Exhibit 1
5,750,000 Shares of Common Stock
ESENJAY EXPLORATION, INC.
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UNDERWRITING AGREEMENT
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July 15, 1998
XXXXXX, XXXXXXX INC.
As Representative of the
several Underwriters named in
Schedule I attached hereto
c/x Xxxxxx, Xxxxxxx Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Esenjay Exploration, Inc., a Delaware corporation (the "COMPANY"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several underwriters named in SCHEDULE I hereto (the "UNDERWRITERS")
5,000,000 shares of its common stock, par value $.01 per share (the "COMMON
STOCK"), which 5,000,000 shares of Common Stock are herein referred to as the
"FIRM SHARES." In addition, the Company proposes to sell to the Underwriters,
at the option of the Underwriters, an aggregate of up to an additional 750,000
shares of Common Stock (the "OPTION SHARES") for the sole purpose of covering
over-allotments in the sale of the Firm Shares. The respective amounts of the
Firm Shares to be so purchased by the Underwriters are set forth opposite their
names in SCHEDULE I hereto. The Firm Shares and any Option Shares purchased by
the Underwriters are herein referred to as the "SHARES." In connection with the
proposed issuance and sale of the Shares, the Company proposes to issue to
Xxxxxx, Xxxxxxx Inc. a Warrant (the "WARRANT") to purchase from the Company
191,250 shares of Common Stock (the "WARRANT SHARES") pursuant to the terms and
conditions set forth in the Warrant (a form of which is attached hereto as
Annex A).
The Shares are more fully described in the Registration Statement referred
to hereafter.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. The Company represents and warrants to, and agrees with, the
Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, and amendments
thereto, on Form SB-2 (No. 333-53581), for the registration of the Shares,
the Warrant and the Warrant Shares under the
Securities Act of 1933 (the "ACT"). Such registration statement,
including the prospectus, financial statements and schedules, exhibits
and all other documents filed as a part thereof, as amended at the time
of effectiveness of the registration statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A or Rule 434 of the Rules and Regulations of
the Commission under the Act (the "REGULATIONS"), and any additional
related registration statement filed pursuant to Rule 462(b) of the Act,
is herein called the "REGISTRATION STATEMENT," and the prospectus, in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, or filed as part of the Registration Statement at the time
of effectiveness if no Rule 424(b) or Rule 434 filing is required, is
herein called the "PROSPECTUS." The term "PRELIMINARY PROSPECTUS" as
used herein means a preliminary prospectus as described in Rule 430 of
the Regulations.
(b) At the time of effectiveness of the Registration Statement
or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b) or Rule 434 of the Regulations,
when any supplement to or amendment of the Prospectus is filed with
the Commission (but only after any such amendment becomes effective),
and at the Closing Date and the Additional Closing Date, if any (as
hereinafter respectively defined), the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto complied
or will comply in all material respects with the applicable provisions
of the Act and the Regulations and do not or will not contain an
untrue statement of a material fact and do not or will not omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein (i) in the case of the
Registration Statement, not misleading, and (ii) in the case of the
Prospectus, in light of the circumstances under which they were made,
not misleading. When any related preliminary prospectus was first
filed with the Commission (whether filed as part of the registration
statement for the registration of the Shares, the Warrant and the
Warrant Shares or any amendment thereto or pursuant to Rule 424(a) of
the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such preliminary prospectus and
any amendments thereof and supplements thereto complied in all
material respects with the applicable provisions of the Act and the
Regulations and did not contain an untrue statement of a material fact
and did not omit, other than omissions contemplated by the Act and the
Regulations, to state any material fact required to be stated therein
or necessary in order to make the statements therein in light of the
circumstances under which they were made not misleading. No
representation and warranty is made in this subsection (b), however,
with respect to any information contained in or omitted from the
Registration Statement or the Prospectus or any related preliminary
prospectus or any amendment thereof or supplement thereto in reliance
upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you as herein
stated expressly for use in connection with the preparation thereof.
If Rule 434 is used, the Company will comply with the requirements of
Rule 434.
(c) Deloitte & Touche LLP, which has certified the financial
statements and supporting schedules included in the Registration
Statement, are independent public accountants with regard to the
Company as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
disclosed in the Registration Statement and the Prospectus, there has
been no material adverse change or any development that could
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reasonably be expected to result in a material adverse change in the
business, prospects, properties, operations, condition (financial or
other) or results of operations of the Company and its Subsidiaries
(as defined below) taken as a whole, whether or not arising from
transactions in the ordinary course of business, and since the date of
the latest balance sheet presented in the Registration Statement and
the Prospectus, neither the Company nor any of its Subsidiaries has
incurred or undertaken any liabilities or obligations, direct or
contingent, which are material to the Company and its subsidiaries
taken as a whole, except for liabilities or obligations which are
disclosed in or contemplated by the Registration Statement and the
Prospectus. Except as disclosed in or contemplated by the Prospectus,
since the date of the last audited financial statements included in
the Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(e) This Agreement, the Warrant and the transactions
contemplated herein and therein have been duly and validly authorized
by the Company, and this Agreement and the Warrant have been duly and
validly executed and delivered by the Company. This Agreement and the
Warrant are valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the
extent that rights to indemnity may be limited by applicable federal
or state securities laws or the public policy underlying such laws.
(f) The execution, delivery and performance of this Agreement,
the Warrant and the consummation of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or result in
a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both,
would constitute a default) or require consent under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries, pursuant
to the terms of any agreement, instrument, franchise, license or
permit to which the Company or any of its Subsidiaries is a party or
by which any of such corporations or their respective properties or
assets may be bound or (ii) violate or conflict with any provision of
the organizational documents of the Company or any of its Subsidiaries
or any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body,
domestic or foreign, having jurisdiction over the Company or any of
its Subsidiaries or any of their respective properties or assets. No
consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company or any of its Subsidiaries or any of their respective
properties or assets is required for the execution, delivery and
performance of this Agreement, the Warrant or the consummation of the
transactions contemplated hereby and thereby, including the issuance,
sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder, except the registration of the Shares, the
Warrant and Warrant Shares under the Act, the clearance of the
offering of the Shares with the NASD, and such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under foreign and state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters. The Company has full
power and authority to authorize, issue and sell the Shares, the
Warrant and the Warrant Shares as contemplated by this Agreement.
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(g) All of the outstanding shares of Common Stock are duly and
validly authorized and issued, fully paid and nonassessable and have
not been issued in violation of or subject to any preemptive rights.
The Shares, when delivered and sold in accordance with this Agreement,
will be duly and validly issued and outstanding, fully paid and
nonassessable, and will not have been issued in violation of or
subject to any preemptive rights. The Company has authorized and
outstanding capitalization as set forth in the Registration Statement
and the Prospectus. The Common Stock, the Firm Shares and the Option
Shares conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus.
(h) The Warrant Shares, when issued pursuant to the terms and
conditions of the Warrant, will be duly and validly authorized and
issued, fully paid and nonassessable and will have not been issued in
violation of or subject to any preemptive rights.
(i) Each of the Company and its subsidiaries (sometimes referred
to herein as the "SUBSIDIARIES") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation. The Company has no Subsidiaries
that are limited partnerships, limited liability companies or other
forms of entities other than corporations. Each of the Company and
its Subsidiaries is duly qualified and in good standing as a foreign
corporation in each of the jurisdictions listed on Schedule III
hereto, which are the only jurisdictions in which the character or
location of its properties (owned, leased or licensed) or the nature
or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which could
not in the aggregate reasonably be expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. Each of
the Company and its Subsidiaries has or will have by the Closing Date
all requisite power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public, regulatory or
governmental agencies and bodies, to own, lease and operate its
properties and conduct its business as now being conducted and as
described in the Registration Statement and the Prospectus (other than
such consents, approvals, authorizations, orders, registrations,
qualifications, licenses and permits the failure to obtain could not
reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries as a whole), and no such consent,
approval, authorization, order, registration, qualification, license
or permit contains a materially burdensome restriction not adequately
disclosed in the Registration Statement and the Prospectus. All of
the issued and outstanding shares of capital stock of each Subsidiary
of the Company have been duly authorized and validly issued and are
fully paid and nonassessable and are owned by the Company, directly or
through its Subsidiaries, free from liens, encumbrances, claims,
security interests, restrictions on transfer (other than restrictions
arising under federal and applicable foreign and state securities and
Blue Sky Laws and those arising under the Company's credit facilities
as described in the Registration Statement), stockholders' agreement,
voting trust and any other defects of title.
(j) Except as disclosed in or contemplated by the Registration
Statement and the Prospectus, there are no outstanding securities of
the Company or any Subsidiary convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of Common
Stock of the Company or shares of capital stock of any Subsidiary,
respectively, and there are no outstanding options, warrants or rights
of any character obligating the Company
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or any Subsidiary to issue any shares of its capital stock or any
securities convertible or exchangeable or evidencing the right to
purchase or subscribe therefor; and except as disclosed in the
Registration Statement and the Prospectus, no holder of securities of the
Company or any Subsidiary or any other person has the right, contractual
or otherwise, which has not been satisfied or effectively waived, to
cause the Company to sell or otherwise issue to them, or to permit them
to underwrite the sale of, any of the Shares.
(k) Except as disclosed in the Registration Statement and the
Prospectus, the Company and its Subsidiaries have generally
satisfactory or good and indefeasible title to all the producing oil
and gas properties described in the Prospectus as being owned by them,
free and clear of any liens, encumbrances, equities, or claims of any
nature, except for the liens for taxes not yet due, liens, claims and
encumbrances under gas sales contracts, operating agreements,
geophysical exploration agreements, farm-out and farm-in agreements,
participation agreements, unitization and pooling agreements, and such
other agreements as are customarily found in connection with
comparable exploration, drilling, producing and marketing operations,
or in connection with the acquisition of producing properties, and
other liens, claims, contracts, encumbrances and title defects that
are, singly and in the aggregate, not material in amount and do not
materially interfere with the Company's or such Subsidiary's use and
enjoyment of its oil and gas properties and liens under the Company's
credit facilities as described in the Registration Statement.
(l) The engineering values attributed to the oil and gas
properties of the Company disclosed in the Registration Statement and
Prospectus and prepared by the Company reflect in all material
respects the ownership interests of the Company in the properties
therein as the dates specified therein, except as otherwise disclosed
in the Registration Statement and Prospectus. The information
underlying the estimates of the Company's reserves is complete and
accurate in all material respects and no facts have arisen of which
the Company has knowledge that might cause a reasonable person to
believe that any of such information was incorrect or incomplete in
any material respect.
(m) Except as disclosed in the Registration Statement and the
Prospectus, the Company and its Subsidiaries possess or will possess
on the Closing Date, adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by them, except for such
certificates, authorities or permits the failure of which to obtain
could not reasonably be expected to have a material adverse effect on
the Company or any of its Subsidiaries taken as a whole, and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its Subsidiaries, could
individually or in the aggregate reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole.
(n) Except as disclosed in the Registration Statement and the
Prospectus, no labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent
that could reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole.
(o) The Company and its Subsidiaries own, possess or license
adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights,
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confidential information and other intellectual property (collectively,
"INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of termination of any license or notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of
its Subsidiaries, could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(p) To the Company's knowledge and except as disclosed in the
Registration Statement and the Prospectus, neither the Company nor any
of its Subsidiaries (i) is in material violation of any applicable
statute, rule, regulation, decision or order of any governmental
agency or body or any court, domestic or foreign, relating to the use,
disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"),
(ii) owns or operates any real property contaminated at levels harmful
to human health and the environment with any substance that is subject
to any environmental laws, (iii) is liable for any off-site disposal
or contamination pursuant to any environmental laws, or (iv) is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim could individually or in
the aggregate reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries taken as a whole; and the Company
has not received written notice of any pending investigation which
might lead to such a claim.
(q) Except as disclosed in the Registration Statement and the
Prospectus, there is no litigation or governmental proceeding to which
the Company or any of its Subsidiaries is a party or to which any
property of the Company or any of its Subsidiaries is subject or which
is pending or, to the knowledge of the Company, contemplated against
the Company or any of its Subsidiaries which could reasonably be
expected to result in any material adverse change in the business,
prospects, properties, operations, condition (financial or other) or,
results of operations of the Company and its Subsidiaries taken as a
whole or which is required to be disclosed in the Registration
Statement and the Prospectus.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or which could reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares.
(s) The financial statements of the Company, including the notes
thereto and supporting schedules included in the Registration
Statement and the Prospectus, present fairly in all material respects
the financial position of the Company as of the dates indicated and
the results of its operations and cash flows for the periods
specified; except as otherwise stated in the Registration Statement,
such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis; and the supporting schedules included in the Registration
Statement present fairly in all material respects the information
required to be stated therein; and the assumptions used in preparing
the pro forma financial statements included in the Registration
Statement and the Prospectus provide a reasonable basis for presenting
the significant effects directly attributable to the
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transactions or events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement amounts.
(t) Except as described in the Registration Statement and the
Prospectus, no holder of securities of the Company has any rights to
the registration of securities of the Company because of the filing of
the Registration Statement or otherwise in connection with the sale of
the Shares contemplated hereby that have not been waived.
(u) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration
as an "investment company" under the Investment Company Act of 1940.
(v) The Company and the Subsidiaries have filed all federal,
state, local and foreign tax returns which are required to be filed
through the date hereof, or have received extensions thereof, and have
paid all taxes shown on such returns and all assessments received by
them to the extent that the same are material and have become due.
(w) None of the Company, any Subsidiary, director, officer,
agent, employee or other person associated with or acting on behalf of
the Company and the Subsidiaries has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns
from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(x) No transaction has occurred between or among the Company,
the Subsidiaries or any of their officers or directors or any
affiliates of any such officers or directors that is required to be
described in and is not described in the Registration Statement and
the Prospectus.
(y) The Shares have been approved for listing on the Nasdaq
Smallcap Market ("NASDAQ") and the Boston Stock Exchange ("BSE")
subject to notice of issuance.
(z) Except as disclosed in the Registration Statement and the
Prospectus, there are no contracts, agreements or understandings
between the Company and any person that would give rise to a valid
claim against the Company or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with the
sale or resale of Shares under this Agreement.
(aa) Except as described in the Registration Statement, there are
no outstanding options, warrants, or rights of any character
obligating the Company to issue any shares of Common Stock that are
currently exercisable or will become exercisable within 180 days of
the date of the Prospectus.
(bb) The Company has obtained and delivered to you before the
date hereof the written agreements of each of the persons listed on
Schedule II that, for a period of 180 days,
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and in the case of Xxxxx X. Xxxxxxxxxxxxxx and Joint Energy Development
Investments II Limited Partnership ("JEDI") 90 days, after the date of
the final Prospectus filed with the Commission pursuant to Rule 424(b),
such persons will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Commission a
registration statement under the Act relating to, any additional shares
of the Company's securities or securities convertible into or
exchangeable or exercisable for any shares of the Company's securities,
or publicly disclose the intention to make any such offer, sale, pledge,
disposal or filing, without the prior written consent of Xxxxxx, Xxxxxxx
Inc.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters and the Underwriters, severally and not jointly, agree to
purchase from the Company, at a purchase price of $____ per share, the
number of Firm Shares set forth opposite the respective names of the
Underwriters on SCHEDULE I hereto plus any additional number of Shares
that the Underwriter may become obligated to purchase pursuant to the
provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the office of
Xxxxxx & Xxxxxx L.L.P., 2300 First City Tower, 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxx 00000-0000, or such other place as shall be agreed upon
by you and the Company, at 9:00 A.M., Houston, Texas time, on the
third or fourth business day (as permitted under Rule 15c6-1 under the
Exchange Act) (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof) following the date the
Registration Statement becomes effective (or, if the Company has
elected to rely upon Rule 430A of the Regulations, the third or fourth
business day (as permitted under Rule 15c6-1 under the Exchange Act)
after the determination of the public offering price of the Shares),
or at such other time not later than ten business days after such date
as shall be agreed upon by you and the Company (such time and date of
payment and delivery being herein called the "CLOSING DATE").
Delivery of the certificates for the Firm Shares and any Option Shares
shall be made to you for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representative of the purchase price for the Firm Shares or Option
Shares, as the case may be, by wire transfer of federal (same day)
funds, to the account(s) designated by the Company.
(c) Certificates for the Firm Shares shall be registered in such
name or names and in such authorized denominations as you may request
in writing at least two full business days prior to the Closing Date.
The Company will permit you to examine and package such certificates
for delivery at least one full business day prior to the Closing Date.
(d) In addition, the Company hereby grants to the several
Underwriters the option to purchase up to 750,000 Option Shares at the
same purchase price per share to be paid by the several Underwriters
to the Company for the Firm Shares as set forth in this Section 2, for
the sole purpose of covering over-allotments in the sale of Firm
Shares by the several Underwriters. This option may be exercised at
any time in whole or in part on or before the thirtieth day following
the effective date of the Registration Statement, by written notice by
you to the Company. Such notice shall set forth the aggregate number
of Option
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Shares as to which the option is being exercised and the date and time,
as reasonably determined by you, when the Option Shares are to be
delivered (each such date and time being herein sometimes referred to as
an "ADDITIONAL CLOSING DATE"); PROVIDED, HOWEVER, that the Additional
Closing Date shall not be earlier than the Closing Date or earlier than
the second full business day after the date on which the option shall
have been exercised nor later than the tenth full business day after the
date on which the option shall have been exercised (unless such time and
date are postponed in accordance with the provisions of Section 9
hereof). Certificates for the Option Shares shall be registered in such
name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing
Date. The Company will permit you to examine and package such
certificates for delivery at least one full business day prior to the
Additional Closing Date.
The number of Option Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of
Option Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in SCHEDULE I hereto (or such
number increased as set forth in Section 9 hereof) bears to 5,000,000,
subject, however, to such adjustments to eliminate any fractional
shares as you in your sole discretion shall make.
3. OFFERING. Upon your authorization of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale to
the public upon the terms set forth in the Prospectus. To the extent, if at
all, that any Option Shares are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters that:
(a) If the Registration Statement has not yet been declared
effective, the Company will use its reasonable commercial efforts to
cause the Registration Statement and any amendments thereto to become
effective as promptly as possible, and if Rule 430A is used or the
filing of the Prospectus is otherwise required under Rule 424(b) or
Rule 434, the Company will file the Prospectus (properly completed if
Rule 430A has been used) pursuant to Rule 424(b) or Rule 434 within
the prescribed time period and will provide evidence satisfactory to
you of such timely filing. If the Company elects to rely on Rule 434,
the Company will prepare and file a term sheet that complies with the
requirements of Rule 434.
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration
Statement and any amendments thereto become effective, (ii) of any
request by the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for any additional
information, (iii) of the mailing or delivery to the Commission for
filing of any amendment of or supplement to the Registration Statement
or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (v) of the receipt of any
comments from the Commission, and (vi) of the receipt by the Company
of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for that purpose. If the
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Commission shall propose or enter a stop order at any time, the
Company will make every reasonable effort to prevent the issuance of
any such stop order and, if issued, to obtain the lifting of such
order as soon as possible. The Company will not file any amendment to
the Registration Statement or any amendment of or supplement to the
Prospectus (including the prospectus required to be filed pursuant to
Rule 424(b) or Rule 434) that differs from the prospectus on file at
the time of the effectiveness of the Registration Statement before or
after the effective date of the Registration Statement to which you
shall reasonably object in writing within a reasonable time (but in
any event within four business days) after being timely furnished in
advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act but in any event within nine
months after the date of the Prospectus any event shall have occurred
as a result of which the Prospectus as then amended or supplemented
would, in the judgment of the Underwriters or the Company, include an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the
Act or the Regulations, the Company or you, as the case may be, will
notify the other promptly and the Company will prepare and file with
the Commission an appropriate amendment or supplement (in form and
substance satisfactory to you) which will correct such statement or
omission and will use its reasonable commercial efforts to have any
amendment to the Registration Statement declared effective as soon as
possible.
(c) The Company will promptly deliver to you one signed copy of
the Registration Statement, including exhibits (other than exhibits
that are incorporated by reference), and all amendments thereto, and
the Company will promptly deliver to each of the several Underwriters
such number of copies of any preliminary prospectus, the Prospectus,
the Registration Statement, and all amendments of and supplements to
such documents, if any, as you may reasonably request. The Prospectus
shall be furnished on or prior to 3:00 P.M., New York time, on the
second business day following the later of the execution and delivery
of this Agreement or the effective time of the Registration Statement.
(d) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes
effective, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as you may designate and to use its reasonable
commercial efforts to maintain such qualification in effect for so
long as required for the distribution thereof, except that in no event
shall the Company be obligated in connection therewith to qualify as a
foreign corporation, to execute a general consent to service of
process or to take any other action that would subject the Company to
service of process.
(e) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to
you as soon as practicable, but not later than 45 days after the end
of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement, an earnings statement
(within the meaning of Section 11(a) of the Act) covering a period of
at least twelve consecutive months beginning after the effective date
of the Registration Statement.
-10-
(f) During the period of 180 days, from the date of the
Prospectus, the Company will not issue, sell, offer or agree to sell,
grant any option for the sale of, or otherwise dispose of or agree to
dispose of, directly or indirectly, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for
Common Stock or other capital stock of the Company) at a price less
than the price to the public of the Shares sold hereunder; and the
Company will use its reasonable commercial efforts to obtain similar
undertakings of each of its officers, directors and securityholders
(including, without limitation, its optionholders), all of which are
listed on SCHEDULE II hereto, not to engage in any of the
aforementioned transactions on their own behalf, other than the
Company's sale of Shares hereunder, the Company's issuance of Common
Stock upon the exercise of presently outstanding stock options and
warrants, and the Company's issuance of Common Stock or other capital
stock of the Company or options to acquire Common Stock or such other
capital stock described in the Prospectus.
(g) During the period of three years from the effective date of
the Registration Statement, the Company will furnish to the
Representative copies of (i) all reports to its stockholders; and
(ii) all reports, financial statements and proxy or information
statements filed by the Company with the Commission or any national
securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company agrees that it will not accelerate the vesting
or exercisability of any options, warrants, or rights of any character
obligating the Company to issue any shares of Common Stock so that any
such options, warrants, or rights shall become exercisable within 180
days of the Closing Date or any Additional Closing Date.
5. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company agrees to pay all reasonable costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and distributing
the Registration Statement, as originally filed and all amendments thereof
(including all exhibits thereto), any preliminary prospectus, the Prospectus and
any amendments thereof or supplements thereto (including, without limitation,
fees and expenses of the Company's accountants and counsel), and the cost of
duplicating and distributing the underwriting documents (including this
Agreement, the Selected Dealers Agreement and the Agreement Among Underwriters)
and all other documents related to the public offering of the Shares (including
those supplied to the Underwriters in quantities as hereinabove stated),
(ii) the travel expenses of the Company's officers and employees and any other
expenses of the Company in connection with attending or hosting meetings with
prospective purchasers of the Shares, (iii) the issuance, transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iv) the qualification of the Shares under state or foreign securities
or Blue Sky Laws, including the costs of printing and mailing a preliminary and
final "Blue Sky Survey" and the reasonable fees of counsel for the Underwriters
and such counsel's reasonable disbursements in relation thereto, (v) quotation
of the Shares on the NASDAQ, (vi) filing fees of the Commission and the National
Association of Securities Dealers, Inc., (vii) the cost of printing certificates
representing the Shares, and (viii) the cost and charges of any transfer agent
or registrar. In addition, the Company has agreed to pay you a nonaccountable
expense allowance of $300,000. It is understood, however, that except as
provided in this Section 5 and Sections 7, 8 and 11(d) of this Agreement, the
Underwriters will
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pay their own costs and expenses, including the fees and expenses of their
counsel, transfer taxes on resale of any Shares by them, and any advertising
expenses connected with any offers they may make.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Firm Shares and the Option
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (or in the case of the Option Shares as of the
Additional Closing Date), to the absence from any certificates, opinions,
written statements or letters furnished to you or to Xxxxxx & Xxxxxx L.L.P.
("UNDERWRITERS' COUNSEL") pursuant to this Section 6 of any material
misstatement or omission, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement, including any related
registration statement filed pursuant to Rule 462(b) under the Act,
shall have become effective not later than 5:30 P.M., New York time,
on the date of this Agreement or at such later time and date as shall
have been consented to in writing by you; if the Company shall have
elected to rely upon Rule 430A or Rule 434 of the Regulations, the
Prospectus shall have been filed with the Commission in a timely
fashion in accordance with Section 4(a) hereof; and, at or prior to
the Closing Date and Additional Closing Date, as the case may be, no
stop order suspending the effectiveness of the Registration Statement
or any post-effective amendment thereof shall have been issued and no
proceedings therefor shall have been initiated or threatened by the
Commission.
(b) At the Closing Date and each Additional Closing Date, you
shall have received the opinion of Xxxxxx & Xxxxxx, L.L.P., counsel
for the Company, dated the Closing Date or the Additional Closing
Date, as the case may be, addressed to the Underwriters, in form and
substance reasonably satisfactory to Underwriters' Counsel, and
subject to customary qualification and limitations, to the effect
that:
(i) Each of the Company and its Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation or
formation. Each of the Company and its Subsidiaries is duly
qualified and in good standing as a foreign corporation in each
jurisdiction described in Schedule III hereto. Each of the
Company and its Subsidiaries has all requisite power and
authority to own, lease and license its respective properties and
conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus. All of the issued
and outstanding capital stock of each Subsidiary has been duly
and validly issued and is fully paid and nonassessable and, to
such counsel's knowledge: (i) was not issued in violation of, and
is free of, preemptive rights and (ii) is owned directly or
indirectly by the Company, free and clear of any lien,
encumbrance, claim, security interest, restriction on transfer
(other than any restriction arising under foreign securities
laws, federal securities laws or state securities or Blue Sky
Laws), stockholders' agreement, voting trust or other defect of
title whatsoever.
(ii) The Company has authorized capital stock as set forth
under the caption "Capitalization" in the Registration Statement
and the Prospectus. All of the outstanding shares of Common
Stock are duly and validly authorized and issued, are fully paid
and nonassessable and to such counsel's knowledge were not issued
in
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violation of or subject to any preemptive rights. The Shares to be
delivered by the Company on the Closing Date or Additional Closing
Date, as the case may be, have been duly and validly authorized
and, when delivered against payment therefor in accordance with
this Agreement, will be duly and validly issued, fully paid and
nonassessable and to such counsel's knowledge will not have been
issued in violation of or subject to any preemptive rights. Each
of the Underwriters who acquires Shares from the Company for value
in good faith without notice of any adverse claim will receive good
and valid title to the Firm Shares and the Option Shares being sold
by the Company hereunder, free and clear of all liens,
encumbrances, claims, security interests, restrictions on transfer
(other than restrictions arising under foreign securities laws and
state securities and Blue Sky Laws), stockholders' agreements,
voting trusts and other defects of title whatsoever. The Common
Stock, the Firm Shares and the Option Shares conform in all
material respects as to legal matters to the descriptions thereof
contained in the Registration Statement and the Prospectus under
the caption "Description of Securities", and, assuming the
certificates for the Common Stock are in the form filed with the
Commission, are in due and proper form and comply with the
requirements of the Delaware General Corporation Law, the Company's
certificate of incorporation and by-laws, and the requirements of
the NASDAQ and the BSE.
(iii) Except as disclosed in or contemplated by the
Registration Statement and the Prospectus, to the knowledge of
such counsel, (i) there are no outstanding securities of the
Company or any Subsidiary convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of
Common Stock of the Company or shares of capital stock,
partnership interests or membership interests of any Subsidiary,
respectively, and (ii) there are no outstanding options,
warrants, or rights of any character obligating the Company or
any Subsidiary to issue any shares of its capital stock, any
partnership interests or any membership interests, as applicable,
or any securities convertible or exchangeable or evidencing the
right to purchase or subscribe therefor; and except as described
in the Registration Statement and the Prospectus, to the
knowledge of counsel, no holder of securities of the Company or
any Subsidiary or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to
cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares.
(iv) This Agreement and the Warrant have been duly and
validly authorized, executed and delivered by the Company.
(v) To such counsel's knowledge, there is no litigation or
governmental or other action, suit, proceeding or investigation
before any court or before or by any public, regulatory or
governmental agency or body pending or threatened against, or
involving the properties or business of, the Company or any of
its Subsidiaries, which, if resolved against the Company or such
Subsidiary, individually or, to the extent involving related
claims or issues, in the aggregate, is of a character required to
be disclosed in the Registration Statement and the Prospectus
which has not been disclosed therein.
-13-
(vi) The execution, delivery, and performance of this
Agreement, the Warrant and the consummation of the transactions
contemplated hereby and thereby do not and will not (A) conflict
with or result in a breach of any of the terms and provisions of,
or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) or require consent
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
or any of its Subsidiaries pursuant to the terms of any
agreement, instrument, franchise, license or permit known to such
counsel to which the Company or any of its Subsidiaries is a
party or by which any of such corporations or their respective
properties or assets may be bound or (B) violate or conflict with
any provision of the organizational documents of the Company or
any of its Subsidiaries, or, to the knowledge of such counsel
(assuming compliance with foreign securities laws and state
securities and Blue Sky Laws) any judgment, decree, order,
statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction
over the Company or any of its Subsidiaries or any of their
respective properties or assets; PROVIDED, HOWEVER, that such
counsel need not express any opinion with respect to compliance
with any foreign, federal or state securities, statutes, rules or
regulations except as specifically stated in the opinion of such
counsel. To such counsel's knowledge, no consent, approval,
authorization, order, registration, filing, qualification,
license or permit of or with any court or any public,
governmental, or regulatory agency or body having jurisdiction
over the Company or any of its Subsidiaries or any of their
respective properties or assets is required for the execution,
delivery and performance of this Agreement, the Warrant or the
consummation of the transactions contemplated hereby and thereby,
except for (1) such as may be required under foreign securities
laws or state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares, the Warrant or the
Warrant Shares by the Underwriters (as to which such counsel need
express no opinion), (2) the clearance of the offering of the
Shares with the NASD, and (3) such as have been made or obtained
under the Act.
(vii) The Registration Statement and the Prospectus and
any amendments thereof or supplements thereto (other than the
financial statements and schedules and other financial and
petroleum engineering data included therein, as to which no
opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and the Regulations.
(viii) The Registration Statement is effective under the
Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the
Commission, and all filings required by Rule 424(b) of the
Regulations have been made.
(ix) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings known to such counsel
between the Company and any person granting such person the right
to require the Company to file a registration statement under the
Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
securities in the
-14-
securities registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other registration
statement filed by the Company under the Act; and to such counsel's
knowledge all rights to require registration of any securities
under that agreement have been waived with respect to the offering
contemplated hereby.
(x) In addition, such opinion shall also contain a
statement that such counsel has participated in conferences with
officers and representatives of the Company, representatives of
the independent public accountants for the Company and the
Underwriters at which the contents and the Prospectus and related
matters were discussed, and no facts have come to the attention
of such counsel which leads such counsel to believe that either
the Registration Statement at the time it became effective
(including the information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A or
Rule 434, if applicable), or any amendment thereof made prior to
the Closing Date or Additional Closing Date, as the case may be,
as of the date of such amendment, contained an untrue statement
of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing
Date or the Additional Closing Date, as the case may be, as of
the date of such amendment or supplement) contained or contains
an untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it
being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules
and other financial and petroleum engineering data included
therein).
(xi) The Shares to be sold under this Agreement have been
approved for quotation on the NASDAQ and the BSE upon notice of
issuance.
In rendering such opinion, such counsel may (A) rely as to
matters involving the application of laws other than the laws of the
United States upon the laws of the State of Texas and the corporate
laws of the State of Delaware; (B) render their opinion on the basis
that this Agreement and the matters addressed in their opinion are
subject to and governed by Texas law (without regard to conflict of
law principles); (C) as to matters of fact, to the extent they deem
proper, rely on certificates of responsible officers of the Company
and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and
its Subsidiaries, provided that copies of any such statements or
certificates shall be delivered to Underwriters' counsel; and (D) as
to the opinion set forth in (viii) above, rely upon oral statements of
and written correspondence from the Commission.
(c) At the Closing Date and each Additional Closing Date, you
shall have received a certificate of the Chief Executive Officer and
the Chief Financial Officer of the Company, dated the Closing Date or
Additional Closing Date, as the case may be, to the effect that
(i) the condition set forth in subsection (a) of this Section 6 has
been satisfied, (ii) as of the date hereof and as of the Closing Date
or Additional Closing Date, as the case may be, the representations
and warranties of the Company set forth in Section 1 hereof are
-15-
accurate, (iii) as of the Closing Date or the Additional Closing Date,
as the case may be, the obligations of the Company to be performed
hereunder on or prior thereto have been duly performed, and
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A) the
Company and its Subsidiaries have not sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental
proceeding, and (B) there has not been any material adverse change, or
any development that could reasonably be expected to result in a
material adverse change, in the business, properties, operations,
financial condition, or results of operations of the Company and its
Subsidiaries taken as a whole, except in each case as disclosed in or
contemplated by the Registration Statement and the Prospectus.
(d) At the time this Agreement is executed and at the Closing
Date (and each Additional Closing Date), you shall have received a
letter, from Deloitte & Touche LLP, independent public accountants for
the Company, dated, respectively, as of the date of this Agreement and
as of the Closing Date or Additional Closing Date, as the case may be,
addressed to the Underwriters and in form and substance satisfactory
to you, to the effect that: (i) they are independent accountants with
respect to the Company within the meaning of the Act and the
Regulations; (ii) stating that, in their opinion, the financial
statements and schedules of the Company audited by them and included
in the Registration Statement and the Prospectus comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Regulations with respect to registration statements on
Form SB-2; (iii) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards) consisting of a
reading of the minutes of meetings and consents of the stockholders
and board of directors of the Company and the committees of such board
subsequent to December 31, 1997 as set forth in the minutes books
through a specified date not more than five business days prior to the
date of delivery of such letter, inquiries of officers and other
employees of the Company and its Subsidiaries who have responsibility
for financial and accounting matters of the Company with respect to
transactions and events subsequent to December 31, 1997 to a date not
more than five days prior to the date of such letter, nothing has come
to their attention that would cause them to believe that: (A) with
respect to the period subsequent to December 31, 1997, there were, as
of a specified date not more than five days prior to the date of such
letter, any changes in long-term indebtedness of the Company or any
decrease, excluding net losses, of the Company, capital stock of the
Company, or stockholders' equity of the Company, in each case as
compared with the amounts shown in the most recent balance sheet of
the Company, as applicable, included in the Registration Statement and
the Prospectus, except for changes or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter, or (B) that during the period from
January 1, 1997 to a specified date not more than five days prior to
the date of such letter, there was any decrease, as compared with the
corresponding period in the prior fiscal year, in total revenues of
the Company, except for decreases which the Registration Statement and
the Prospectus disclose have occurred or may occur or which are set
forth in such letter; (iv) they have read the unaudited pro forma
financial statements included in the Registration Statement and
inquired of officials of the Company about the basis for their
determination of the pro forma adjustments, and whether the unaudited
pro forma financial statements included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of rule 11-02 of Regulation S-X; (v) they have
proved the arithmetic accuracy of the application of
-16-
the pro forma adjustments to the historical amounts in the unaudited
pro forma financial statements; (vi) on the basis of the review referred
to in (iv) and (v) above, nothing came to their attention that caused them
to believe that the unaudited pro forma financial statements included
in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of rule 11-02 of
Regulation S-X and that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements; and (vii) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, and
other financial information pertaining to the Company set forth in the
Registration Statement and the Prospectus, which have been specified
by you prior to the date of this Agreement, and they (Deloitte &
Touche LLP) are willing to perform to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting and financial records of the Company which are subject to
the internal controls of the Company's accounting system, and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries, and other appropriate procedures specified by you (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in such letter.
(e) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to you and to
Underwriters' counsel, and the Underwriters shall have received from
Underwriters' counsel a favorable opinion, dated as of the Closing
Date and the Additional Closing Date, as the case may be, with respect
to the issuance and sale of the Shares, the Registration Statement and
the Prospectus and such other related matters, as you may reasonably
require, and the Company shall have furnished to Underwriters' counsel
such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
(f) You shall have received from each person who is listed on
SCHEDULE II hereto, an agreement to the effect that such person will
not, directly or indirectly, without your prior written consent,
offer, sell, offer or agree to sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of an option to
purchase or other disposition) of any shares of Common Stock (or any
securities convertible into, exercisable for or exchangeable or
exercisable for shares of Common Stock) for a period of 180 days, and
with respect to Xxxxx X. Xxxxxxxxxxxxxx and JEDI 90 days, after the
date of the Prospectus.
(g) At the Closing Date, the Shares shall have been approved for
quotation on the NASDAQ and the BSE.
(h) At the Closing Date, the Company shall have executed and
entered into a Warrant Agreement in substantially the form attached
hereto as ANNEX A granting and issuing to the Representative a warrant
to purchase pursuant to such Warrant Agreement 191,250 shares of
Common Stock.
(i) Prior to the Closing Date and each Additional Closing Date,
the Company shall have furnished to you such further information,
certificates and documents as you may reasonably request.
-17-
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to Underwriters'
counsel pursuant to this Section 6 shall not have been in all material respects
reasonably satisfactory in form and substance to you and to Underwriters'
Counsel, all obligations of the Underwriters hereunder may be canceled by you
at, or at any time prior to, the Closing Date and the obligations of the
Underwriters to purchase the Additional Shares may be canceled by you at, or at
any time prior to, the Additional Closing Date. Notice of such cancellation
shall be given to the Company in writing, or by telephone, telex or telegraph,
confirmed in writing.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to reasonable
attorneys' fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation), joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, or any related preliminary prospectus or the
Prospectus, if used within the time period specified in
Section 4(A)(b) hereof and as supplemented by any post-effective
supplement or as amended by any amendment that has become effective,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein (i) in the case of the
Registration Statement, not misleading, and (ii) in the case of the
Prospectus, in light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent but only to the extent that any such
loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter through you, in each case expressly for use therein
and PROVIDED, FURTHER, that the Company will not be liable to any
Underwriter or any person controlling such Underwriter with respect to
any such untrue statement or omission made in any preliminary
prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus (as amended or supplemented) at
or prior to the written confirmation of the sale of such Shares to
such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Act, unless such failure
to deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 4(b) or (c) of this
Agreement. This indemnity agreement will be in addition to any
liability which the Company may otherwise have including under this
Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the
-18-
Company who shall have signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof
that has become effective or any post-effective supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent,
but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through you expressly for
use therein, and any such loss, liability, claim, damage or expense
arising out of, based upon or resulting from the fact that a copy of the
Prospectus (as then amended or supplemented) was not sent or given to a
person to whom any Shares were sold at or before the written
confirmation of the sale of the Shares and the untrue statement or
omission was corrected in the Prospectus (as so amended or
supplemented), unless the failure to deliver the Prospectus (as amended
or supplemented) was a result of noncompliance by the Company with
Section 4(A)(b) or (c) of this Agreement. This indemnity will be in
addition to any liability which any Underwriter may otherwise have
including under this Agreement. The Company acknowledges that the
statements set forth in the last paragraph of the outside cover page of
the Prospectus, the last paragraph of the inside cover page and in the
first four and the sixth paragraphs under the caption "Underwriting" in
the Prospectus constitute the only information furnished in writing by
or on behalf of any Underwriter expressly for use in the Registration
Statement, any related preliminary prospectus or the Prospectus or in
any amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been
prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is
brought against any indemnified party, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume,
jointly with any other indemnifying party or parties, the defense
thereof with counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been
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authorized in writing by one of the indemnifying parties in
connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have
charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are
different from or additional to those available to one or all
of the indemnifying parties (in which case the indemnifying
parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any
of which events such fees and expenses shall be borne by the
indemnifying parties. It is understood that in no event shall
the Company be liable for the fees and expenses of more than
one firm of attorneys (in addition to local counsel) for all
Underwriters and their controlling persons, which firm shall
be designated by you, in connection with any one action or
separate but similar or related actions arising out of the
same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be
sought under this Section 7 or Section 8 hereof (whether or
not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party
from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party. In
addition, no such settlement, compromise or consent by any
indemnified party shall be binding on any indemnifying party
without such indemnifying party's consent (which consent shall
not be unreasonably withheld) for purposes of the indemnifying
party's indemnity obligations under this Agreement or
otherwise. Any consent of any indemnified party under this
paragraph may be given on behalf of all actual and potential
indemnified parties by you in the case of parties indemnified
pursuant to Section 7(a) above and by the Company in the case
of parties indemnified pursuant to Section 7(b) above.
(d) Any party granted the right to direct the defense of any
action under this Section 7 shall (i) keep the other parties informed
of material developments in the action, (ii) promptly submit to the
other parties copies of all pleadings, responsive pleadings, motions
and other similar legal documents and papers received in connection
with the action, and (iii) permit the other parties and their counsel,
to the extent practicable, to confer on the conduct of the defense of
the action. The parties shall make available to each other and each
other's counsel and accountants all of its or their books and records
relating to the action, and each party shall render to the other such
assistance as may be reasonably required in order to insure the proper
and adequate defense of the action. The parties shall use their
respective good faith efforts to avoid the waiver of any privilege of
another party. The assumption of the defense of any matter by an
indemnifying party shall not constitute an admission of responsibility
to indemnify or in any manner impair or restrict such party's rights
to later seek to be reimbursed its costs and expenses if
indemnification with respect to such matter was not required.
8. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
applicable but for any reason (other than the failure to provide notice to the
indemnifying party or parties as provided in Section 7(c) above) held to be
unavailable
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from a party or is insufficient to hold harmless a party indemnified
thereunder, the Company and the Underwriters shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provisions (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but
after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Company any contribution received by the Company
from persons, other than the Underwriters, who may also be liable for
contribution, including persons who control the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company)
as incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative
benefits received by the Company and the Underwriters from the offering of
the Shares or, if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, shall be
deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company, on the one hand, bears to (y) the
underwriting discounts and commissions received by the Underwriters, on the
other hand, in each case as set forth in the table on the cover page of the
Prospectus (and as each such amount may be similarly determined to give
effect to the sale of the Option Shares, if any). The relative fault of the
Company and of the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 8, (i) in
no case shall any Underwriter (except as may be provided in the Agreement
Among Underwriters) be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. For purposes of
this Section 8, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall
have the same rights to contribution as such Underwriter and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement, each director of the Company and each
person named in the Registration Statement as about to become a director of
the Company shall have the same rights to contribution as the Company,
subject in each case to clauses (i) and (ii) of this Section 8. Any party
entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or
parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 8 or
otherwise except to the extent that
-21-
the contributing party has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Option Shares hereunder,
and if the Firm Shares or Option Shares with respect to which such
default relates do not (after giving effect to arrangements, if any,
made by you or the Company pursuant to subsection (b) below) exceed in
the aggregate 10% of the number of shares of Firm Shares or Option
Shares, as the case may be, which all Underwriters have agreed to
purchase hereunder, then such Firm Shares or Option Shares to which
the default relates shall be purchased by the non-defaulting
Underwriters in proportion to the respective proportions which the
numbers of Firm Shares set forth opposite their respective names in
SCHEDULE I hereto bear to the aggregate number of Firm Shares set
forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Option Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so
agree) to purchase such Firm Shares or Option Shares, as the case may
be, to which such default relates on the terms contained herein. In
the event that within five calendar days after such a default you do
not arrange for the purchase of all of the Firm Shares or Option
Shares, as the case may be, to which such default relates as provided
in this Section 9, and within an additional five calendar days the
Company has not arranged for the purchase of any remaining Firm Shares
or Option Shares, as the case may be, by another party or parties
reasonably satisfactory to you, this Agreement or, in the case of a
default with respect to the Option Shares, the obligations of the
Underwriters to purchase and of the Company to sell the Option Shares
shall thereupon terminate, without liability on the part of the
Company or the Underwriters with respect thereto (except in each case
as provided in Sections 5, 7(a), (b) and (c) and 8 hereof), but
nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other several
Underwriters and the Company for damages occasioned by its or their
default hereunder.
(c) In the event that the Firm Shares or Option Shares to which
the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, you or the Company shall have the right to postpone the
Closing Date or Additional Closing Date, as the case may be, for a
period, not exceeding five business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or
the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the
Registration Statement or the Prospectus which, in the opinion of
Underwriters' counsel, may thereby be made necessary or advisable.
The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had
originally been a party to this Agreement with respect to such Firm
Shares and Option Shares.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All
representations and warranties, covenants and agreements of the Underwriters
and the Company contained in this Agreement, including the agreements
contained in Section 5, the indemnity agreements contained in Section 7 and
the contribution
-22-
agreements contained in Section 8, shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling person thereof or by or on behalf of the
Company, and shall survive delivery of and payment for the Shares to and by
the several Underwriters. The representations contained in Section 1 and the
agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the
termination of this Agreement including pursuant to Sections 9 or 11 hereof.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon the later of (i)
when you and the Company shall have received notification of the
effectiveness of the Registration Statement, or (ii) the execution of
this Agreement. Until this Agreement becomes effective as aforesaid,
it may be terminated by the Company by notifying you or by you by
notifying the Company, and the Company and the Underwriters shall have
no liability under this Agreement or otherwise except as provided in
Sections 5, 7, 8 and 11(d) hereof. Notwithstanding the foregoing, the
provisions of this Section 11 and of Sections 1, 5, 7 and 8 hereof
shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or the obligations of the Underwriters
to purchase the Option Shares at any time prior to the Additional
Closing Date, as the case may be, if since the date hereof (A) any
domestic or international event or act or occurrence has materially
disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in
general; or (B) trading on the New York Stock Exchange or on the
NASDAQ generally or with respect to securities of the Company shall
have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall
have been required, on the New York Stock Exchange or on the NASDAQ by
order of the New York Stock Exchange or the NASDAQ or by order of the
Commission or any other governmental authority having jurisdiction; or
(C) a banking moratorium has been declared by a state or federal
authority or if any new restriction materially adversely affecting the
distribution of the Firm Shares or the Option Shares, as the case may
be, shall have become effective; or (D) if a moratorium in foreign
exchange trading by major international banks or persons has been
declared; or (E) if the United States becomes engaged in hostilities
or there is an escalation of hostilities involving the United States
or there is a declaration of a national emergency or war by the United
States; or (F) if there shall have been such change in the market for
the Company's securities or securities in general or in political,
financial or economic conditions, if the effect of any such event as
in your judgment makes it inadvisable to proceed with the offering,
sale and delivery of the Firm Shares or the Option Shares, as the case
may be, on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall
be by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you
as provided in Section 11(a) hereof or (ii) Sections 9(b) or 11(b)
hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the several
Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company to perform
any agreement herein or comply with any provision hereof, the Company
agrees,
-23-
subject to demand by you, to reimburse the Underwriters for
all out-of-pocket expenses (including the reasonable fees and expenses
of their counsel), incurred by the several Underwriters in connection
herewith.
12. NOTICE. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to
any Underwriter, shall be mailed, delivered, or telexed or telegraphed and
confirmed in writing, to such Underwriter c/x Xxxxxx, Xxxxxxx Inc., 1055
Xxxxxxx Avenue, Bethpage, New York, N.Y. 10714, Attention: Xxxxx X. Xxxx; if
sent to the Company shall be mailed, delivered, or telegraphed and confirmed
in writing, at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxxxxx, Xxxxx
00000, Attention: Xxxxxxx X. Xxxxxxx.
13. PARTIES. You represent and agree that you are authorized to
act on behalf of the several Underwriters named in SCHEDULE I hereto and the
Company shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Underwriters when the
same shall have been given by you on such behalf. This Agreement shall inure
solely to the benefit of, and shall be binding upon, the several Underwriters
and the Company and the controlling persons, directors, officers, employees
and agents referred to in Sections 7 and 8, and their respective successors
and assigns, and no other person shall have or be construed to have any legal
or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provision herein contained. The term "successors and
assigns" shall not include a purchaser, in its capacity as such, of Shares
from any of the Underwriters.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, but without
regard to principles of conflict of law.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
16. JURISDICTION OF DISPUTES. THE COMPANY HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(SIGNATURE PAGE FOLLOWS)
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If the foregoing correctly sets forth the understanding among you,
the Company please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us. It is
understood that your acceptance of this letter on behalf of each Underwriter
is pursuant to the authority set forth in a form of Agreement Among
Underwriters, manually or facsimile executed counterparts of which have been
submitted to the Company for examination, but without warranty on your part
as to the authority of the signers thereof.
Very truly yours,
THE COMPANY:
ESENJAY EXPLORATION, INC., a Delaware
corporation
By
----------------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Accepted as of the date first above written.
XXXXXX, XXXXXXX INC.
By
-------------------------------------
Xxxxx X. Xxxx
Senior Managing Director
On behalf of themselves and the other several
Underwriters named in Schedule I hereto.
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SCHEDULE I
NUMBER OF FIRM
SHARES TO BE
NAME OF UNDERWRITER PURCHASED
-------------------------------------------- ---------------
Xxxxxx, Xxxxxxx Inc. .......................
Total:
SCHEDULE II
LOCKUP LIST OF DIRECTORS, OFFICERS AND STOCKHOLDERS
Xxxxx X. Xxxxx
Xxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxx
Xxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxx, III
Xxxx X. Xxxxxxx
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxxxxxxxxxxx
Esenjay Exploration Corporation
Aspect Resources LLC
Joint Energy Development Investments II Limited Partnership
SCHEDULE III
SUBSIDIARIES
