals
Acquisition LP."
2.3 Principal Office; Registered Office.
(a) The principal office of the Partnership shall be at Raley Compressor
Station, Intersection of Mile 43 Road and "K" Road, 2.5 Miles southwest of
Hooker, Oklahoma, Hooker, Oklahoma 73945 or such other place as the General
Partner may from time to time designate. The Partnership may maintain offices at
such other places as the General Partner deems advisable.
(b) The address of the Partnership's registered office in the State of
Oklahoma shall be at Raley Compressor Station, Intersection of Mile 43 Road and
"K" Road, 2.5 Miles southwest of Hooker, Oklahoma, Hooker, Oklahoma 73945, and
the name of the Partnership's registered agent for service of process at such
address shall be Rodney D. Childress.
2.4 Term. The Partnership shall continue in existence until an election to
dissolve the Partnership by the General Partner.
2.5 Organizational Certificate. A Certificate of Limited Partnership of the
Partnership has been filed by the General Partner with the Secretary of State of
the State of Oklahoma as required by the Oklahoma Act. The General Partner shall
cause to be filed such other certificates or documents as may be required for
the formation, operation, and qualification of a limited partnership in the
State of Oklahoma and any state in which the Partnership may elect to do
business. The General Partner shall thereafter file any necessary amendments to
the Certificate of Limited Partnership and any such other certificates and
documents and do all things requisite to the maintenance of the Partnership as a
limited partnership (or as a partnership in which the Limited Partners have
limited liability) under the laws of Oklahoma and any state or jurisdiction in
which the Partnership may elect to do business.
2.6 Partnership Interests. Effective as of the date hereof, the General
Partner shall have a 0.1% Percentage Interest and the Limited Partner shall have
a 99.9% Percentage Interest.
III. PURPOSE
The purpose and business of the Partnership shall be to engage in any
lawful activity for which limited partnerships may be organized under the
Oklahoma Act.
IV. CAPITAL CONTRIBUTIONS
At or around the date hereof, the Limited Partner contributed to the
Partnership $990 in cash and the General Partner contributed to the Partnership
$10 in cash.
Page 2
V. CAPITAL ACCOUNTS ALLOCATIONS
5.1 Capital Accounts. The Partnership shall maintain a capital account for
each of the Partners in accordance with the regulations issued pursuant to
Section 704 of the Internal Revenue Code of 1986, as amended (the "Code") and as
determined by the General Partner as consistent therewith.
5.2 Allocations. For federal income tax purposes, each item of income,
gain, loss, deduction, and credit of the Partnership shall be allocated among
the Partners in accordance with their Percentage Interests, except that the
General Partner shall have the authority to make such other allocations as are
necessary and appropriate to comply with Section 704 of the Code and the
regulations issued pursuant thereto.
5.3 Distributions. From time to time, but not less often than quarterly,
the General Partner shall review the Partnership's accounts to determine whether
distributions are appropriate. The General Partner may make such cash
distributions as it, in its sole discretion, may determine without being limited
to current or accumulated income or gains from any Partnership funds, including,
without limitation, Partnership revenues, capital contributions, or borrowed
funds; provided, however, that no such distribution shall be made if, after
giving effect thereto, the liabilities of the Partnership exceed the fair market
value of the assets of the Partnership. In its sole discretion, the General
Partner may, subject to the foregoing proviso, also distribute to the Partners
other Partnership property or other securities of the Partnership or other
entities. All distributions by the General Partner shall be made in accordance
with the Percentage Interests of the Partners.
VI. MANAGEMENT AND OPERATIONS OF BUSINESS
Except as otherwise expressly provided in this Agreement, all powers to
control and manage the business and affairs of the Partnership shall be vested
exclusively in the General Partner, and the Limited Partner shall not have any
power to control or manage the Partnership.
VII. RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
The Limited Partner shall have no liability under this Agreement except as
provided in Article IV.
VIII. DISSOLUTION AND LIQUIDATION
The Partnership shall be dissolved as provided in Section 2.4 and its
affairs shall be wound up as provided by applicable law.
IX. AMENDMENT OF PARTNERSHIP AGREEMENT
The General Partner may amend any provision of this Agreement without the
consent of the Limited Partner and may execute, swear to, acknowledge, deliver,
file, and record whatever documents may be required in connection therewith.
X. GENERAL PROVISIONS
Page 3
10.1 Addresses and Notices. Any notice to the Partnership, the General
Partner, or the Limited Partner shall be deemed given if received by it in
writing at the principal office of the Partnership designated pursuant to
Section 2.3(a).
10.2 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
10.3 Integration. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
10.4 Severability. If any provision of this Agreement is or becomes
invalid, illegal, or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions hereof, or of such provision in other
respects, shall not be affected thereby.
10.5 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Oklahoma.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
Page 4
IN WITNESS WHEREOF, this Agreement has been duly executed by the General
Partner and the Limited Partner as of the date first above written.
GENERAL PARTNER:
DORCHESTER MINERALS ACQUISITION GP, INC.
BY:/s/ William Casey McManemin
-------------------------------------
William Casey McManemin, President
LIMITED PARTNER:
DORCHESTER MINERALS, L.P.
BY: Dorchester Minerals Management LP
its general partner
By: Dorchester Minerals Management GP LLC
By:/s/ James E. Raley
------------------------------------
James E. Raley
Chief Operating Officer
Page 5
Exhibit 31.1
CERTIFICATIONS
I, William Casey McManemin, Chief Executive Officer of Dorchester Minerals
Management GP LLC, General Partner of Dorchester Minerals Management LP, General
Partner of Dorchester Minerals, L.P., (the "Registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dorchester Minerals,
L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the Registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal
control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Registrant's auditors and the audit committee of the Registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
control over financial reporting.
/s/ William Casey McManemin
-----------------------------
William Casey McManemin
Date:November 5, 2004 Chief Executive Officer