Exhibit 1.02
FX ENERGY, INC.
UNDERWRITING AGREEMENT
April 13, 2004
I-Bankers Securities, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxx 00000
Ladies and Gentlemen:
FX Energy, Inc., a Nevada corporation (the "Company"), proposes to sell (the
"Offering"), upon the terms and subject to the conditions of this Agreement, to
the I-Bankers Securities, Inc. (the "Underwriter"), on a best efforts basis, an
aggregate of 2,152,778 shares (the "Offered Shares") of the Company's common
stock, par value $0.001 per share ("Common Stock").
1. Registration Statement and Prospectus.
A registration statement (File No. 333-80489) on Form S-3 relating to
the Common Stock, and such amendments to such registration statement as
may have been required to the date of this Agreement, has been prepared
by the Company under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and
has been filed with the Commission. Such registration statement,
including any documents incorporated therein by reference and any
exhibits, financial statements and schedules thereto, together with any
registration statement filed pursuant to Rule 462(b), is herein
referred to as the "Registration Statement." The form of prospectus to
be included in the Registration Statement, as supplemented by any
preliminary prospectus supplement or definitive prospectus supplement
relating to the offering of the Offered Shares and filed by the Company
with the Commission pursuant to Rule 424(b), are herein referred to
collectively as the "Prospectus." Any reference herein to the
Registration Statement or the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein, as of the
date of such Registration Statement or Prospectus, as the case may be,
and, in the case of any reference herein to any Prospectus, also shall
be deemed to include any documents incorporated by reference therein,
and any supplements or amendments relating to the Offered Shares being
issued and sold pursuant hereto, filed with the Commission under Rule
424(b), and prior to the termination of the offering of the Offered
Shares by the Underwriter.
2. Representations and Warranties.
Except as set forth under the corresponding section of the Disclosure
Schedules attached hereto, the Company hereby makes the following
representations and warranties to the Underwriter:
(a) Effectiveness of Registration Statement. The Registration Statement has
been declared effective as of June 30, 1999, by the Commission under
the Securities Act and no post-effective amendment to the Registration
Statement has been filed as of the date of this Agreement. Neither the
Commission nor any state regulatory authority has issued any order
preventing or suspending the use of the Registration Statement or the
Prospectus and no proceedings for a stop order suspending the
effectiveness of the Registration Statement have been instituted, or,
to the Company's knowledge, are threatened.
(b) Accuracy and Completeness of Registration Statement. The Registration
Statement contains and the Prospectus and any amendments or supplements
thereto conforms or will conform, as the case may be, in all material
respects with the requirements of the Securities Act and the Rules and
Regulations. The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply, as the case may
be, in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the Rules and Regulations promulgated thereunder. Neither the
Registration Statement nor any amendment thereto, and neither the
Prospectus nor any supplement thereto, including any documents
incorporated by reference therein, contains or will contain, as the
case may be, any untrue statement of a material fact or omits or will
omit, as the case may be, 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; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or
the Prospectus, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the
Underwriter, specifically for use in the preparation thereof.
(c) Blue Sky. The Company (or at the Company's request, counsel to the
Underwriter) will prepare and file the necessary documents so that
offers and sales of the Offered Shares may be made in certain
jurisdictions in the United States.
(d) Description of Common Stock. The Common Stock conforms to all
statements relating thereto contained in the Registration Statement or
the Prospectus.
(e) Conduct of Business. The Company is not, and does not intend to conduct
its business in a manner in which it would be, an "investment company"
as defined in Section 3(a) of the Investment Company Act of 1940 (the
"Investment Company Act").
(f) No Third-Party Rights to Registration. No person or entity has the
right to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of the
Registration Statement, except such persons or entities as set forth on
Schedule 2(f) hereto or persons or entities from whom written waivers
of such rights have been received prior to the date hereof.
(g) Nasdaq Authorization for Quotation. The Common Stock, including the
Offered Shares, is registered pursuant to Section 12(g) of the Exchange
Act and is listed on The Nasdaq SmallCap Market (the "Nasdaq SmallCap
Market"), and the Company has taken no action designed to terminate, or
likely to have the effect of terminating, the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from
the Nasdaq SmallCap Market, nor has the Company received any
notification that the Commission or the NASD is contemplating
terminating such registration or listing. The Company is not aware of
any facts or circumstances that might reasonably be expected to give
rise to any of the foregoing.
(h) Subsidiaries. Except as set forth on Schedule 2(h), the Company does
not have any subsidiaries and does not own or control, directly or
indirectly, and interest in any other corporation, association or other
business entity.
(i) Organization. The Company is duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization.
The Company has full power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Exchange Act,
since the end of its most recently completed fiscal year through the
date hereof, including, without limitation, its most recent report on
Form 10-K included in the SEC Documents as defined in Section 2(n)
herein, and is registered or qualified to do business and in good
standing in each jurisdiction in which the nature of the business
conducted by it or the location of the properties owned or leased by it
requires such qualification and where the failure to be so qualified
would have a material adverse effect upon the condition (financial or
otherwise), earnings, business or business prospects, properties or
operations of the Company, considered as one enterprise (a "Material
Adverse Effect"), and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(j) Due Authorization and Valid Issuance. The Company has all requisite
power and authority to execute, deliver and perform its obligations
hereunder (including its obligation to issue, sell and deliver the
Offered Shares), and this Agreement has been duly authorized and
validly executed and delivered by the Company and constitutes a legal,
valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the
public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' and contracting
parties' rights generally, and except as enforceability may be subject
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
Offered Shares will, upon issuance and payment therefor pursuant to the
terms of this Agreement, be duly authorized, validly issued, fully-paid
and nonassessable.
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(k) Noncontravention. The execution, delivery and performance of this
Agreement and the consummation of the transactions herein contemplated
will not (i) conflict with or constitute a violation of, or default
(with the passage of time or otherwise) under (1) any material bond,
debenture, note or other evidence of indebtedness, lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party or by
which its properties are bound, (2) the charter, bylaws or other
organizational documents of the Company, or (3) any law, administrative
regulation, ordinance or order of any court or governmental agency,
arbitration panel or authority applicable to the Company or by which
its properties are bound, except in the case of clauses (1) and (3) for
any such conflicts, violations or defaults that are not reasonably
likely to have a Material Adverse Effect, or (ii) result in the
creation or imposition of any lien, encumbrance, claim, security
interest or restriction whatsoever upon any of the material properties
or assets of the Company or an acceleration of indebtedness pursuant to
any obligation, agreement or condition contained in any material bond,
debenture, note or any other evidence of indebtedness or any material
indenture, mortgage, deed of trust or any other agreement or instrument
to which the Company is a party or by which it is bound or to which any
of the material property or assets of the Company is subject. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative
agency, or other governmental body in the United States or any other
person is required for the execution and delivery of the Agreement and
the valid issuance and sale of the Common Stock to be sold pursuant to
the Agreement, other than such as have been made or obtained, and
except for any post-closing securities filings or notifications
required to be made under federal or state securities laws.
(l) No Violation. The Company is not in violation of its charter, bylaws or
other organizational document, or in violation of any law,
administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the
Company, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or is in default
(and there exists no condition that, with the passage of time or
otherwise, would constitute a default) in any material respect in the
performance of any bond, debenture, note or any other evidence of
indebtedness, indenture, mortgage, deed of trust or any other material
agreement or instrument to which the Company is a party or by which the
Company is bound or by which the properties of the Company are bound,
that would be reasonably likely to have a Material Adverse Effect. The
business of the Company and its subsidiaries is not being conducted,
and shall not be conducted so long as the investors own any of the
Common Stock, in violation of any law, ordinance, rule, regulation,
order, judgment or decree of any governmental entity, court or
arbitration tribunal, except for possible violations the sanctions for
which either singly or in the aggregate would not have a Material
Adverse Effect.
(m) Capitalization. Except for issuances pursuant to the exercise of
options under the Company's stock option plans, the Company has not
issued any capital stock since December 31, 2003. The Offered Shares to
be sold pursuant to the Prospectus have been duly authorized, and when
issued and paid for in accordance with the terms of the Prospectus will
be duly and validly issued, fully paid and nonassessable. The
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, have been issued
in compliance with all applicable federal and state securities laws,
and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as set forth on
Schedule 2(m) hereto, there are no other outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire,
or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any
kind to which the Company is a party or of which the Company has
knowledge and relating to the issuance or sale of any capital stock of
the Company, any such convertible or exchangeable securities or any
such rights, warrants or options. Without limiting the foregoing,
except as set forth on Schedules 2(f) and 2(m) hereto, no preemptive
right, co-sale right, right of first refusal, registration right, or
other similar right exists with respect to the Common Stock or the
issuance and sale thereof. No further approval or authorization of any
stockholder, the Board of Directors of the Company or of a third party
is required for the issuance and sale of the Common Stock. Except as
set forth on Schedule 2(m) hereto, there are no stockholders
agreements, voting agreements or other similar agreements with respect
to the Common Stock to which the Company is a party or, to the
knowledge of the Company, between or among any of the Company's
stockholders. The Company does not have any so-called stockholder
rights plan or "poison pill" and there are no "shark-repellant" charter
or bylaw provisions or so-called "state anti-takeover" statutes
applicable, in any case, to all or any portion of the transactions
contemplated by the Agreements, including, without limitation, the
issuance of the Common Stock.
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(n) Reporting Status. Since December 31, 2003, the Company has timely filed
all reports, schedules, forms, statements and other documents required
to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed after
December 31, 2003, and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
reference therein, being referred to herein as the "SEC Documents")).
The Company has made available to the Underwriter true and complete
copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of
the Exchange Act and the Rules and Regulations of the Commission
promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the Commission,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent corrected by a
subsequent SEC Document. None of the statements made in any such SEC
Documents is currently required to be updated or amended under
applicable law (except for such statements as have been amended or
updated by subsequent SEC Documents prior to the date of this
Agreement). The SEC Documents contain or incorporate by reference a
complete and accurate list of all material undischarged written or oral
contracts, agreements, leases or other instruments to which the Company
or any subsidiary is a party, or by which the Company or any subsidiary
is bound, or to which any of the properties or assets of the Company or
any subsidiary is subject, and that are required by the Rules and
Regulations promulgated under the Exchange Act to be included as
exhibits to the SEC Documents (each a "Contract"). None of the Company,
its subsidiaries or, to the best knowledge of the Company, any of the
other parties thereto, is in breach or violation of any Contract, which
breach or violation would have a Material Adverse Effect. No event,
occurrence or condition exists that, with the lapse of time, the giving
of notice, or both, or the happening of any further event or condition,
would become a breach or default by the Company or its subsidiaries
under any Contract, which breach or default would have a Material
Adverse Effect.
(o) Legal Proceedings. There is no action, suit, proceeding, or to the
knowledge of the Company or any of its subsidiaries, inquiry or
investigation before or by any court, public board, governmental agency
or authority, or self-regulatory organization or body pending or, to
the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such,
wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or would adversely affect the Offering or that
would adversely affect the validity or enforceability of, or the
authority or ability of the Company to consummate the Offering. The
Company and each of its subsidiaries are unaware of any facts that
could give rise to a claim or proceeding that, if asserted or conducted
with results unfavorable to the Company or any of its subsidiaries,
could have a Material Adverse Effect.
(p) No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take any action designed to or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of the Company's Common Stock to facilitate
the sale or resale of the Common Stock.
(q) Environmental. Except as would not, individually or in the aggregate,
result in a Material Adverse Effect (i) the Company is not in violation
of any applicable federal, state, provincial, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including
without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
and petroleum products (collectively, "Materials of Environmental
Concern"), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Materials of Environmental Concern (collectively, "Environmental
Laws"), which violation includes, but is not limited to, noncompliance
with any permits or other governmental authorizations required for the
operation of the business of the Company under applicable Environmental
Laws, or noncompliance with the terms and conditions thereof, nor has
the Company received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that the Company is in violation of any Environmental Law; (ii)
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there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the
Company has received written notice, and no written notice to the
Company by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs,
natural resources damages, property damages, personal injuries,
attorneys' fees or penalties arising out of, based on or resulting from
the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by the
Company, now or to the Company's knowledge, in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's
knowledge, threatened against the Company or any person or entity whose
liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law; and (iii) to the
best of the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably
could result in a violation of any Environmental Law or form the basis
of a potential Environmental Claim against the Company or against any
person or entity whose liability for any Environmental Claim the
Company has retained or assumed either contractually or by operation of
law.
(r) Intellectual Property. The Company owns, possesses or has pending, or
licenses or otherwise has the right to use all patents, patent
applications, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, franchises, licenses,
inventions, trade secrets and other intangible properties and assets
described in the Prospectus (all of the foregoing being collectively
herein called "Intangibles"), and such Intangibles, if applicable, are
in good standing and uncontested. Other than the Intangibles described
in the Prospectus, the Company is unaware of any other Intangibles
necessary for the conduct of its business as now conducted or as
proposed to be conducted. The Company has not infringed, is not
infringing, nor has it received any notice of infringement with respect
to asserted Intangibles of others. To the knowledge of the Company,
there is no infringement by others of Intangibles of the Company.
(s) Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries has, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any subsidiary has in the
course of his actions for or on behalf of the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct
or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation
of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government
official or employee. Without limiting the generality of the foregoing,
the Company and its subsidiaries have not directly or indirectly made
or agreed to make (whether or not said payment is lawful) any payment
to obtain, or with respect to, sales other than usual and regular
compensation to its or their employees and sales representatives with
respect to such sales.
(t) Internal Accounting Controls. The Company and each of its subsidiaries
maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (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. The
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company's
Form 10-K or 10-Q, as the case may be, is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's
controls and procedures as of the end of the period covered for such
report. The Company presented in its most recently filed Form 10-K or
Form 10-Q, as the case may be, the conclusions of the certifying
officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the end of the period
covered by such report. Since the end of the period covered by such
report, there have been no significant changes in the Company's
internal controls (as such term is used in Item 307(b) of Regulation
S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal
controls.
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(u) Financial Statements. The financial statements, together with the
related notes and schedules, set forth or incorporated by reference in
the Prospectus and in the Registration Statement fairly present, on the
basis stated in the Registration Statement, the financial condition and
the results of operations of the Company at the respective dates or for
the respective periods therein specified. Such statements and related
notes and schedules have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except
that interim financial statements do not contain all of the notes
required by generally accepted accounting principles to be included in
audited financial statements and are subject to normal year-end audit
adjustments, and as otherwise may be set forth in the Prospectus.
(v) Independent Auditors. PricewaterhouseCoopers, LLP has expressed its
opinions on the audited financial statements and related schedules
included in the Registration Statement and the Prospectus and is an
independent public accountant as required by the Securities Act and the
Rules and Regulations.
(w) Material Contracts. The Company has performed all material obligations
required to be performed by it through the date hereof under all
contracts required by Item 601(b)(10) of Regulation S-K under the
Securities Act to be filed as exhibits to the Registration Statement,
and neither the Company nor, to the knowledge of the Company, any other
party to such contract is in default under or in breach of any such
obligations, except with respect to any defaults or breaches which,
singly or in the aggregate, will not result in a Material Adverse
Effect. The Company has not received any notice of such default or
breach.
(x) Labor Agreements and Actions. The Company is not involved in any labor
dispute of a type likely to have a Material Adverse Effect and, to the
Company's knowledge, no such dispute is threatened. The Company is not
aware that (i) any executive, key employee or significant group of
employees of the Company plans to terminate employment with the
Company, or (ii) any such executive or key employee is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreement that would be violated by the present or proposed
business activities of the Company. The Company does not have or expect
to have any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with respect
to any pension, profit sharing or other plan which is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
to which the Company makes or ever has made a contribution and in which
any employee of the Company is or has ever been a participant, except
where such liability would not have a Material Adverse Effect. With
respect to such plans, the Company is in compliance in all material
respects with all applicable provisions of ERISA
(y) Key Individuals; Company's Knowledge. Each Key Individual (as defined
below) is currently serving the Company in the capacity disclosed in
its most recent report on Form 10-K and reports filed thereafter and
included in the SEC Documents. No Key Individual, to the best of the
knowledge of the Company and its subsidiaries, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
noncompetition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each Key
Individual does not subject the Company or any of its subsidiaries to
any liability with respect to any of the foregoing matters. No Key
Individual has, to the best of the knowledge of the Company and its
subsidiaries, any intention to terminate or limit his employment with,
or services to, the Company or any of its subsidiaries, nor is any such
Key Individual subject to any constraints (e.g., litigation) that would
cause such employee to be unable to devote his full time and attention
to such employment or services. "Key Individual" means each of Xxxxx X.
Xxxxxx, President and Chief Executive Officer; Xxxxxx X. Xxxxxx, Vice
President and Chief Operating Officer; Xxxxxx X. Xxxxxxx, Chairman and
Chief Financial Officer; Xxxxx X. Xxxxxxxx, Vice-President of
Exploration; and Xxxxxxx Xxxxxxx, Exploration Advisor. For purposes
hereof, the term "knowledge of the Company" shall mean the knowledge of
each of the Key Individuals.
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(z) Drilling Practices. The real property that the Company has the right to
explore, develop or recover oil and gas substances (the "Lands"), all
right, title and interest of the Company in and to the Lands, and all
machinery, equipment, jigs, drills, dies, tools, handling equipment,
furniture, furnishings and accessories and supplies of all kinds used
on the Lands (collectively, the "Oilfield Assets") have been operated
in accordance with good oilfield practice, in compliance with the
applicable law, ordinance, rule, regulation, order, judgment or decree
of any governmental entity, court or arbitration tribunal, except for
possible violations, the sanctions for which, either singly or in the
aggregate would not have a Material Adverse Effect, and materially in
accordance with the terms and conditions of all agreements applicable
thereto.
(aa) Sale/Leasebacks. The Oilfield Assets are not be subject to any lease,
leaseback or sale/leaseback arrangements.
(bb) Oil or Gas Balancing Agreements. Neither the Company nor any other
person on its behalf has entered into any agreement or arrangements,
commonly known as an oil or gas balancing, swaps, overproduction or
underlift-overlift agreements, that are among two or more persons
owning interests in a portion of the Lands or pooled or unitized
therewith, nor, to the knowledge of the Company, has there been any
circumstance or case whereby one of such persons has taken, or may
hereafter take, a share of the production of oil or gas substances from
such Lands greater than it would otherwise be entitled to by virtue of
its interest in such Lands, and which excess taking entitled the other
persons to a credit in respect of subsequent production of the
Company's oil and gas substances produced from such Lands.
(cc) Assets Subject to Obligations. The Oilfield Assets are not affected by
any "take or pay" obligations.
(dd) Abandoned Xxxxx. To the knowledge of the Company, Schedule 2(dd)
includes a list of all oil and gas xxxxx on the Lands that have been
either plugged and abandoned, or drilled and abandoned, in which the
Company had or now has an interest, and for which authorization, if
required, has been obtained for each such well from the applicable
governmental entity.
(ee) Allowables. To the knowledge of the Company, none of the oil and gas
xxxxx operated by the Company on the Lands has been produced in excess
of applicable production allowables imposed by applicable law,
ordinance, rule, regulation, order, judgment or decree of any
governmental entity, court or arbitration tribunal, since the Company
acquired its interest therein. Such oil and gas xxxxx are not subject
to any production penalty and, to the knowledge of the Company, it is
not aware of any impending change in statutorily imposed or sanctioned
production allowables imposed by applicable governmental entities
currently applicable to any of the oil and gas xxxxx other than changes
that are in the public domain.
(ff) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, that have had or could reasonably be expected
to result in a Material Adverse Effect, between the accountants and
lawyers formerly or presently employed by the Company and the Company
is current with respect to any fees owed to its accountants and
lawyers.
(gg) Title to Property and Assets. The Company has good title to all
personal property owned by it that is material to the business of the
Company, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as would
not have a Material Adverse Effect. Any real property and buildings
held under lease by the Company described in the Prospectus are held by
it under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect, in each case except as
described in or contemplated by the Prospectus.
(hh) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the
Company believes are reasonable with respect to the business in which
it is engaged, all of which insurance is in full force an effect.
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(ii) Brokers. Except as set forth on Schedule 2(ii), there is no broker,
finder or other party that is entitled to receive from the Company any
brokerage or finder's fee or similar fee or commission as a result of
any of the transactions contemplated by this Agreement.
(jj) Distribution of Offering Materials. The Company has not distributed and
will not distribute prior to the later of (i) the Closing Date and (ii)
the completion of the distribution of the Offered Shares, any offering
material in connection with the offering and sale of the Offered Shares
other than the Prospectus, the Registration Statement and other
materials, if any, permitted by the Securities Act and the use of which
has been approved in advance by the Underwriter.
(kk) NASD Rule 2710. With respect to the compensation to be paid to the
Underwriter under this Agreement, such compensation arrangements are
exempt from the filing requirements of NASD Rule 2710 because the
Company has met and continues to meet the pre-1992 eligibility
requirements for the use of the Registration Statement on Form S-3 in
connection with the Offering contemplated thereby and hereby. Further,
the Offered Shares meet the "actively traded securities" definition
contained in NASD Rule IM-2110-1(7), namely, that the Offered Shares
have an ADTV value of at least $1 million and are issued by an issuer
whose common equity securities have a public float value of at least
$150 million. Additionally, the Company has been continuously subject
to and fulfilled the reporting requirements under the Exchange Act for
a period of 36 months. As used in this Section 2(kk), "ADTV" means the
worldwide average daily trading volume during the two full calendar
months immediately preceding, or any 60 consecutive calendar days
ending within the 10 calendar days preceding, the filing of a
registration statement; or, if there is no registration statement or if
the distribution involves the sale of securities on a delayed basis
pursuant to Rule 415 of the Securities Act, two full calendar months
immediately receding, or any consecutive 60 calendar days ending within
the 10 calendar days preceding, the determination of the offering
price.
(ll) Solvency. The Company (both before and after giving effect to
transactions contemplated by the Offering) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead
it to reasonably conclude that the Company would not have the ability
to, nor does it intend to take any action that would impair its ability
to, pay its debts from time to time incurred in connection therewith as
such debts mature.
(mm) Certificates. Each certificate signed by any officer of the Company and
delivered to the Underwriter or counsel for the Underwriter pursuant to
this Agreement or in connection with the Offering contemplated hereby
shall be deemed to be a representation and warranty of the Company to
the Underwriter as to the matters covered thereby.
(nn) Concurrent Offering. In connection with the Offering, the Company
has executed a Placement Agency Agreement with CDC Securities (the
"Placement Agent"), dated of even date herewith (the "Placement
Agency"), whereby the Placement Agent shall, on a best efforts basis,
place up to 1,334,000 shares of Common Stock to certain European
institutional investors (the "Placed Shares"). The representations,
warranties and agreements made by the Company to the Placement Agent in
the Placement Agency Agreement shall be deemed to be the
representations, warranties and agreements of the Company to the
Underwriter as to the matters covered thereby.
3. Offering of the Offered Shares.
Upon the basis of the representations, warranties and covenants and
subject to the terms and conditions herein set forth, the Underwriter
agrees, on a best efforts basis to offer the Offered Shares for sale to
the public in accordance with the Plan of Distribution section set
forth in the Final Prospectus. The Company understands and agrees that
the Underwriter is under no obligation to obtain offers to purchase any
or all of the Offered Shares, that the Underwriter's undertaking
hereunder is a best efforts undertaking and the Underwriter is not
obligated to purchase any Offered Shares that are not sold to the
public, and that offers to purchase Offered Shares may be accepted on
more than one day at more than one time.
8
(a) Public Offering. The purchase price per Offered Share to be paid by the
Underwriter to the Company will be $6.80 per share (the "Purchase
Price") (representing an underwriter discount of five and one-half
percent (5.5%)). In addition, the Company shall pay the Placement Agent
a cash fee of 1% with respect to the shares sold to the Underwriter
hereunder. The Underwriter agrees to offer the Offered Shares (subject
to the terms of the Placement Agency Agreement") at the public offering
price of $7.20 per share as soon after the execution and delivery of
this Agreement as, in its reasonable judgment, is advisable. The
Underwriter shall promptly advise the Company of the making of the
public offering. After making the public offering, the Underwriter may,
in its discretion, after consultation with the Company, vary the public
offering price.
(b) First Closing. The Company will deliver the Offered Shares so purchased
(the "Purchased Shares") to the Underwriter in the form of definitive
certificates, issued in such names and in such denominations as the
Underwriter may direct by notice in writing to the Company given at or
prior to 10:00 a.m., New York time, on the second full business day
preceding the First Closing Date (as defined below) or, if no such
direction is received, in the name of the Underwriter (solely for the
purpose of administrative convenience) and in such denominations as the
Underwriter may determine, against payment of the aggregate Purchase
Price therefor or other immediately available funds, by certified or
official bank check payable to the order of the Company or by wire
transfer to accounts designated by the Company, all at the offices of
Xxxxxxxxx Xxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Such
delivery and closing shall occur at 10:00 a.m., New York time, on the
third business day after the date of this Agreement (the First Closing
Date"), simultaneously with the closing of the Placed Shares. The First
Closing Date and the location of delivery of, and the form of payment
for, the Purchased Shares may be varied by agreement between the
Company and the Underwriter. In addition, subsequent closings of the
Offered Shares (if applicable) may be scheduled at the discretion of
the Company and Underwriter, each of which shall be deemed a "Closing"
hereunder
(c) Certificates for the Purchased Shares. The Company shall make the
certificates for the Purchased Shares available to the Underwriter not
later than 12:00 p.m., New York time, on the business day preceding the
First Closing Date and each such Closing at such location within New
York City as may be designated by the Underwriter.
(d) No Adverse Changes. There shall not have occurred, at any time prior to
the applicable closing (i) any domestic or international event, act or
occurrence which has materially disrupted, or in the Underwriter's
opinion will in the immediate future materially disrupt, the securities
markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the
Nasdaq - Amex Stock Exchange or in the over-the-counter market; (iii)
any outbreak of major hostilities or other national or international
calamity; (iv) any banking moratorium declared by a state or federal
authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material
interruption in the mail service or other significant means of
communication within the United States; (vii) any material adverse
change in the business, properties, assets, results of operations, or
financial condition of the Company; or (viii) any change in the market
for securities in general or in political, financial, or economic
conditions which, in the Underwriter's reasonable judgment, makes it
inadvisable to proceed with the applicable Offering.
4. Conditions to Underwriter's Obligations.
The obligations of the Underwriter hereunder to purchase the Purchased
Shares on the First Closing Date and any Offered Shares on each other
Closing Date will be subject to the accuracy of the representations and
warranties of the Company herein contained as of the date hereof and as
of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) No Stop Order. No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission or by any
Governmental Authority, and any requests for additional information on
the part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with
to the satisfaction of the Underwriter.
9
(b) No Material Misstatements. Neither the Registration Statement, nor any
supplement thereto, will contain any untrue statement of a fact by the
Company which in the opinion of the Underwriter is material, or omits
to state a fact, which in the opinion of the Underwriter is material
and is required to be stated therein, or is necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(c) Compliance with Agreements. The Company will have complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to each Closing Date;
(d) Corporate Action. The Company will have taken all necessary corporate
action, including, without limitation, obtaining the approval of its
Board, for the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the
Offering contemplated hereby;
(e) Opinion of Company Counsel. The Underwriter shall receive the opinion
of Xxxxx Xxxxx Xxxxxxx & Xxxxx, LLC, counsel to the Company, dated as
of each Closing Date, addressed to the Underwriter, with such knowledge
qualifiers as is customary and reasonable, substantially to the effect
that:
(i) if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and based
solely upon the oral advice of the staff of the Commission,
the Registration Statement is effective under the Securities
Act and no stop order suspending the use of the Registration
Statement or the Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or, to such counsel's knowledge,
threatened or contemplated under the Securities Act;
(ii) each of the Registration Statement, the Prospectus and any
amendments or supplements thereto (other than the financial
statements and other financial and statistical data included
therein as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the
Securities Act and the Regulations. Such counsel shall state
that such counsel has participated in conferences with
officers and other representatives of the Company, at which
conferences the content of the Registration Statement and any
amendments or supplements thereto were discussed, and,
although such counsel is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement and
any amendments or supplements thereto, on the basis of the
foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such
Registration Statement or amendment or supplement became
effective or the Prospectus or amendment or supplement thereto
as of the date of such opinion contained any untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statement therein not misleading (it being understood that
such counsel need express no opinion with respect to the
financial statements and schedules and other financial and
statistical data included in the Registration Statement or the
Prospectus, and any amendments or supplements thereto);
(iii) the Company is validly existing and in good corporate standing
under the laws of its state of incorporation, has all
requisite corporate power and authority necessary to own or
hold its respective properties and conduct its business and is
duly qualified or licensed to do business as a foreign
corporation in each other jurisdiction in which the ownership
or leasing of its properties or conduct of its business
requires such qualification, except where the failure to so
qualify or be licensed would not have a Material Adverse
Effect;
(iv) this Agreement has been duly and validly authorized, executed
and delivered by the Company, and is the valid and binding
obligation of the Company, enforceable against it in
accordance with its terms, subject to any applicable
bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
10
(v) the Offered Shares have been duly authorized, and when issued
and delivered to the Underwriter against payment therefor as
provided by this Agreement, will have been validly issued and
will be fully paid and nonassessable, and the issuance of the
Offered Shares, to such counsel's knowledge, is not subject to
any preemptive or similar rights;
(vi) the authorized, and to such counsel's knowledge the issued and
outstanding capital stock of the Company as of the date hereof
(before giving effect to the transactions contemplated by this
Agreement) is as set forth in the Prospectus. Except as set
forth in this Agreement, the Schedules hereto or as set forth
in the Prospectus, to counsel's knowledge, there are no
outstanding warrants, options, agreements, convertible
securities, preemptive rights or other commitments pursuant to
which the Company is, or may become, obligated to issue any
shares of its capital stock or other securities of the
Company. To such counsel's knowledge, all of the other issued
shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and
nonassessable, and to such counsel's knowledge have not been
issued in violation of the preemptive rights of any security
holder of the Company. Nothing has come to such counsel's
attention indicating that the Company's offers and sales of
such securities were not either registered under the
Securities Act or exempt from such registration requirements;
(vii) other than as set forth in the Prospectus, neither the
execution and delivery of this Agreement nor compliance with
the terms hereof, nor the consummation of the transactions
herein contemplated, nor the issuance of the Offered Shares,
has, nor will, conflict with, result in a breach of, or
constitute a default under the Articles of Organization or
By-laws of the Company, or any material contract, instrument
or document known to such counsel and identified to us by the
Company as material, to which the Company is a party, or by
which it or any of its properties is bound or violate any
applicable law, rule, regulation, judgment, order or decree
known to counsel of any governmental agency or court having
jurisdiction over the Company or any of its properties or
business;
(viii) other than as set forth in the Prospectus, to counsel's
knowledge, there are no claims, actions, suits, investigations
or proceedings before or by any arbitrator, court,
governmental authority or instrumentality pending or, to such
counsel's knowledge, threatened against or affecting the
Company or involving the properties of the Company that might
materially and adversely affect the business, properties or
financial condition of the Company or that might materially
adversely affect the transactions or other acts contemplated
by this Agreement or the validity or enforceability of this
Agreement;
(ix) the Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act and, if the Company
conducts its businesses as set forth in the Prospectus, will
not become an "investment company" and will not be required to
be registered under the Investment Company Act; and
(x) except as set forth in the Prospectus or in this Agreement and
the Schedules hereto, to counsel's knowledge, no person or
entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement.
(f) Legal Opinion of Counsel for the Underwriter. The Underwriter shall
have received from Xxxxxxxxx Traurig, LLP ("Underwriter's Counsel),
their opinion or opinions, dated each Closing Date, with respect to the
validity of the Common Stock, the Registration Statement and the
Prospectus and such other related matters as they may reasonably
request, and the Company shall have furnished to such counsel such
documents as they may request for the purpose of enabling them to pass
upon such matters.
(g) Officers' Certificate. The Underwriter shall receive a certificate of
the Company, signed by the Chief Executive Officer and Chief Financial
Officer thereof, that the representations and warranties contained in
Section 4 hereof are true and accurate in all material respects at each
Closing Date with the same effect as though expressly made at such
Closing Date.
11
(h) Due Diligence. The Underwriter shall have completed and been satisfied
with the results of its due diligence investigation of the Company,
including, without limitation, the Company's financial statements,
projections, expense budgets, business prospects, capital structure,
background searches and contractual arrangements.
(i) Filing of Prospectus. The Prospectus shall have been timely filed with
the Commission in accordance with Section 5(c) of the Securities Act.
(j) Accountant's Letter. The Underwriter shall have received at the time
this Agreement is executed and on each Closing Date, signed letters
from PricewaterhouseCoopers LLP addressed to the Underwriter and dated,
respectively, the date of this Agreement and each Closing Date, in form
and scope reasonably satisfactory to the Underwriter, with reproduced
copies or signed counterparts thereof for the Underwriter confirming
that they are independent accountants within the meaning of the
Securities Act and the Regulations, that the response to Item 10 of the
Registration Statement is correct in so far as it relates to them and
stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated by
reference in the Registration Statement and the Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Securities
Act, the Exchange Act and the Rules and Regulations;
(ii) on the basis of a reading of the amounts included in the
Registration Statement and the Prospectus, a reading of the
minutes of the meetings of the shareholders and directors of
the Company, and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters
of the Company as to transactions and events subsequent to the
date of the latest audited financial statements, except as
disclosed in the Registration Statement and the Prospectus,
nothing came to their attention which caused them to believe
that:
(A) the amounts included or incorporated by reference in
the Registration Statement and the Prospectus do not
agree with the corresponding amounts in the audited
financial statements from which such amounts were
derived; or
(B) with respect to the Company, there were, at a
specified date not more than five business days prior
to the date of the letter, any decreases in net
sales, income before income taxes and net income or
any increases in long-term debt of the Company or any
decreases in the capital stock, working capital or
the shareholders' equity in the Company, as compared
with the amounts shown on the Company's audited
Balance Sheet for the fiscal year ended December 31,
2003 included in the Registration Statement or the
audited Statement of Operations, for such year, all
except for the continuation of operating losses,
including exploration expense, in accordance with
disclosures in the SEC Documents not is excess of a
specified amount acceptable to the Placement Agents.
(iii) they have performed certain other procedures as a result of
which they determined that 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 reasonably
specified by the Agent agrees with the accounting records of
the Company; and
(iv) as to such other matters as the Underwriter shall reasonably
request.
(k) Satisfaction of Underwriter. All proceedings taken in connection with
the sale of the Offered Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Underwriter and
Underwriter's Counsel.
12
(l) Completeness of Information. On or prior to the applicable Closing
date, the Underwriter shall have been furnished such documents,
certificates and opinions as they may reasonably require in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions
contained in this Agreement.
(m) No NASD Objection. The NASD shall not have objected to the
Underwriter's participation in the Offering. (n) Executed Placement
Agency Agreement. The Company shall have entered into the Placement
Agency Agreement with the Placement Agent, and the parties shall have
performed their respective obligations thereunder.
(o) Closing Documents. All documents required to be delivered hereunder to
the Underwriter may also be addressed to the Placement Agent if such
documents are required under the Placement Agency Agreement.
5. Covenants of the Company.
(a) Effectiveness of Registration Statement. The Company will not at any
time, whether before or after the effective date of the Registration
Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Securities
Act or Exchange Act before termination of the offering of the Offered
Shares which the Underwriter shall not previously have been advised and
furnished with a copy, or to which the Underwriter shall have
reasonably objected or which is not in compliance with the Securities
Act, the Exchange Act or the Regulations.
(b) Prospectus Supplement. The Company will (A) prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
prospectus supplement setting forth the information and the terms of
the offering contemplated by Section 4 hereof, (B) not file any
amendment to the Registration Statement or supplement to the Prospectus
of which the Underwriter shall not previously have been advised and
furnished with a copy or to which the Underwriter shall have reasonably
objected in writing or which is not in compliance with the Rules and
Regulations and (C) file on a timely basis all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission subsequent to the date of the Prospectus
and prior to the termination of the offering of the Offered Shares by
the Underwriter.
(c) Notification. As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice
in writing, (i) when the Prospectus has been filed in accordance with
said Rule 430A and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the issuance by the
Commission of any proceeding, suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of
any preliminary prospectus or the Prospectus, or any amendment or
supplement thereto, or the institution of proceedings for that purpose,
(iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification
of any of the Common Stock for offering or sale in any jurisdiction or
of the initiation, or the threatening, of any proceeding for that
purpose, (iv) of the receipt of any comments from the Commission; and
(v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
or for additional information. If the Commission or any state
securities commission shall enter a stop order and suspend such
qualifications at any time, the Company will use its best efforts to
obtain promptly the lifting of such order.
(d) Amendments. The Company shall give the Underwriter reasonable notice of
its intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any amendment or
supplement to the Prospectus (including any revised prospectus which
the Company proposes for use by the Underwriter in connection with the
offering of the Common Stock which differs from the corresponding
prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the Regulations), and
will furnish the Underwriter with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such amendment or
supplement to which the Underwriter or Underwriter's Counsel shall
reasonably object.
13
(e) Copies of Registration Statement and Prospectus. The Company will
deliver to the Underwriter, at or before each Closing date, conformed
copies of the Registration Statement, and each amendment thereto,
including all financial statements and exhibits thereto, and will
deliver to the Underwriter such number of copies of the Registration
Statement, including such financial statements but without exhibits,
and all amendments thereto, as the Underwriter may reasonably request.
The Company will deliver or mail to the Underwriter on the date of the
public offering, and thereafter from time to time during the period
when delivery of a prospectus relating to the Offered Shares is
required under the Securities Act, as many copies of the Prospectus, in
final form or as thereafter amended or supplemented as the Underwriter
may reasonably request.
(f) Section 11(a) Earnings Statement. The Company will make generally
available to its stockholders as soon as practicable, but not later
than 45 days after the end of the fourth fiscal quarter following the
fiscal quarter that includes the "effective date of the registration
statement" (as defined in Rule 158(c) of the Securities Act) if such
fourth fiscal quarter is not the last fiscal quarter of the Company's
fiscal year and not later than 90 days after the end of the fourth
fiscal quarter following the fiscal quarter that includes the
"effective date of the registration statement" if such fourth fiscal
quarter is the last fiscal quarter of the Company's fiscal year, an
earnings statement which will be in reasonable detail (but which need
not be audited) and which will comply with Section 11(a) of the
Securities Act, covering a period of at least twelve (12) months
beginning after the "effective date of the registration statement,"
provided that compliance with Rule 158 shall satisfy this subsection
(f).
(g) Compliance with Requirements. During the time when a prospectus is
required to be delivered under the Securities Act, the Company shall
use all reasonable efforts to comply with all requirements imposed upon
it by the Securities Act, as now and hereafter amended, and by the
Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the
Common Stock in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time
when a prospectus relating to the Offered Shares is required to be
delivered under the Securities Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or
Underwriter's Counsel, the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or it is necessary at any time to amend or
supplement the Prospectus to comply with the Securities Act, the
Company shall notify the Underwriter promptly and prepare and file with
the Commission an appropriate amendment or supplement in accordance
with Section 10 of the Securities Act, each such amendment or
supplement to be satisfactory to the Company's and the Underwriter's
Counsel, and the Company will furnish to the Underwriter copies of such
amendment or supplement as soon as available and in such quantities as
the Underwriter may request.
(h) Use of Proceeds. The net proceeds of the Offering will be used by the
Company as set forth in the Prospectus. Except as set forth in Schedule
5(h) to this Agreement, the Company shall not use any of the proceeds
from the Offering to repay any indebtedness of the Company (other than
trade payables in the ordinary course), including but not limited to
indebtedness to any current executive officers, directors or principal
stockholders of the Company.
(i) Expenses of Offering. The Company shall be responsible for, and shall
bear all reasonable expenses directly incurred in connection with, the
proposed offering including, but not limited to legal fees of the
Company's counsel relating to the costs of preparing the Registration
Statement and all amendments, supplements and exhibits thereto and
preparing and delivering all underwriter and selling documents, Common
Stock certificates (the "Company Expenses").
(j) Press Releases, Etc. The Company shall not, during the period
commencing on the date hereof and ending on the termination of the
offering of the Offered Shares, issue any press release or other
communication, or hold any press conference with respect to the
Company, its financial condition, results of operations, business,
properties, assets, or liabilities, or the Offering, without the prior
consent of the Underwriter, which consent shall not be unreasonably
withheld. The Company shall not include information with respect to the
Offering or use the Underwriter's name in any press release,
advertisement or on any website maintained by the Company with out the
prior written consent of the Underwriter.
14
(k) Restrictions on Issuances of Securities. During the period commencing
on the date hereof and ending on the later of (i) the Closing Date or
(ii) the termination of the offering of the Offered Shares, the Company
will not, without the prior written consent of the Underwriter, issue
additional shares of Common Stock, other than pursuant to the exercise
of options or warrants outstanding on the date hereof, or grant any
warrants, options or other securities of the Company except for options
under the Company's stock option plans.
(l) Nasdaq SmallCap Market. On or before completion of this Offering, the
Company shall make all filings required under applicable securities
laws and by the Nasdaq SmallCap Market and will use its best efforts to
maintain the listing of the Common Stock on the Nasdaq SmallCap Market,
or if the Company so elects, the New York Stock Exchange, the American
Stock Exchange, or the Nasdaq National Market for a period of two (2)
years after the date hereof.
(m) Financial Statements. Prior to each Closing Date the Company will
furnish to the Underwriter, as soon as they have been prepared, copies
of any unaudited interim financial statements of the Company for any
periods subsequent to the periods covered by the financial statements
appearing in the Prospectus.
(n) Reports to Underwriter. During the period of three (3) years from the
date hereof, the Company will furnish to the Underwriter, (i) as soon
as practicable after the end of each fiscal year, copies of the annual
report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholder's
equity and cash flows of the Company for the year then ended and the
opinion thereon of the Company's independent public accountants, (ii)
as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Report on Form 8-K or other report filed by the Company with the
Commission, Nasdaq or any securities exchange, (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock, and (iv) such other
information concerning the Company as the Underwriter may reasonably
request from time to time.
6. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Underwriter, each person, if any, who controls any of
the Underwriter within the meaning of the Securities Act and the
respective officers, directors, partners, employees, and agents of the
Underwriter and controlling person (collectively, the "Underwriter
Indemnified Parties" and, each, an "Underwriter Indemnified Party")
against any losses, claims, damages, liabilities or expenses (including
the reasonable cost of investigating and defending against any claims
therefor and fees of one counsel incurred in connection therewith),
joint or several, which may be based upon the Securities Act, the
Exchange Act, or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that the
Registration Statement or the Prospectus (as from time to time amended
or supplemented) includes or allegedly includes an untrue statement of
a material fact or omits or allegedly omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, written information furnished to
the Company by the Underwriter, directly or through the Underwriter,
specifically for use in the preparation thereof. The Company will be
entitled to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any such
liability, but, if the Company elects to assume the defense, such
defense shall be conducted by counsel chosen by it. In the event the
Company elects to assume the defense of any such suit and retain such
counsel, any Underwriter Indemnified Parties may retain additional
counsel but shall bear the fees and expenses of such counsel unless (i)
the Company shall have specifically authorized the retaining of such
counsel, or (ii) the parties to such suit include any such Underwriter
Indemnified Parties, and the Company and such Underwriter Indemnified
Parties have been advised by counsel to the Underwriter that one or
more legal defenses may be available to it or them which may not be
available to the Company, in which case counsel selected by the
Underwriter Indemnified Parties shall participate in such suit with
respect to those defenses, provided that the Company shall not be
required to bear the reasonable fees and expenses of more than one such
counsel. The Company shall not be liable to indemnify any person for
any settlement of any such claim effected without the Company's
consent. This indemnity agreement is not exclusive and will be in
addition to any liability which the Company might otherwise have and
shall not limit any rights or remedies which may otherwise be available
at law or in equity to each Underwriter Indemnified Party.
15
(b) Indemnification by the Underwriter. The Underwriter agrees to indemnify
and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Securities Act
(collectively, the "Company Indemnified Parties") against any losses,
claims, damages, liabilities or expenses (including, unless the
Underwriter elects to assume the defense, the reasonable cost of
investigating and defending against any claims therefor and fees of
counsel incurred in connection therewith), joint or several, which
arise out of or are based in whole or in part upon the Securities Act,
the Exchange Act or any other federal, state, local or foreign statute
or regulation, or at common law, on the ground or alleged ground that
the Registration Statement or the Prospectus (as from time to time
amended and supplemented) includes or allegedly includes an untrue
statement of a material fact or omits or allegedly omits to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which
they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriter, directly or
through an agent of the Underwriter, specifically for use in the
preparation thereof, and the parties acknowledge and agree that the
only information furnished by the Underwriter to the Company for
inclusion in the Prospectus, as from time to time amended or
supplemented, is the information under the caption "Plan of
Distribution" in the Prospectus that does not describe this Agreement;
provided, however, that in no case is the Underwriter to be liable with
respect to any claims made against any Company Indemnified Party
against whom the action is brought unless such Company Indemnified
Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Company Indemnified Party, but failure to notify the Underwriter of
such claim shall not relieve it from any liability which it may have to
any Company Indemnified Party except to the extent such failure
prejudices the Underwriter's defense of such action or otherwise than
on account of its indemnity agreement contained in this paragraph. The
Underwriter shall be entitled to participate at their own expense in
the defense, or, if they so elect, to assume the defense of any suit
brought to enforce any such liability, but, if the Underwriter elects
to assume the defense, such defense shall be conducted by counsel
chosen by them. In the event that the Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company
Indemnified Parties or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, respectively. The Underwriter
shall not be liable to indemnify any person for any settlement of any
such claim effected without the Underwriter's consent. This indemnity
agreement is not exclusive and will be in addition to any liability
which the Underwriter might otherwise have and shall not limit any
rights or remedies which may otherwise be available at law or in equity
to any Company Indemnified Party.
(c) Contribution. If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to
herein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Underwriter, respectively,
from the offering of the Offered Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand, and the Underwriter on
the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand, and the Underwriter on the other hand, shall be deemed to be
in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriter, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriter,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriter agree that it would not be just and
equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take account of the
equitable considerations referred to above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
16
liabilities or expenses (or actions in respect thereof) referred to
above shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating,
defending, settling or compromising any such claim. Notwithstanding the
provisions of this subsection (c), the Underwriter shall not be
required to contribute any amount in excess of the amount by which the
total price at which the Offered Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount
of any damages which the Underwriter have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Miscellaneous.
(a) Notices. All notices or communications hereunder will be in writing and
will be mailed or delivered as follows: If to the Company, at 0000
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, Attention: Xxxxx
X. Xxxxxx, facsimile number (000) 000-0000, with a copy to Xxxxx Xxxxx
Xxxxxxx & Xxxxx, LLC, 00 Xxxx Xxxxxxxx, Xxxxxx Xxxxx, Xxxx Xxxx Xxxx,
Xxxx 00000, Attention: Xxxxx X. Xxxxx, facsimile number (000) 000-0000;
and if to Underwriter at 0000 Xxxxxx Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxx
00000, Attention: Xxxx XxXxxxx, facsimile number (000) 000-0000 with a
copy to Xxxxxxx X. Xxxxxx, Esq. at Xxxxxxxxx Xxxxxxx, LLP, 000 Xxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, facsimile number (212)
801-6400.
(b) Survival; Governing Law; Entire Agreement; Independent Contractor. The
representations, warranties and covenants of the Company set forth
herein will remain in full force and effect regardless of any
investigation made by or on behalf of the Underwriter, any investor or
any other entity or persons and will survive delivery of the
Securities. The provisions of this Section 7 ("Miscellaneous") and
Sections 2 and 6, shall survive any closing of the Offering or
termination of this Agreement, as applicable. This Agreement contains
the entire agreement between the Company and the Underwriter concerning
the Offering and supersedes any prior understanding or agreement
whether written or oral. Any amendment hereto or waiver of any right or
obligation hereunder must be in writing signed by the party to be
charged. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of New York without
giving effect to that state's principles of conflicts of law. The
Underwriter will act under this Agreement as an independent contractors
at "arm's-length" with duties solely to the Company. It is understood
that the Underwriter's responsibility to the Company is solely
contractual in nature and that the Underwriter does not owe the
Company, or any other party, any financial advisory, fiduciary, agency
or similar duties as a result of its engagement. The Company
acknowledges and agrees that any statement made by the Underwriter, or
any of their representatives or agents, in connection with this
Agreement or the transactions contemplated hereby is not advice or a
recommendation, is merely incidental thereto and has not been relied
upon in any way by the Company, its officers, directors or other
representatives. The Company further represents that the Company's
decision to enter into this Agreement and the transactions contemplated
hereby has been based solely on an independent evaluation by the
Company and its representatives. Any information provided by the
Underwriter may not be disclosed or referred to publicly or to any
third party except with the Underwriter's express prior consent. The
Company acknowledges that the business of the Underwriter may give rise
to situations where the Underwriter or its affiliates may have a client
whose interest may be regarded as conflicting with the Company's
interests and nothing in this Agreement shall preclude the Underwriter
from performing services for such other clients. Without the Company's
prior written consent, the Underwriter has no right to describe their
services to the Company in connection with the Offering or to reproduce
the Company's name and logo in the Underwriter's advertisements,
marketing materials and equity research reports, if any. The invalidity
or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. The Company
agrees and consents to personal jurisdiction, service of process and
venue in any Federal or state court within the state of New York for
purposes of any action, suit or proceeding arising out of or relating
to this Agreement. The Underwriter and the Company (on its own behalf
and, to the extent permitted by law, on behalf of its stockholders or
other interest holders) each waives any right to trial by jury in any
action, claim, suit or proceeding with respect to the Underwriter's
engagement hereunder or its role in connection therewith. The benefits
of, and the obligations and liabilities assumed in, this Agreement
shall inure to the benefit of, and be binding upon, any successors and
assigns.
17
(c) Relationships. The Company acknowledges that the relationship between
and among the Underwriter, on the one hand, and the Placement Agent, on
the other hand, shall not be construed as giving rise to or
constituting a joint venture, nor shall the Underwriter be liable or
otherwise responsible for any act or omission on the part of the
Placement Agent in connection with the Offering.
This Agreement is effective as of the date first set forth above.
Please confirm that the foregoing correctly and completely sets forth our
understanding, by signing and returning to us the enclosed duplicate of this
Agreement.
Sincerely,
I-BANKERS SECURITIES, INC.
By: /s/ Xxxxxxx Xxxxx
------------------------
Name: Xxxxxxx Xxxxx
Title: CFO
Accepted and agreed:
FX ENERGY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman and CFO
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