1,250,000 Units
COTTON VALLEY RESOURCESCORPORATION
Each Unit Consisting of
Two Shares of Common Stock and
Two Redeemable Common Stock Purchase Warrants
, 1997
UNDERWRITING AGREEMENT
NATIONAL SECURITIES CORPORATION
As Representative of the Several Underwriters
c/o National Securities Corporation
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Dear Sirs:
Cotton Valley Resources Corporation, a corporation organized under the
laws of Ontario, Canada (the "Company"), proposes to issue and sell to you and
the other underwriters named in Schedule I hereto (collectively, the
"Underwriters"), for whom National Securities Corporation is acting as the
managing underwriter and Representative (the "Representative"), in the
respective amount set forth opposite the Underwriter's name in Schedule I hereto
an aggregate of 1,250,000 Units (individually a "Unit" and collectively the
"Units"), each Unit consisting of two shares of Common Stock, without par value,
of the Company (the "Common Stock") and two Redeemable Common Stock Purchase
Warrants (individually, a "Warrant"), which entitles the holder thereof to
purchase one share of Common Stock at a price of $____ per share, subject to
certain conditions. Such Units, together with (a) the shares of Common Stock and
the Warrants comprising such Units and (b) the shares of Common Stock issuable
upon exercise of such Warrants, are collectively referred to herein as the
"Underwritten Securities." In addition, (i) the Company proposes to grant to the
Underwriters an option (the "Underwriters' Option") to purchase up to an
aggregate of 187,500 additional Units solely to cover over-allotments in the
sale of the Underwritten Securities (such additional Units, together with (a)
the shares of Common Stock and Warrants comprising such additional Units and (b)
the shares of Common Stock issuable upon exercise of such Warrants, are
collectively referred to herein as the "Option Securities") and (ii) the Company
proposes to sell to the Underwriters the Underwriters' Warrants (described in
Section 7 hereof) to purchase 125,000 additional Units, which additional Units
are identical to the Units described above (such Underwriters' Warrants and
additional Units, together with (a) the shares of Common Stock and Warrants
comprising such additional Units and (b) the shares of Common Stock issuable
upon exercise of such Warrants, are collectively referred to herein as the
"Underwriters' Securities"). The Underwritten Securities, the Option Securities
and the Underwriters' 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 the event any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined) or any settlement date pursuant to Section 3(b) 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 Underwriter that:
(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(b)(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.
(b) 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 Underwriter 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 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 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 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 rights, and will conform in
all respects to the description thereof contained in the Prospectus;
the Warrants and Underwriters' 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 Underwriters' Warrants); the Warrants and
Underwriters' 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; and the
Securities (other than the Underwriters' Warrants) have been approved
for listing on the American Stock Exchange upon notice of issuance
thereof. 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).
(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 purchase and distribution of
the Securities by the Underwriters.
(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.
(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 title 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 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 Underwriters, 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 plan 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 Underwriters shall also be
deemed a representation and warranty of the Company to the
Underwriters as to the matters covered thereby.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees
to issue and sell to the Underwriters an aggregate of 1,250,000 Units,
with each Unit consisting of two shares of Common Stock and two
Warrants. Each of the Underwriters agrees, severally and not jointly,
to purchase from the Company the number of Units set forth opposite its
name in Schedule I hereto. The purchase price per Unit to be paid by
the several Underwriters to the Company shall be $____ per Unit. A
value of $.10 shall be attributable to each Warrant which comprises a
part of each Unit.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby
grants an option (the "Underwriters' Option") to the several
Underwriters to purchase, severally and not jointly, up to an aggregate
of 187,500 Units at the purchase price of $____ per Unit for use solely
in covering any over-allotments made by the Representative for the
account of the Underwriters in the sale and distribution of the
Underwritten Securities. The Underwriters' Option may be exercised in
whole or in part at any time on or before the 45th day after the
Effective Date upon written or telegraphic notice by the Representative
to the Company setting forth the number of Units which the several
Underwriters are electing to purchase pursuant to the Underwriters'
Option and the settlement date and instructions as to the names and
denominations in which the Securities to be issued pursuant to the
Underwriters' Option are to be registered. Delivery of certificates for
such Units by the Company, and payment therefor to the Company, shall
be made as provided in Section 3 hereof. The number of Units to be so
purchased by each Underwriter pursuant to the Underwriters' Option
shall be determined by multiplying the number of Units to be sold by
the Company pursuant to the Underwriters' Option, as exercised, by a
fraction, the numerator of which is the number of Units to be purchased
by such Underwriter as set forth opposite its name in Schedule I and
the denominator of which is the total number of Units to be purchased
by all of the Underwriters as set forth on Schedule I (subject to such
adjustments to eliminate any fractional Unit purchases as the
Representative in their discretion may make).
3. Delivery and Payment.
(a) Delivery of the certificates for the Units described in
Sections 2(a) and, if the Underwriters' Option described in Section
2(b) hereof is exercised on or before the third business day prior to
the Closing Date (as defined below), 2(b) hereof 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 date, not earlier than the
fourth full business day following the Effective Date of the
Registration Statement, but not later than twelve business days after
such Effective Date, as you shall designate by at least 48 hours' prior
notice to the Company (such date, time of delivery and payment for such
Securities being herein called the Closing Date. Delivery of the
certificates for such Securities to be purchased on the Closing Date
shall be made as provided in the preceding sentence for the respective
accounts of the several Underwriters against payment by the several
Underwriters through the Representative 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 Representative may request not less than
three full business days in advance of the Closing Date. The Company
agrees to have the certificates for the Securities to be purchased on
the 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 the
Closing Date.
(b) If the Underwriters' Option is exercised after the third
business day prior to the Closing Date, the Company will deliver (at
the expense of the Company) on the date specified by the Representative
(which shall not be less than three business days after exercise of the
Underwriters' Option), certificates for the Securities described in
Section 2(b) hereof in such names and denominations as the
Representative shall have requested against payment at the office of
the Company of the purchase price therefor, by certified or official
bank check or checks drawn on or by a New York Clearing House bank and
payable in next day funds. If settlement for such Securities occurs
after the Closing Date, the Company will deliver to the Representative
on the settlement date for such Securities, and the obligation of the
Underwriters to purchase such Securities shall be conditioned upon
receipt of, supplemental opinions, certificates and letters confirming
as of such date the opinions, certificates and letters delivered on the
Closing Date pursuant to Section 6 hereof. The Company agrees to have
the certificates for the Securities to be purchased after the 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 the settlement
date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements of the Company. The Company agrees with the several Underwriters
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 the prior consent of
the Representative. The Company will prepare and file with the
Commission, promptly upon your request, any amendment to the
Registration Statement or supplement to the Prospectus that you
reasonably determine to be necessary or advisable in connection with
the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible.
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 Underwriter 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 Underwriter 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 ____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 Underwriters, without charge, three signed copies of the
Registration Statement and any amendments thereto (including exhibits
thereto) and to each other Underwriter a conformed copy of the
Registration Statement and any amendments thereto (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter 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.
(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 designate, 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 will 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) cause the Securities (other than the
Underwriters' Warrants) to be listed on the American Stock Exchange,
(ii) comply with all registration, filing and reporting requirements of
the Exchange Act and the American Stock Exchange 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 filed 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 unaudited quarterly reports of earnings and will
furnish to you and, upon request, to the other Underwriters 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, the American Stock Exchange, 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 will not, for a period of one year following
the Effective Date, without the prior written consent of the
Representative, issue, sell, contract to sell (including, without
limitation, any short sale), transfer, assign, pledge, encumber,
hypothecate or grant any option to purchase or otherwise dispose of,
any capital stock, or any options, rights or warrants to purchase any
capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the
Company, except for (i) sales of the Securities as contemplated by this
Agreement, and (ii) sales of Common Stock upon the exercise of Warrants
or outstanding options described in the Prospectus.
(l) The Company has reserved and shall continue to reserve a
sufficient number of shares of Common Stock for issuance upon exercise
of the Underwriters' Warrants and Warrants (including the Warrants
included in the Underwriters' Warrants).
(m) 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 10b-6, Rule 10b-7 or Rule 10b-18 under the
Exchange Act.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Units described in Sections 2(a) and 2(b)
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, the 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 the 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, on the
execution date hereof or at such later date and time as you may
approve in writing and, at the 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 Underwriter, 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 Wolin, Fuller, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Company, or
other counsel acceptable to the Underwriters addressed to the
Underwriters and dated the 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 Underwriters' 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
Underwriters' Warrants); the Warrants and Underwriters' 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; and the Securities (other than
the Underwriters' Warrants) have been approved for listing on the
American Stock Exchange upon notice of issuance thereof. 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.
(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 the
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
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 Underwriters 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 the 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 ▇▇▇▇ & ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, L.L.C., counsel for the Underwriters, an opinion dated the
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 the 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 the 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 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 the Closing Date
(and any settlement date pursuant to Section 3(b) hereof) with
the same effect as if made on and as of the 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) At the Execution Time and on the Closing Date (and any
settlement date pursuant to Section 3(b) hereof).▇▇▇▇ + 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 six months ended
December 31, 1996 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 their 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 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 December 31, 1996 and the related
unaudited statements of operations for the six months ended
December 31, 1996, 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 ▇▇▇▇
+ 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) On or prior to the Effective Date, the Securities shall
have been approved for listing on the American Stock Exchange.
(h) The Company shall not have sustained any uninsured
substantial loss as a result of fire, flood, accident or other
calamity.
(i) 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.
(j) 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 Underwriters
hereunder may be canceled at, or at any time prior to, the 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 Underwriters' 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 Underwriters 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 Underwriters 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;
(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) (i) incident to the sale and delivery by the Company of
the Securities to the Underwriters, and (ii) incident to the sale and
delivery of the Securities by the Underwriters 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 the American Stock Exchange;
(h) The cost of printing, producing and distributing this Agreement,
the Agreement among Underwriters, the Selected Dealers 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;
(j) A nonaccountable expense allowance of 2.5% of the gross proceeds
from the offering (including the Units described in Section 2(b) hereof)
payable to the Representative, provided, however, in the event that the
offering is not consummated, the Representative will be reimbursed only for
its actual out of pocket expenses; and
(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 herein and in addition to the Underwriters' Option,
the Underwriters shall be entitled to receive, as partial compensation
for their services, unit purchase warrants for the purchase of up to an
additional 125,000 Units (the "Underwriters' Warrants"). The
Underwriters' Warrants shall be issued pursuant to the Warrant and
Registration Rights Agreement (the "Underwriters' Warrant Agreement")
in the form of Exhibit B attached hereto and shall be exercisable, in
whole or in part, for a period of four 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 Underwriters'
Warrants, including the Warrants issuable upon exercise thereof, shall
be non-transferable for one year from the date of issuance of the
Underwriters' Warrants, except as provided in the Underwriters' Warrant
Agreement. The terms of the Units subject to the Underwriters' Warrants
shall be the same as the Units sold to the public.
Without limiting in any respect the foregoing obligations of
the Company, which obligations shall survive any termination of this
Agreement, if the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof, or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply in all material respects with any provision
hereof other than by reason of a default by any of the Underwriters,
the Company agrees to reimburse the Underwriters, upon demand, for all
out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities to the extent the amounts
paid pursuant to Section 7(j) hereof are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person who controls any Underwriter 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 Underwriter 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 Underwriter (or to the benefit of any person controlling any
such Underwriter) 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) 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 Underwriter, 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 Underwriter or any person who controls such
Underwriter 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 Underwriter 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 Underwriter 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 Underwriter, but only with reference to
written information relating to such Underwriter furnished to the Company
by or on behalf of such Underwriter through the Representative specifically
for use in the Registration Statement or Prospectus. The Company
acknowledges that the corporate names of the Underwriters and the
information under the heading "Underwriting" in the Prospectus and in any
Preliminary Prospectus constitute the only information furnished in writing
by or on behalf of the several Underwriters. The obligations of each
Underwriter under this subsection (b) shall be in addition to any liability
which the Underwriters 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 Underwriters 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 Underwriters
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
Underwriters 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 Underwriters 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
Underwriter (except as may be provided in the Agreement Among Underwriters
relating to the offering of the Securities) be responsible for any amount
in excess of the underwriting discount applicable to the Units to be
purchased by such Underwriter 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 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 Underwriters 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 Underwriters 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
Underwriters 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
Underwriters 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 an
Underwriter within the meaning of the Act shall have the same rights to
contribution as such Underwriter, 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. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Units agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under
this Agreement, the remaining Underwriters shall be obligated severally to
take up and pay for (in the respective proportions which the number of
Units set forth opposite their names in Schedule I hereto bears to the
aggregate number of Units set forth opposite the names of all the remaining
Underwriters) the Units which the defaulting Underwriter or Underwriters
agreed but failed to purchase; provided, however, that if the aggregate
number of Units which the defaulting Underwriter or Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate number of Units set
forth in Schedule I hereto, the remaining Underwriters shall have the right
to purchase all, but shall not be under any obligation to purchase any, of
such Units, and if such nondefaulting Underwriters do not purchase all of
such Units, this Agreement will terminate without liability to any
non-defaulting Underwriter or the Company except as otherwise provided in
Section 7. In the event of a default by any Underwriter as set forth in
this Section 9, the Closing Date shall be postponed for such period, not
exceeding seven days, as the Representative shall determine in order that
the required changes in the Registration Statement and the Prospectus or in
any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Underwriter of its liability,
if any, to the Company or any nondefaulting Underwriter for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company 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 ▇▇▇▇▇ 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 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 Underwriters 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 Underwriter,
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
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
to the Company at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
13. Successors. This Agreement 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
Underwriting 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 Underwriters.
Very truly yours,
Cotton Valley Resources Corporation
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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 Underwriters in Schedule I to the foregoing
Agreement.
SCHEDULE I
Underwriters
National Securities Corporation
SCHEDULE II
SCHEDULE III
EXHIBIT A
Form of Lock-Up Agreement
, 1997
National SECURITIES CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Agreement Not to Sell
Gentlemen:
Reference is made to the proposed public offering of 1,250,000 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
underwriters (the "Underwriters") to be named in an underwriting agreement.
In consideration of the offer and sale of such Units by the Company and
the Underwriters and of other good and valuable consideration the receipt of
which is hereby acknowledged, 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 Underwriters 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
Accepted and Agreed to:
NATIONAL SECURITIES CORPORATION
As Representative of the
Several Underwriters
By:
Title:
PLEASE COMPLETE AND RETURN TO:
National Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT B
Underwriters' Warrant Agreement
