EXHIBIT 1
300,000 Units
COTTON VALLEY RESOURCES CORPORATION
Each Unit Consisting of
Six Shares of Common Stock and
Six Redeemable Common Stock Purchase Warrants
1997
PLACEMENT AGENT AGREEMENT
-------------------------
NATIONAL SECURITIES CORPORATION
As Lead Placement Agent
0000 Xxxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Dear Sirs:
Cotton Valley Resources Corporation, a corporation organized under the
laws of Ontario, Canada (the "Company"), proposes to issue and sell through you
and other placement agents who have signed "Selling Agreements" in the form of
Schedule I hereto (collectively, the "Placement Agents"), for whom National
Securities Corporation is acting as the lead placement agent and representative
(the "Representative"), an aggregate of 300,000 Units (individually a "Unit" and
collectively the "Units"), each Unit consisting of six shares of Common Stock,
without par value, of the Company (the "Common Stock") and six Redeemable Common
Stock Purchase Warrants (individually, a "Warrant"), which entitles the holder
thereof to purchase one share of Common Stock at a price of $2.08 per share,
subject to certain conditions. Such Units, together with (a) the shares of
Common Stock and the Warrants comprising such Units and (a) the shares of Common
Stock issuable upon exercise of such Warrants, are collectively referred to
herein as the "Placement Securities." In addition, the Company proposes to sell
to the Placement Agents the "Placement Agents" Warrants (described in Section 7
hereof) to purchase up to an aggregate of 30,000 additional Units of the
Underwritten Securities (such additional Units, together with (a) the shares of
Common Stock and Warrants comprising such additional Units and) the shares of
Common Stock issuable upon exercise of such Warrants, are collectively referred
to herein as the "Placement Agents' Securities"). The Placement Securities and
the Placement Agents' Securities are collectively referred to herein as the
"Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. "Effective Date" shall mean each date that the Registration
Statement (as defined below) and any post-effective amendment or amendments
thereto became or become effective. "Execution time," shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
Section 1(a) below with respect to the offering of the Securities, and any
preliminary prospectus included in the Registration Statement at the Effective
Date that omits Rule 430A Information (as defined below). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the most
recent Preliminary Prospectus which predates or coincides with the Execution
Time. "Prospectus"' shall mean the final prospectus with respect to the offering
of the Securities that contains the Rule 430A Information (as defined below).
"Registration Statement" shall mean the registration statement referred to in
Section 1(a) below, including exhibits and financial statements, in the form in
which it has or shall become effective and, in tile event any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined) or any settlement date pursuant to Section 3(1,) hereof, shall also
mean such registration statement as so amended on such date. Such term shall
include Rule 430A Information (as defined below) deemed to be included therein
at the Effective Date as provided by Rule 430A. "Rule 424"and "Rule 430A" refer
to such rules under the Securities Act of 1933, as amended (the "Act"). "Rule
430A Information" means information with respect to the Securities and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each Placement Agent that:
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(a) The Company meets the requirements for the use of Form SB-2
under the Act and has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, including a related
preliminary prospectus ("Preliminary Prospectus"), on Form SB-2
(Commission File No.333-16893) (the "Registration Statement") for the
registration under the Act of the Securities. The Company may have filed
one or more amendments thereto, including related Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either, prior to
effectiveness of such Registration Statement, a further amendment
thereto (including the form of Prospectus) or, after effectiveness of
such Registration Statement, a Prospectus in accordance with Rules 430A
and 424(a)(1) or (4). As filed, such amendment and form of Prospectus,
or such Prospectus, shall include all Rule 430A Information and, except
to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at
the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest
Preliminary Prospectus) as the Company has advised you in writing, prior
to the Execution Time, will be included or made therein.
(1.) Each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects with the applicable requirements of
the Act and the rules and regulations thereunder and did not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. If the Effective Date is prior to or
simultaneous with the Execution Time, (i) on the Effective Date, the
Registration Statement conformed in all material respects to the
requirements of the Act and the rules and regulations thereunder and did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading and (ii) at the Execution
Time, the Registration Statement conforms, and at the time of filing of
the Prospectus pursuant to Rule 424(b), the Registration Statement and
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations thereunder, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state a material
fact required to be stated therein or necessary in order to make the
statements therein (and, in the case of the Prospectus, in the light of
the circumstances under which they were made) not misleading. If the
Effective Date is subsequent to the Execution Time, on the Effective
Date, the Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents will contain any
untrue statement of any material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein (and, in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading. The two
preceding sentences do not apply to statements in or omissions from the
Registration Statement or the Prospectus (or any supplements thereto)
based upon and in conformity with information furnished in writing to
the Company by or on behalf of any Placement Agent through the
Representative specifically for use in connection with the preparation
of the Registration Statement or the Prospectus (or any supplements
thereto).
(c) Except as set forth in the Prospectus, the Company has no
subsidiaries, and as of the Effective Date, will have no subsidiaries.
(d) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the Province of
Ontario, Canada with full corporate power and corporate authority to own
its properties and conduct its business as described in the Prospectus,
and is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which it conducts
its business or owns property and in which the failure, individually or
in the aggregate, to be so qualified would have a material adverse
effect on the properties, assets, operations, business or condition
(financial or otherwise) of the Company ("Material Adverse Effect").
(e) The Company does not own any shares of capital stock or any
other securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than as described in the
Registration Statement.
(f) The Company's pro forma authorized and outstanding capital
stock and short-term and long-term indebtedness is as set forth in the
Prospectus under the caption "Capitalization" as of the dates therein
indicated and giving effect to the statements and assumptions therein
stated. The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock have been duly and validly authorized
and issued and are fully paid and nonassessable, and the certificates
therefor are in valid and sufficient form in accordance with the laws of
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the Province of Ontario and the Company's Bylaws; and, on the Closing
Date (as defined in Section 3(a) hereof) and any settlement date
pursuant to Section 3(b) hereof, there will be, no other classes of
stock outstanding except the Common Stock; all outstanding options to
purchase shares of Common Stock have been duly and validly authorized
and issued; except as described in the Prospectus, there are, and, on
the Closing Date and any settlement date pursuant to Section 3(b)
hereof, there will be, no options, warrants or fights to acquire, or
debt instruments convertible into or exchangeable for, or other
agreements or understandings to which the Company is a party,
outstanding or in existence, entitling any person to purchase or
otherwise acquire shares of capital stock of the Company; the issuance
and sale of the Securities have been duly and validly authorized and,
when issued, delivered and paid for in accordance with the terms hereof,
the Securities will be fully paid and nonassessable and free from
preemptive fights, and will conform in all respects to the description
thereof contained in the Prospectus; the Warrants and Placement Agents'
Warrants will, when issued, constitute valid and binding obligations of
the Company enforceable in accordance with their terms and the Company
has reserved a sufficient number of shares of Common Stock for issuance
upon exercise thereof (including the Warrants included in the Placement
Agents' Warrants); and the Warrants and Placement Agents' Warrants will,
when issued, possess the rights, privileges and characteristics as
represented in the exhibits to the Registration Statement and as
described in the Prospectus. Each offer and sale of securities of the
Company referred to in Item 26 of Part II of the Registration Statement
was effected in compliance with the Act and the rules and regulations
thereunder, and with all applicable state securities and blue sky ("Blue
Sky") laws.
(g) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of the Company, threatened action,
suit or proceeding before any court or governmental agency, authority or
body, domestic or foreign, or any arbitrator involving the Company of a
character required to be disclosed in the Registration Statement or the
Prospectus. There is no contract or other document of a character
required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit that is not described or]filed as required.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as rights of indemnity and contribution hereunder
may be limited by public policy and except as the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and general
principles of equity.
(i) The Company has full corporate power and authority to enter
into and perform its obligations under this Agreement and to issue, sell
and deliver the Securities in the manner provided in this Agreement. The
Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(j) Neither the execution, delivery and performance of this
Agreement by the Company, the offering, issue and sale of the
Securities, nor the consummation of any other of the transactions
contemplated herein, nor the fulfillment of the terms hereof, will
conflict with or result in a breach or violation of, or constitute a
default (or an event that with notice or lapse of time, or both, would
constitute a default) under, or result in the imposition of a lien on
any properties of the Company or an acceleration of indebtedness
pursuant to, the Articles of Incorporation or bylaws of the Company, or
any of the terms of any indenture or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties are bound, or any federal, state or local law, rule,
regulation of any court, governmental or regulatory body, stock exchange
or arbitrator having jurisdiction over the Company or any of its assets.
The Company is not (A) in violation of its Articles of Incorporation or
bylaws or (B) in breach of or default under any of the terms of any
indenture or other agreement or instrument to which it is a party or by
which it or its properties are bound, which breach or default described
in this clause (B) would, individually or in the aggregate, have a
Material Adverse Effect.
(k) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it any
shares of capital stock in consequence of the issue and sale of the
Securities, nor does any person have preemptive rights, or rights of
first refusal or other rights to purchase any of the Securities. Except
as referred to in the Prospectus, no person holds a right to require or
participate in a registration under the Act of Common Stock or any other
equity securities of the Company.
(l) The Company has not (i) taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in,
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale or the
Securities or (ii) effected any sales of shares or securities that are
required to be disclosed in response to Item 26 of Part II of the
Registration Statement (other than transactions disclosed in response to
Item 26 of Part II of the Registration Statement or the Prospectus).
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(m) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as may
have been obtained or made and registration of the Securities under the
Act, and such as may be required under the Blue Sky laws of any
jurisdiction in connection with the placement of the Securities by the
Placement Agents.
(n) The accountants who have certified the financial statements
filed or to be filed with the Commission as part of the Registration
Statement are independent accountants as required by the Act.
(o) No stop order preventing or suspending the use of any
Preliminary Prospectus has been issued, and no proceedings for that
purpose are pending or, to the best knowledge of the Company, threatened
or contemplated by the Commission; no stop order suspending the sale of
the Securities in any jurisdiction has been issued and no proceedings
for that purpose have been instituted or, to the best knowledge of the
Company, threatened or are contemplated; and any request of the
Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) has been complied
with.
(p) The Company has not sustained since June 30, 1996, any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there have not been any
material changes in the capital stock or short-or long-term debt of the
Company, or any material adverse change, or a development known to the
Company that could reasonably be expected to cause or result in a
material adverse change, in the general affairs, management, financial
position, stockholders' equity, results of operations or prospects of
the Company, other than as set forth in the Prospectus. Except as set
forth in the Prospectus, there exists no present condition or state of
facts or circumstances known to the Company (A) affecting its reserves
or (B) involving its business which the Company can now reasonably
foresee would have a Material Adverse Effect on the business of the
Company, or which would prevent the Company from conducting its business
as described in the Prospectus in essentially the same manner in which
it has heretofore been conducted.
(q) The financial statements and the related notes of the Company
included in the Registration Statement and the Prospectus present fairly
the financial position, results of operations, cash flow and changes in
stockholders' equity of the Company at the dates and for the periods
indicated, subject in the case of the financial statements for interim
periods, to normal and recurring year-end adjustments. The financial
statement schedules included in the Registration Statement present
fairly the information required to be stated therein. Such financial
statements and schedules were prepared in conformity with the
Commission's rules and regulations and in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved, except as stated therein. The financial
information of the Company set forth in the Prospectus under the
captions "Capitalization" and "Management's Discussion and Analysis or
Plan of Operations" fairly present, on the basis stated in the
Prospectus, the information included therein.
(r) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or otherwise,
adequate patents, copyrights, trade names, trademarks, service marks,
licenses and other intellectual property rights necessary to carry on
its business as described in the Prospectus, and, except as set forth in
the Prospectus, the Company has not received any notice of either (i)
default under any of the foregoing or (ii) infringement of or conflict
with asserted rights of others with respect to, or challenge to the
validity of, any of the foregoing which, in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could have a
Material Adverse Effect, and the Company knows of no fact or existing
circumstance which could reasonably be anticipated to serve as the basis
for any such notice or any such default, infringement or conflict.
(s) The Company has filed all applications and has obtained all
permits, approvals, licenses, franchises, certificates and
authorizations of all Federal, state, local or foreign governmental
authorities ("Permits") as are necessary to own its respective property
and to conduct its business in the manner now being conducted and as
described in the Prospectus, subject to such qualifications as may be
set forth in the Prospectus, except where the lack of ownership or
possession of such Permits would not, individually or in the aggregate,
have a Material Adverse Effect on the Company; the Company has fulfilled
and performed all of its material obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse
of time would allow, revocation or termination thereof or would result
in any other material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be set forth
in the Prospectus, except where such revocations, terminations or other
impairments thereof would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; and, except as described in the
Prospectus, none of such Permits contains any restriction that is
materially burdensome to the Company.
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(t) Subject to such exceptions as are not material (A) the
Company owns all properties and assets described in the Registration
Statement and the Prospectus as being owned by it and (B) the Company
has good tide to all properties and assets owned by it, free and clear
of all liens, charges, encumbrances and restrictions, except as
otherwise disclosed in the Prospectus, and except for (i) liens for
taxes not yet due, (ii) mortgages and liens securing debt reflected on
the financial statements included in the Prospectus, (iii)
materialmen's, workmen's, vendor's and other similar liens incurred in
the ordinary course of business that are not delinquent and,
individually or in the aggregate, do not have a material adverse effect
on the value of such properties or assets to the Company, or on the use
of such properties or assets by the Company, in its respective
businesses, and (iv) any other liens that, individually or in the
aggregate, are not likely to result in a Material Adverse Effect. All
leases to which the Company is a party and which are material to the
conduct of the business of the Company are valid and binding and no
material default by the Company has occurred and is continuing
thereunder; and the Company enjoys peaceful and undisturbed possession
under all such material leases to which it is a party as lessee.
(u) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Company. The system of internal
accounting controls maintained by the Company is sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, in each case, which are likely to result in a Material
Adverse Effect, and there has not been any payment of or declaration to
pay any dividends or any other distribution with respect to the shares
of the capital stock of the Company.
(w) The Company has obtained and delivered to the Representative
the written agreements in substantially the form of Exhibit A attached
hereto, of each of the persons listed in Schedule III attached hereto,
restricting dispositions of shares of capital stock of the Company in
accordance with the provisions of Section 6 hereof and the terms
contained in the Exhibit A form applicable thereto.
(x) The Company is in compliance in all material respects with
all applicable laws, rules and regulations, including, without
limitation, employment and employment practices, immigration, terms and
conditions of employment, health and safety of workers, customs and
wages and hours, and is not engaged in any unfair labor practice. No
property of the Company has been seized by any governmental agency or
authority as a result of any violation by the Company or any independent
contractor of the Company of any provision of law. There is no pending
unfair labor practice complaint or charge filed with any governmental
agency against the Company. There is no labor strike, material dispute,
slow down or work stoppage actually pending or, to the best knowledge of
the Company, threatened against or affecting the Company; no grievance
or arbitration arising out of or under any collective bargaining
agreement is pending against the Company; no collective bargaining
agreement which is binding on the Company restricts the Company from
relocating or closing any of its operations; and the Company has not
experienced any work stoppage or other labor dispute at any time.
(y) The Company has accurately, properly and timely (giving
effect to any valid extensions of time) filed all federal, state, local
and foreign tax returns (including all schedules thereto) that are
required to be filed, and has paid all taxes and assessments shown
thereon. All tax deficiencies asserted or assessed against the Company
by the Internal Revenue Service ("IRS") or any other foreign or domestic
taxing authority have been paid or finally settled with no remaining
amounts owed. Neither the IRS nor any other foreign or domestic taxing
authority has examined any tax returns of the Company. The charges,
accruals and reserves shown in the financial statements included in the
Prospectus in respect of taxes for all fiscal periods to date are
adequate, and nothing has occurred subsequent to the date of such
financial statements that makes such charges, accruals or reserves
inadequate. The Company is not aware of any proposal (whether oral or
written) by any taxing authority to adjust any tax return filed by the
Company.
(z) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the Company
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to or for the benefit of its affiliates, or any of its officers or
directors, or any of the members of the families of any of them, which
are required to be disclosed in the Registration Statement or the
Prospectus.
(aa) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(bb) Except as set forth in the Prospectus, the Company has
insurance of the types and in the amounts that it reasonably believes is
adequate for its business, including, but not limited to, casualty and
general liability insurance covering all real and personal property
owned or leased by the Company, as applicable, against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against.
(cc) The Company has not at any time (i) made any contributions
to any candidate for political office, or failed to disclose fully any
such contribution, in violation of law; (ii) made any payment to any
state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than
payments required or allowed by all applicable laws; or (iii) violated,
nor is it in violation of, any provision of the Foreign Corrupt
Practices Act of 1977.
(dd) The preparation and the filing of the Registration Statement
with the Commission have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant
to such authorization by and on behalf of the Company.
(ee) All documents delivered or to be delivered by the Company or
any of its directors or officers to the Placement Agents, the Commission
or any state securities law administrator in connection with the
issuance and sale of the Securities were, on the dates on which they
were delivered, and will be, on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(ff) With such exceptions as are not likely to result in a
Material Adverse Effect, the Company is in compliance with all Federal,
state, foreign and local laws and regulations relating to pollution or
protection of human health or the environment ("Environmental Laws"),
and the Company has not received any notice or other communication
alleging a currently pending violation of any Environmental Laws. With
such exceptions as are not likely to result in a Material Adverse
Effect, other than as set forth in the Prospectus, to the Company's best
knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products, that may result in the imposition of liability
on the Company or any claim against the Company or, to the Company's
best knowledge, against any person or entity whose liability for any
claim the Company has or may have assumed either contractually or by
operation of law, and the Company has not received any notice or other
communication concerning any such claim against the Company or such
person or entity.
(gg) Except as described in the Prospectus, the Company does not
maintain, nor does any other person maintain on behalf of the Company,
any retirement, pension (whether deferred or non-deferred, defined
contribution or defined benefit) or money purchase p]an or trust. There
are no unfunded liabilities of the Company with respect to any such
plans or trusts that are not accrued or otherwise reserved for on the
Company's financial statements included in the Registration Statement
and the Prospectus.
(hh) Any certificates signed by an officer of the Company and
delivered to the Representative or the Placement Agents shall also be
deemed a representation and warranty of the Company to the Placement
Agents as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees to offer
and sell through the Placement Agents a maximum of 300,000 Units, with each Unit
consisting of six shares of Common Stock and six Warrants. Each of the Placement
Agents agrees, severally and not jointly, to use its best efforts to place the
number of Units set forth on the signature page of the Selling Agreement. The
purchase price shall be $10.00 per Unit. Any order arranged by a Placement Agent
may be accepted or rejected in whole or in part by the Company.
3. Delivery and Payment. Delivery of the certificates for the components of the
Units described in Section 2 placed through any Placement Agent and accepted by
the Company shall be made by the Company through the facilities of the
Depository Trust Company ("DTC'), and payment therefor shall be made at the
office of the Company at 11:00 a.m. Dallas, Texas time, on such dates, not
earlier than the tenth full business day following the Effective Date of the
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Registration Statement, as such Placement Agent shall designate by at least 48
hours' prior notice to the Company (each such date, time of delivery and payment
for such Securities being herein called a Closing Date). Delivery of the
certificates for such Securities to be purchased on a Closing Date shall be made
as provided in the preceding sentence for the respective accounts of the several
Placement Agents against payment by the several Placement Agents through the DTC
of the aggregate purchase price of such Securities being sold by the Company, to
or upon the order of the Company, by certified or official bank check or checks
drawn on or by a New York Clearing House bank and payable in next day funds.
Certificates for such Securities shall be registered in such names and in such
denominations as the Placement Agent may request not less than three full
business days in advance of the related Closing Date. The Company agrees to have
the certificates for the Securities to be purchased on a Closing Date available
at the office of the DTC, not later than 9:00 a.m. Dallas, Texas time at least
one business day prior to such Closing Date.
4. Offering through Placement Agents. It is understood that the several
Placement Agents propose to make the Securities available to the public solely
as agents of the Company as set forth in the Prospectus.
5. Agreements of the Company. The Company agrees with the several Placement
Agents that:
(a) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, if not effective at
the Execution Time, to become effective as promptly as possible if the
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule
424(b), the Company will file the Prospectus, properly completed,
pursuant to Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any
post-effective amendment thereto shall have become effective, (iii) of
any request by the Commission for any amendment or supplement of the
Registration Statement or the Prospectus or for any additional
information with respect thereto, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that
purpose, and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or suspension and, if
issued, to obtain as soon as possible the withdrawal thereof. The
Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without notice to the Representative. The
Company, at the Company's expense, shall keep the Registration Statement
effective and the information contained therein (including information
contained in the Prospectus) current during the term of the Warrants in
accordance with the Act and the rules and regulations thereunder.
Without limiting the effect of the preceding sentence, in the event any
Placement Agent is required to deliver a Prospectus in connection with
sales of any of the Securities at any time nine months or more after the
Effective Date, upon the written request of the Representative and at
the expense of the Company, the Company will prepare, file with the
Commission and deliver to such Placement Agent as many copies as the
Representative may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result
of which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
otherwise shall be necessary to supplement the Prospectus to comply with
the Act or the rules or regulations thereunder, the Company will
promptly notify the Representative and prepare and file with the
Commission, subject to Section 5(a) hereof, a supplement that will
correct such statement or omission or a supplement that will effect such
compliance.
(c) As soon as practicable (but not later than September 15,
1998), the Company will make generally available to its security holders
and to the Representative an earnings statement or statements (which
need not be audited) of the Company covering a period of at least twelve
months after the Effective Date but in no event commencing later than 90
days after such date), which will satisfy the provisions of Section
11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Placement Agents, without charge, three signed copies of the
Registration Statement and any amendments thereto (including exhibits
thereto) and to each other Placement Agent a conformed copy of the
Registration Statement and any amendments thereto (without exhibits
thereto) and, so long as delivery of a prospectus by a Placement Agent
or dealer may be required by the Act, as many copies of the Prospectus
and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request. The Company will furnish or cause
to be furnished to the Representative copies of all reports on Form SR
required by Rule 463 under the Act.
7
(e) The Company will take all actions necessary for the
registration or qualification of the Securities for sale under the laws
of such jurisdictions within the United States and its territories as
the Representative may reasonably request, will maintain such
qualifications in effect so long as required for the distribution of the
Securities and will pay the fee of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with its review of
the offering, provided that the Company shall not be required to qualify
as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to
the offering and sale of the Securities).
(f) The Company xxxx apply the net proceeds from the offering
received by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(g) The Company will (i) use its best efforts cause the
Securities (other than the Placement Agents' Warrants) to be listed on a
recognized national or regional stock exchanges in the United States,
(ii) comply with all registration, filing and reporting requirements of
the Exchange Act and the such which may from time to time be applicable
to the Company, and (iii) file a report of sales and use of proceeds on
Form SR as required to be filed pursuant to Rule 463 under the Act from
time to time.
(h) The Company will file promptly all documents required to be
flied with the Commission pursuant to Sections 13, 14 or 15(d) of the
Exchange Act subsequent to the Effective Date and during any period in
which the Prospectus is required to be delivered.
(i) During the five year period commencing on the date hereof,
the Company will furnish to its stockholders, as soon as practicable
after the end of each respective period, annual reports (including
financial statements audited by independent certified public
accountants) and make publicly available and unaudited quarterly reports
of earnings and will furnish to you and, upon request, to the other
Placement Agents hereunder (i) concurrent with furnishing such annual
and quarterly reports to its stockholders, copies of such reports; (ii)
as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD, or any
other securities exchange; (iii) every press release and every material
news item or article in respect of the Company or its affairs which was
released or prepared by the Company; and (iv) any additional information
of a public nature concerning the Company or its business that you may
reasonably request. During such five year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on
a consolidated basis to the extent that the accounts of the Company and
its subsidiaries are consolidated, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so
consolidated.
(j) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for the Securities.
(k) The Company has reserved and shall continue to reserve a
sufficient number of shares of Common Stock for issuance upon exercise
of the Placement Agents' Warrants and Warrants (including the Warrants
included in the Placement Agents' Warrants).
(l) The Company will not take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Units, Common Stock or
Warrants to facilitate the sale or resale of such Securities or that
otherwise might reasonably be expected to violate the provisions of Rule
l0b-6, Rule l0b-7 or Rule l0b-l8 under the Exchange Act.
6. Conditions to the Obligations of the Placement Agents. The obligations of the
Placement Agents to offer, as agents, the Units described in Sections 2(a) and
2b) hereof shall be subject to (i) the accuracy in all material respects of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, each Closing Date (except that each of the representations
and warranties of the Company, the breach or violation of which is not qualified
as to materiality, shall be true in all respects) and (in the case of any Units
delivered after any Closing Date) any settlement date pursuant to Section 3(b)
hereof, (ii) the accuracy of the statements of the Company made in any
certificates delivered pursuant to the provisions hereof, (iii) the performance
in all material respects by the Company of their respective obligations
hereunder (except that each of the obligations of the Company, the violation of
which is not qualified as to materiality, shall be performed in all respects),
and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or,
if a post-effective amendment is required to be filed pursuant to Rule
430A under the Act, such post-effective amendment shall become
effective) not later than 5:00 p.m. Dallas, Texas time, thirty days
8
following the execution date hereof or at such later date and time as
you may approve in writing and, at any Closing Date (and any settlement
date pursuant to Section 3(b) hereof), no stop order suspending the
effectiveness of the Registration Statement or any qualification in any
jurisdiction shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company or any
Placement Agent, threatened by the Commission, and any request of the
Commission for additional information (to be included in the
Registration Statement or Prospectus or otherwise) shall have been
complied with to the Representative's reasonable satisfaction.
(b) The Company shall have furnished to the Representative the
opinion of Xxxxx, Xxxxxx, Xxxxxx & Xxxxxx, counsel for the Company, or
other counsel acceptable to the Placement Agent addressed to the
Placement Agent and dated on each Closing Date (and any settlement date
pursuant to Section 3(b) hereof), to the effect that:
(i) The Registration Statement has become effective under
the Act; any required filing of the Prospectus or any supplements
thereto pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any qualification
in any jurisdiction has been issued and no proceedings for that
purpose have been instituted or threatened; the Registration
Statement and the Prospectus (and any amendments or supplements
thereto) comply as to form in all material respects with the
applicable requirements of the Act and the rules and regulations
thereunder (other than the financial statements and related
schedules, as to which such counsel need make no statement).
(ii) Except as set for in the Prospectus, the Company
has no subsidiaries.
(iii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the Province of Ontario, with requisite corporate power and
authority to own its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business
as a foreign corporation and is in good standing under the laws
of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the
aggregate, to be so qualified would have a Material Adverse
Effect. The Company has all necessary and material
authorizations, approvals, orders, licenses, certificates and
permits of and from all government regulatory officials and
bodies, to own its properties and conduct its business as
described in the Prospectus, except where failure to obtain such
authorizations, approvals, orders, licenses, certificates or
permits would not have a Material Adverse Effect.
(iv) The Company does not own any shares of capital stock
or any other equity securities of any corporation or any equity
interest in any firm, partnership, association or other entity,
other than as described in the Prospectus.
(v) The Company has authorized and outstanding share
capitalization as set forth in the Prospectus; the capital stock
of the Company conforms in all material respects to the
description thereof contained in the Prospectus; all outstanding
shares of Common Stock have been duly and validly authorized and
issued and are fully paid and nonassessable and the certificates
therefor are in valid and sufficient form in accordance with the
laws of the Province of Ontario and the Company's Bylaws; there
are no other classes of stock outstanding except Common Stock as
described in the Prospectus; all outstanding options to purchase
shares of Common Stock have been duly and validly authorized and
issued; except as described in the Prospectus, there are no
options, warrants or rights to acquire, or debt instruments
convertible into or exchangeable for, or other agreements or
understandings to which the Company is a party, outstanding or in
existence, entitling any person to purchase or otherwise acquire
any shares of capital stock of the Company; the issuance and sale
of the Securities have been duly and validly authorized and, when
issued and delivered and paid for in accordance with the terms of
this Agreement, the Securities will be fully paid and
nonassessable and free from preemptive rights, and will conform
in all respects to the description thereof contained in the
Prospectus; the Warrants and Placement Agents' Warrants
constitute valid and binding obligations of the Company
enforceable in accordance with their terms (subject to customary
bankruptcy and equitable remedy exceptions) and the Company has
reserved a sufficient number of shares of Common Stock for
issuance upon exercise thereof (including the Warrants included
in the Placement Agents' Warrants); and the Warrants and
Placement Agents' Warrants possess the rights, privileges and
characteristics as represented in the forms filed as exhibits to
the Registration Statement and as described in the Prospectus.
Each offer and sale of securities of the Company referred to in
Item 26 of Part II of the Registration Statement was effected in
compliance with the Act and the rules and regulations thereunder,
and with all applicable state securities and blue sky ("Blue
Sky") laws.
9
(vi) Other than as described in the Prospectus, there is
no pending or, to the best knowledge of such counsel, threatened
action, suit or proceeding before any court or governmental
agency, authority or body, domestic or foreign, or any arbitrator
involving the Company of a character required to be disclosed in
the Registration Statement or the Prospectus that is not
adequately disclosed in the Prospectus, and, to the best
knowledge of such counsel, there is no contract or other document
of a character required to be described in the Registration
Statement or the Prospectus, or to be filed as an exhibit, which
is not described or filed as required.
(vii) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes the legal, valid and
binding agreement and obligation of the Company enforceable
against it in accordance with its terms (subject to customary
bankruptcy and equitable remedy exceptions, and limitations under
the Act as to the enforceability of indemnification provisions).
(viii) The Company has requisite corporate power and
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities to be
sold by it in the manner provided in this Agreement. The Company
has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations
under, this Agreement.
(ix) Neither the execution, delivery and performance of
this Agreement by the Company, the offering, issue and sale of
the Securities, nor the consummation of any other of the
transactions contemplated herein, nor the fulfillment of the
terms hereof, will conflict with or result in a breach or
violation of, or constitute a default (or an event that with
notice or lapse of time, or both, would constitute a default)
under, or result in the imposition of a lien on any properties of
the Company or an acceleration of indebtedness pursuant to, the
Articles of Incorporation or bylaws of the Company, or any of the
terms of any indenture or other agreement or instrument to which
the Company is a party or by which the Company or any of its
properties are bound, or any federal, state or local law, rule,
regulation of any court, governmental or regulatory body, stock
exchange or arbitrator having jurisdiction over the Company or
any of its assets. The Company is not (A) in violation of its
Articles of Incorporation or bylaws or (B) in breach of or
default under any of the terms of any indenture or other
agreement or instrument to which it is a party or by which it or
its properties are bound, which breach or default described in
this clause (B) would, individually or in the aggregate, have a
Material Adverse Effect. Neither the offering, issue and sale of
the Securities nor the consummation of any other of the
transactions contemplated herein, nor the fulfillment of the
terms hereof, will conflict with or result in a breach or
violation of, or constitute a default (or an event that with
notice or lapse of time, or both, would constitute a default)
under, or result in the imposition of a lien on any properties of
the Company, or an acceleration of indebtedness pursuant to, the
Articles of Incorporation or bylaws of the Company, or any of die
terms of any indenture or other agreement or instrument to which
the Company is a party or by which any of their respective
properties are bound, or any law, rule, regulation, court decree,
judgment or other order of any court, governmental or regulatory
body, stock exchange or arbitrator having jurisdiction over the
Company or any of its assets. The Company is not (A) in violation
of its Articles of Incorporation or bylaws or (B) in breach of or
default under any of the terms of any indenture or other
agreement or instrument to which it is a party or by which it or
its properties are bound, which breach or default described in
this clause (B) would, individually or in the aggregate, have a
Material Adverse Effect.
(x) Except as disclosed in the Prospectus, no person has
the right, contractual or otherwise, to cause the Company to
issue to it any shares of capital stock in consequence of the
issue and sale of the Securities to be sold by the Company
hereunder nor does any person have preemptive rights, or rights
of first refusal or other rights to purchase any of the
Securities. Except as referred to in the Prospectus, no person
holds a right to require or participate in a registration under
the Act of Common Stock or any other equity securities of the
Company.
(xi) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or
body is required to be obtained or filed by or on behalf of the
Company in connection with the transactions contemplated herein,
except such as may have been obtained or made and registration of
the Securities under the Act, and such as may be required under
the Blue Sky laws of any jurisdiction.
(xii) The Company is not in violation of or default under
any judgment, ruling, decree or order or any statute, rule or
regulation of any court or other United States governmental
agency or body, including any applicable laws respecting
employment, immigration and wages and hours, in each case, where
10
such violation or default could have a Material Adverse Effect.
The Company is not involved in any labor dispute nor, to the best
knowledge of such counsel, is any labor dispute threatened.
(xiii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as
amended.
(xiv) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company and the Registration Statement has been
duly executed pursuant to such authorization by and on behalf of
the Company.
(xv) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the
Prospectus, and, except as set forth in the Prospectus, the
Company has not received any notice of either (i) default under
any of the foregoing, or (ii) infringement of or conflict with
asserted rights of others with respect to, or challenge to the
validity of, any of the foregoing which, in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could have
a Material Adverse Effect.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Placement Agents at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in the first three
clauses of subparagraph (v) above), on the basis of the foregoing and on such
counsel's participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
each Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or that the Prospectus, at the date of such Prospectus or
at the Closing Date (or any settlement date pursuant to Section 3(b) hereof), or
any amendment or supplement to the Prospectus, as of its respective date or as
of the Closing Date (or any settlement date pursuant to Section 3(b) hereof)
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
comment with respect to the financial statements and schedules and other
financial or statistical data included in the Registration Statement or
Prospectus).
Counsel may rely on the opinion of Xxxx & Xxxxxx as to matters of
Canadian law.
References to the Prospectus in this Section 7(b) shall include any
amendments or supplements thereto.
(c) The Representative shall have received from Xxxxxxx X. Xxxxx,
L.L.C., counsel for the Placement Agents, an opinion dated each Closing Date
(and any settlement date pursuant to Section 3(b) hereof), with respect to the
issuance and sale of the Securities, and with respect to the Registration
Statement, the Prospectus and other related matters as the Representative may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may reasonably request for the purpose of enabling them to
pass upon such matters.
(d) The Company shall have furnished to the Representative a certificate
of the Company, signed by its President and Chief Executive Officer, dated each
Closing Date (and any settlement date pursuant to Section 3(b) hereof), to the
effect that each has carefully examined the Registration Statement, the
Prospectus (and any supplements thereto) and this Agreement, and, after due
inquiry, that:
(i) As of each Closing Date (and any settlement date pursuant to
Section 3(b) hereof), the statements made in the Registration
Statement and the Prospectus are true and correct and the
Registration Statement and the Prospectus do not contain any
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 light of the circumstances under which
they were made, not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities
under the securities or Blue Sky laws of any jurisdiction is in
effect and no proceeding for such purpose is pending before or,
to the knowledge of such officers, threatened or contemplated by
11
the Commission or the authorities of any such jurisdiction; and
any request for additional information with respect to the
Registration Statement or the Prospectus on the part of the staff
of the Commission or any such authorities brought to the
attention of such officers has been complied with to the
satisfaction of the staff of the Commission or such authorities.
(iii) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (x) there has
not been any change in the capital stock or short- or long-term
debt of the Company, except as set forth in or contemplated by
the Registration Statement and the Prospectus, (y) there has not
been any material adverse change in the business, prospects,
properties, management, results of operations or condition
(financial or otherwise) of the Company, whether or not arising
from transactions in the ordinary course of business, in each
case, other than as set forth in or contemplated by the
Registration Statement and the Prospectus, and (z) the Company
has not sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether
or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or
decree, which is not set forth in the Registration Statement and
the Prospectus.
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has been
no litigation instituted against the Company or any of its
respective officers or directors, and since such dates there has
been no proceeding instituted or, to the best knowledge of such
officers, threatened against the Company or any of its officers
or directors before any federal, state or county court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding could have
a Material Adverse Effect.
(v) Each of the representations and warranties of the Company in
this Agreement is true and correct in all material respects on
and as of the Execution Time and each Closing Date (and any
settlement date pursuant to Section 3(b) hereof) with the same
effect as if made on and as of each Closing Date (and any
settlement date pursuant to Section 3(b) hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 3(b) hereof) has been duly,
timely and fully performed in all material respects, and each
condition required herein to be complied with by the Company on
or prior to the Closing Date (and any settlement date pursuant to
Section 3(b) hereof) has been duly, timely and fully complied
with in all material respects.
(e) On each Closing Date (and any settlement date pursuant to Section
3(b) hereof), Xxxx + Associates, LLP shall have furnished to the Representative
letters, dated as of such dates, in form and substance satisfactory to the
Representative, confirming that they are independent accountants within the
meaning of the Act and the applicable rules and regulations thereunder and
stating in effect that:
(i) In their opinion, the audited financial statements of the
Company for the fiscal year ended June 30, 1996, and the unaided
statements for the nine months ended March 31, 1997 compiled by the
Company and the notes to the financial statements and financial
statement schedules for those periods included in the Registration
Statement and the Prospectus, comply in form in all material respects
with the applicable accounting requirements of the Act and the
applicable rules and regulations thereunder.
(ii) On the basis of a reading of the latest unaudited financial
statements made available by the Company, carrying out certain specified
procedures (but not an examination in accordance with generally accepted
auditing standards), a reading of the minutes of the meetings of the
stockholders, directors and committees of the Company, and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters of the Company, nothing came to theft attention
that caused them to believe that with respect to the period subsequent
to June 30, 1996, at a specified date not more than five business days
prior to the date of the letter, (y) there were any changes in the
short- or long-term debt or capital stock of the Company, or decreases
in net current assets, net assets or stockholders' equity of the Company
as compared with the amounts shown on the June 30, 1996 balance sheet
included in the Registration Statement and the Prospectus, or (z) there
were any decreases in reserves, sales, net income or income from
operations, of the Company, as compared with the corresponding period in
the preceding year, except for changes or decreases which the
Registration Statement discloses have occurred or may occur and except
for changes or decreases, set forth in such letter, in which case (A)
the letter shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed necessary
by the Representative
12
and (B) such changes or decreases and the explanation thereof shall be
acceptable to the Representative, in its sole discretion.
(iii) They have performed certain other specified procedures as a
result of which they determined that all information of an accounting,
financial or statistical nature (which is limited to accounting,
financial or statistical information derived from the general accounting
records of the Company) set forth in the Registration Statement and the
Prospectus and specified by you prior to the Execution Time, agrees with
the accounting records of the Company.
(iv) On the basis of a reading of the unaudited balance sheet as
of March 31, 1997 and the related unaudited statements of operations for
the nine months ended March 31, 1997, and the procedures specified by
you prior to the Execution Time, nothing came to their attention that
caused them to believe that the above described balance sheet and
statements of operations had not been properly compiled on the bases
described in the notes thereto.
References to the Prospectus in this Section 6(e) shall include any
amendments or supplements thereto.
The Representative shall have also received from Xxxx + Associates a
letter to the Company stating that the Company's system of internal accounting
controls taken as a whole are sufficient to meet the broad objectives of
internal accounting control insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that would be
material to the financial statements of the Company.
(f) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been (i)
any changes or decreases from those specified in the letters referred to in
Section 6(e) hereof which have been accepted by the Representative pursuant
thereto or (ii) any change in the properties, assets, results of operations,
business, capitalization, net worth, prospects, general affairs or condition
(financial or otherwise) of the Company the effect of which is, in the sole
judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
(g) The Company shall not have sustained any uninsured substantial loss
as a result of fire, flood, accident or other calamity.
(h) The Company shall have furnished to the Representative a certificate
of the Secretary of the Company certifying as to certain information and other
matters as the Representative may reasonably request.
(i) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in any respect when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all respects reasonably
satisfactory in form and substance to the Representative and its
counsel, this Agreement and all obligations of the Placement Agents
hereunder may be terminated at, or at any time prior to, each Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the
Company in writing or by telephone, facsimile or telegraph confirmed in
writing.
7. Fees and Expenses and Placement Agents' Warrants. The Company agrees to
pay or cause to be paid the following:
(a) The fees, disbursements and expenses of its own counsel and
accountants in connection with the registration of the Securities under
the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary
Prospectus, any Prospectus, and any drafts thereof, and amendments and
supplements thereto, and the mailing and delivery of copies thereof to
the Placement Agent and dealers;
(b) All expenses in connection with the qualification of the
Securities for offering under state securities laws, including the fees
and disbursements of counsel for the Placement Agents in connection with
such qualification and in connection with the Blue Sky Memorandum;
(c) All filing and other fees in connection with filing with
the NASD, and complying with applicable review requirements thereof;
(d) The cost of preparing and printing certificates for the
Securities;
13
(e) All expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties, sellers' and buyers'
stamp taxes or duties on the purchase and sale of the Securities and
stock exchange brokerage and transaction levies with respect to the
purchase and, if applicable, the sale of the Securities (the latter to
the extent paid and not reimbursed) incident to the sale and delivery of
the Securities through the Placement Agents to the initial purchasers
thereof;
(f) The costs and charges of any transfer agent and registrar;
(g) The fees and expenses in connection with the registration of
the Securities under the Securities Exchange Act and the qualification
of the Securities for listing on any regional or national stock
exchange.
(h) The cost of printing, producing and distributing this
Agreement, the Selling Agreement, the related syndication materials and
the Preliminary and Final Blue Sky Memoranda;
(i) All travel expenses (including without limitation airfare and
hotel) of the Company's officers, directors and other representatives in
connection with the road show;
(1) A nonaccountable expense allowance of 1.8% of the gross
proceeds from the offering placed by the several Placement Agents
payable to the Placement Agents pro rata with the number of Units placed
by each Placement Agent.
(k) All other costs and expenses incident to the performance of
the Company's obligations hereunder.
In addition to the sums payable to the Representative as provided
elsewhere, the Placement Agents shall be entitled to receive, as partial
compensation for their services, unit purchase warrants for the purchase
of up to an additional 30,000 Units (the "Placement Agents' Warrants").
The Placement Agents' Warrants shall be issued pursuant to the Warrant
and Registration Rights Agreement (the "Placement Agents' Warrant
Agreement") in the form of Exhibit B attached hereto and shall be
exercisable, in whole or in part, for a period of two years commencing
one year from the date of the Prospectus, at 120% of the public offering
price of the Units set forth on the cover page of the Prospectus. The
Placement Agents' Warrants, including the Warrants issuable upon
exercise thereof, shall be non-transferable for one year from the date
of issuance of the Placement Agents' Warrants, except as provided in the
Placement Agents' Warrant Agreement. The terms of the Units subject to
the Placement Agents' Warrants shall be the same as the Units sold to
the public.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Placement
Agent and each person who controls any Placement Agent within the
meaning of the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (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
(i) Section 1 of this Agreement, the Registration Statement, any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or (ii) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Securities under the securities
or Blue Sky laws thereof or filed with the Commission or any securities
association or securities exchange, 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, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon 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 Placement
Agent through the Representative specifically for use in the
Registration Statement or Prospectus; provided further, that with
respect to any untrue statement or omission, or any alleged untrue
statement or omission, made in any Preliminary Prospectus, the indemnity
agreement contained in this Section 8 shall not inure to the benefit of
any Placement Agent (or to the benefit of any person controlling any
such Placement Agent) from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Securities
concerned to the extent that such untrue statement or omission, or
alleged untrue statement or omission, has been corrected in the
Prospectus and the failure to deliver the Prospectus was not a result of
the Company's failure to comply with its obligations under Sections 5(b)
14
and 5(d) hereof. The indemnity agreement contained in this Section 8
will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of each
Placement Agent, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or
not such Placement Agent or any person who controls such Placement Agent
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding),
unless the settlement or compromise or consent includes an unconditional
release of such Placement Agent and each such controlling person from
all liability arising out of such claim, action, suit or proceeding,
satisfactory in form and substance to the Representative.
(b) Each Placement Agent severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person who controls the
Company within the meaning of the Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each Placement
Agent, but only with reference to written information relating to such
Placement Agent furnished to the Company by or on behalf of such
Placement Agent through the Representative specifically for use in the
Registration Statement or Prospectus. The obligations of each Placement
Agent under this subsection (b) shall be in addition to any liability
which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or
proceeding, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof and
the indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the indemnified party
and the payment of all expenses; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party, unless such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party.
All such expenses shall be paid by the indemnifying party as incurred by
an indemnified party. Any such indemnified party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party
has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed promptly after notice by such indemnified party to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the indemnified party in any such action,
suit or proceeding or (iii) the named parties in any such action or
proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party
shall have been advised by counsel that there is a conflict of interest
on the part of counsel employed by the indemnifying party to represent
such indemnified party or there may be one or more legal defenses
available to such indemnified party which are different from or
additional to those available to the indemnifying party (in which case,
if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action or proceeding on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties,
which firm shall be designated in writing to the indemnifying party).
Any such fees and expenses payable by the indemnifying party shall be
paid to or on behalf of the indemnified party entitled thereto as
incurred. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its consent, which shall not be
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 8(a)
or 8(b) is applicable in accordance with its terms but is for any reason
held by a court to be unavailable from the indemnifying party on grounds
of policy or otherwise, the Company and the Placement Agents shall
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection
with investigating or defending same) to which the Company and one or
more of the Placement Agents may be subject (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and the Placement Agents on the other hand from the
offering of the Units or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above, but also the relative fault of the Company on the one
hand and the Placement Agents on the other in connection with the
statements or omissions that resulted in such losses, claims, damages
and liabilities, as well as any other relevant equitable considerations;
provided, however, that (x) in no case shall any Placement Agents be
responsible for any amount in excess of the commission on the Units to
be purchased through such Placement Agent hereunder pursuant to this
Section 8 and (y) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
15
contribution from any person who was not guilty of such fraudulent
misrepresentation. The relative benefits received by the Company on the
one hand and the Placement Agents on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Units (before deducting expenses) received by the Company bear to the
total underwriting discounts and commission received by the Placement
Agents by reason of the sale of Units by the Company, in each case as
set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Placement Agents on the
other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Placement
Agents on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. For purposes of this Section 8, each person who
controls a Placement Agent within the meaning of the Act shall have the
same rights to contribution as such Placement Agent, and each person who
controls the Company within the meaning of the Act, each officer of the
Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as
the Company, subject in each case to clause (y) of this Section 8(d).
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 so to
notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may
have hereunder or otherwise.
9. Best Efforts by Placement Agents. Each Placement Agent shall use its best
efforts to place the securities indicated on the signature page of the Selling
Agreement. However, such amount is non-binding on such Placement Agent and the
several Placement Agents shall have no liability to the Company if Units are not
placed.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of either or Company or Representative, by notice given to the other
party prior to delivery of and payment for the Securities, if prior to such time
(a) a suspension or material limitation in trading in securities generally on
the New York or American Stock Exchange, the Nasdaq National Market, or a fall
in the Dow Xxxxx Industrial Average of either ten percent (10%) or more, (b) a
banking moratorium shall have been declared by federal, New York or Texas state
authorities, or (c) the United States shall have engaged in hostilities which
shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets shall have occurred, and with respect to events specified in clause (c)
or (d) hereof, if the effect of any such event is, in the reasonable judgment of
the Company or Representative, so material and adverse to the issuer as to make
it impractical or inadvisable to proceed with the public offering or delivery of
the Securities due to the materially impaired investment quality of the
Securities as contemplated by the Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers, and the Placement Agent set forth in, referred to in, or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Placement Agent, the Company, or
any of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and effective only
on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
National Securities Corporation
0000 Xxxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, III
Facsimile No. (000) 000-0000
16
to the Company at:
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx X0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No. (000) 000-0000
13. Successors. This Agreement replaces and supercedes all prior agreements
between Representative and the Company and will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 8 hereof, and
no other person will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in one or more counterparts, each
of which shall be an original, with the same effect as if the signatures thereon
and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, without reference to conflict of
laws or principles thereunder. All disputes relating to this Placement Agents
Agreement shall be tried before a court of Texas located in Dallas County, Texas
to the exclusion of all other courts that might have jurisdiction.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Placement Agents.
Very truly yours,
Cotton Valley Resources Corporation
By: __________________________________________
Xxxxxx X. Xxxxxxx, Chairman of the Board
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
National Securities Corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
For themselves and the other several
Placement Agents who execute the
Selling Agreement.
17
SCHEDULE I
COTTON VALLEY RESOURCES CORPORATION
300,000 Units
Consisting of
Six Shares of Common Stock, Without Par Value, and
Six Redeemable Common Stock Purchase Warrants
---------,1997
SELLING AGREEMENT
-----------------
NATIONAL SECURITIES CORPORATION (the "Lead Placement Agent") and the one
or more securities broker dealers whose names and signatures appear in
counterpart in the space provided below, collectively, (the "Placement Agents"),
severally, but not jointly, agree with COTTON VALLEY RESOURCES CORPORATION, a
corporation organized under the laws of the Province of Ontario, Canada (the
"Company"): (i) to the terms of the Placement Agent Agreement dated June
_______, 1997 between the Lead Placement Agent and the Company (the "Placement
Agent Agreement") and (ii) to offer, as agent for the Company, on a "Best
Efforts" basis up to a maximum amount of 300,000 units, each unit (the "Unit")
consisting of six shares of common stock, without par value, of the Company
("Common Stock"), and six redeemable Common Stock purchase warrants
(individually, a "Warrant"), each of which entitles the holder thereof to
purchase one share of Common Stock at a price of $2.08 (such Units, together
with (A) the shares of Common Stock and Warrants comprising the Units and (B)
the shares of Common Stock issuable upon exercise of such Warrants, are
collectively referred to herein as the "Securities" and the Units included
therein are referred to as the "Registered Units"), all as set forth in the
Preliminary Prospectus dated June ___, 1997, as amended and supplemented from
time to time, and subject to the terms of this Selling Agreement. The Units and
the terms upon which they are to be offered for sale by the several Placement
Agents are more particularly described in the Preliminary Prospectus, additional
copies of which will be supplied in reasonable quantities upon request by any
Placement Agent to the Lead Placement Agent or the Company.
1. Offering. The Registered Units are to be offered to the public
directly by the Company through its officers and directors and indirectly
through the several Placement Agents at the price per Unit set forth on the
cover page of the Preliminary Prospectus (the "Public Offering Price") which has
been set at $10.00 per Unit. Each Placement Agent must be actually engaged in
the investment banking or securities business and be either (i) a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD")
who agrees that in making sales of the Registered Units it will comply with the
Rules of Fair Practice, including Sections 8, 24 and 36 of Article m, and the
Interpretation of the Board of Governors of the NASD with respect to Free-Riding
and Withholding, or (ii) dealers with their principal place of business located
outside the United States, its territories and possessions and not registered as
brokers or dealers under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), who have agreed not to make any sales within the United States,
its territories or its possessions or to persons who are nationals thereof or
residents therein, and who agree that in making sales of the Registered Units
outside the United States, they will comply with the requirements of the Rules
of Fair Practice of the NASD, including Sections 8, 24 and 36 of Article m of
such Rules, and Section 25 of such Article as that Section applies to non-member
foreign dealers, and the Interpretation of the Board of Governors of the NASD
with respect to Free-Riding and Withholding.
Cotton Valley Resources Corporation Selling Agreement Page 1
Each Placement Agent who desires to place any of the Registered Units
should sign this agreement and fill out the non-binding indication of interest
as set forth below. A copy of this Selling Agreement should reach the Company
promptly by mail or facsimile transmission at its office at 0000 Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxx X0000, Xxxxxx, Xxxxx 00000, facsimile number (000) 000-0000.
The Company reserves the right to accept or reject subscriptions in whole or in
part, to make allotments and to close the subscription books at any time without
notice. The Registered Units allotted to each Placement Agent will be confirmed
by the Company as soon as reasonably feasible following the effective date of
the final Prospectus (the "Effective Date").
Any Registered Units offered through Placement Agents under the terms of
this Agreement may be immediately offered to the public in conformity with the
terms of the offering set forth herein and in the Preliminary Prospectus,
subject to the effective date of the final Prospectus and the securities or blue
sky laws of the various states or other jurisdictions.
Neither the Placement Agents nor any other person is, or has been, authorized by
the Company to give any information or make any representation in connection
with the sale of the Registered Units other than those contained in the
Preliminary Prospectus. It is assumed that the Registered Units will be
effectively placed for investment.
2. Payment and Delivery. Payment for the Registered Units that customers
of the Placement Agents purchase hereunder shall be made by the Placement Agents
directly to the Company or through the Depository Trust Company ("DTC"), payable
in same-day funds to the order of COTTON VALLEY RESOURCES CORPORATION, at such
time and on such dates, no earlier than ten business days following the
Effective Date, as any Placement Agent may designate, (the "Closing Dates")
against delivery of such Registered Units to such Placement Agents through the
facilities of the DTC pursuant to procedures set forth in the Placement Agent
Agreement. Alternate procedures for payment and delivery may be used by any
Placement Agent by separate agreement with the Company.
3. Compensation. Based on a purchase price of $10.00 per Registered
Unit, the Placement Agents will receive a selling commission (the "Commission")
of $1.00 per Registered Unit and a non-accountable expense allowance (the
"Expense Allowance") of $0.18 per Registered Unit. Placement Agents may deduct
their commissions and non-accountable expense allowance when sending in
payments. Any commissions and non-accountable expense allowances payable not
deducted from payments made for Units will be remitted by Cotton Valley to
Placements within five business days after each Closing. Each Placement Agent
shall also receive Placement Agents' Warrants (as described in the Prospectus)
equal to 10% of the Units placed by such Placement Agent.
4. Blue Sky Matters. Upon request, each Placement Agent will be informed
as to the states and other jurisdictions in which the Company has been advised
that the Registered Units are qualified for sale under the respective securities
or blue sky laws of such states or jurisdictions. However, the Company shall not
have any obligation or responsibility with respect to the right of any Placement
Agent to sell the Registered Units in any jurisdiction and each Placement Agent
shall indemnify and hold harmless the Company, its directors and officers, and
any person controlling the Company from and against any and all losses, claims,
damages, expenses or liabilities to which any of them may become subject as a
result of such Placement Agents failure to comply with the laws of any
jurisdiction in connection with the offer and the sale of Registered Units. In
compliance with the General Business Law of the State of New York, it may be
necessary for each Placement Agent to file a Further State Notice respecting the
Registered Units, in the form required by said Law, prior to offering any of the
Registered Units in such state.
5. Termination. This Agreement shall terminate when the Company shall
have determined that the public offering of the Registered Units has been
completed and upon facsimile notice to the Placement Agents of such termination,
or, if not theretofore terminated, it shall terminate 60 days after the initial
public offering of the Registered Units; provided, however, that the Company
Cotton Valley Resources Corporation Selling Agreement Page 2
shall have the right to extend this Agreement for a period or periods not to
exceed an additional 60 days in the aggregate upon facsimile notice to the
Placement Agents. The Company may terminate this Agreement at any time without
prior notice to the Placement Agents.
6. Obligations and Positions of Placement Agents. The several Placement
Agents are acting as agents of the Company in solely offering the Registered
Units to the public in accordance with the terms and conditions of the Placement
Agents Agreement and the Prospectus. Nothing contained herein shall constitute
the Placement Agents an association or other separate entity, or partners with
the Company or the other Placement Agents, but each Placement Agent will be
responsible for such Placement Agent's share of any liability or expense based
on any claim to the contrary. Neither the Company nor the other Placement Agents
shall be under any liability to any Placement Agent for or in respect of the
value, validity or form of the Registered Units, or the delivery of the
Registered Units, or the performance by anyone of any agreement on its part, or
the qualification of the Registered Units for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and matters expressly assumed by the
Company and the other Placement Agents in this Agreement, and no obligation on
the part of the Company or the other Placement Agents shall be implied
therefrom. The foregoing provisions shall not be deemed a waiver of any
liability imposed under the Securities Act of 1933, as amended (the "Act"), or
the Exchange Act.
The Company shall have full authority to take such actions as they may
deem advisable in respect of all matters pertaining to the offering of the
Registered Units or arising hereunder. No obligation not expressly assumed by
the Company in this Agreement shall be implied hereby or inferred herefrom.
7. Compliance with Securities Laws. On becoming a Placement Agent, and in
offering and selling the Registered Units, the several Placement Agents agree to
comply with all of the applicable requirements of the Act and the Exchange Act.
Each Placement Agent confirms that it is familiar with Rule 15c2-8 under the
Exchange Act relating to the distribution of preliminary and final prospectuses
for securities of an issuer and confirm that it has complied and will comply
therewith with respect to the offering of the Registered Units.
8. Stabilization. Each Placement Agent has agreed that, during the term of this
Agreement or such shorter period as the Company may determine, it will not buy
or sell any Securities of the Company except as a broker pursuant to unsolicited
orders and as otherwise provided in this Agreement
The Placement Agents' attention is directed to Rule 10b-6 of the General Rules
and Regulations under the 1934 Act, which contains certain prohibitions against
trading by a person interested in a distribution until such person has completed
its participation in such distribution.
9. Notices. Any notice from a Placement Agent to the Company should be mailed or
sent by facsimile transmission to the Company at the addresses and facsimile
numbers set forth in Section 1 hereof. Any notice from the Company to a
Placement Agent shall be mailed or sent by facsimile transmission to the
Placement Agent at the address and facsimile number set forth on the signature
page hereof. Mailed notices shall be sent by registered mail, return receipt
requested. Notices shall be effective upon receipt.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to the
choice of law or conflicts of law or principles thereof.
If you desire to offer on a "Best Efforts" basis any Registered Units,
please confirm your agreement by signing and returning to the Company by mail or
facsimile transmission a copy of this Selling Agreement and your indication of
interest as indicated below, even though you may have previously advised the
Company thereof.
Very truly yours,
COTTON VALLEY RESOURCES CORPORATION
Cotton Valley Resources Corporation Selling Agreement Page 3
BY: __________________________________
XXXXXX X. XXXXXXX
CHAIRMAN OF THE BOARD
ACCEPTED AND AGREED:
PLACEMENT AGENT
Name:________________________________
Address:______________________________
-------------------------------------
Phone: _______________________________
Fax:_________________________________
BY: _________________________________
Printed Name: ______________________
Title: _____________________________
Date: _____________________________
Non-binding indication of interest: _____________ Registered Units.
Cotton Valley Resources Corporation Selling Agreement Page 4
EXHIBIT A
Form of Lock-Up Agreement
National Securities Corporation
0000 Xxxxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
, 1997 Re: Agreement Not to Sell
Gentlemen.
Reference is made to the proposed public offering of 300,000 Units by
Cotton Valley Resources Corporation. (the "Company"), to be made pursuant to a
Registration Statement (the "Registration Statement") filed with the Securities
and Exchange Commission and to be underwritten by National Securities
Corporation ("National") as representative (the "Representative") of the several
placement agents (the "Placement Agents") to be named in an placement agent
agreement.
In consideration of the offer and sale of such Units by the Company and
the Placement Agents and of other good and valuable consideration the receipt of
which is hereby aim knowledge, the undersigned agrees that, without the express
prior "written consent of National acting alone, he will not offer, sell, make
any short sale of; loan, encumber, grant any option for the purchase of, or
otherwise dispose of (the "Resale Restrictions"), any securities of the Company
beneficially owned or otherwise held by the undersigned as of the date of this
letter or hereafter acquired by the undersigned (other than those securities
included in the registration statement, if any) (collectively, the "Shares")
until _________ (the "Lock-up Period"). The foregoing Resale Restrictions are
expressly agreed to preclude the holder of the Shares from engaging in any
hedging or other transaction which may lead to or result in a sale of Shares
during the Lock-up Period even if such Shares would be sold by someone other
than the undersigned. Such prohibited hedging or other transactions would
include without limitation any short sale (whether or not against the box), any
pledge or any purchase, sale or grant of any right (including without limitation
any put or call option) with respect to any of the Shares.
The undersigned agrees and consents to the entry of stop transfer
instructions with the transfer agent for the Company's Common Stock against any
transfer of shares of Common Stock by the undersigned in contravention of the
Resale Restrictions. In addition, the undersigned agrees to be bound by the
Resale Restrictions whether or not the undersigned participates in the public
offering. The undersigned understands that the Placement Agents and the Company
will rely upon the representations set forth in this letter in proceeding with
the public offering. The undersigned understands that the agreements of the
undersigned are irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors and assigns.
Notwithstanding the foregoing, the undersigned may transfer any or all
of the Shares either during his lifetime or on death by will or intestacy to his
immediate family or to a trust the beneficiaries of which are exclusively the
undersigned and/or a member or members of his immediate family; provided,
however. that in any such case it shall be a condition to the transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the Shares except in accordance with this Lock-Up Agreement. For
purposes of this paragraph, "immediate family" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor.
Very truly yours,
By: _________________________________
Signature
A-1
Accepted and Agreed to:
NATIONAL SECURITIES CORPORATION
As Representative of the
Several Placement Agents
By: __________________________________
Title: _________________________________
PLEASE COMPLETE AND RETURN TO:
National Securities Corporation
0000 Xxxxxxxxxxx
Xxxxx 000
Xxxxxx Xxxxx 00000
A-2
EXHIBIT B
Placement Agents' Warrant Agreement
[All References to Underwriter are changed to Placement Agent]
B-1
