SELECTED DEALER AGREEMENT
FAN ENERGY INC.
Public Offering of 3,000,000 Shares of Common Stock
at
$1.00 Per Share
Dated as of ____________, 1998
Gentlemen:
The undersigned, Fan Energy Inc., a Nevada corporation (the "Company"),
hereby confirms its agreement with you as follows:
1. General. This Selected Dealer Agreement (the "Agreement") sets forth the
terms and conditions between the Company and you (a "Selected Dealer") whereby,
subject to the terms of this Agreement, you as a Selected Dealer will, as a
nonexclusive agent of the Company, offer to sell on behalf of the Company, and
the Company will sell, pursuant to subscriptions obtained by you, other agents
acting on behalf of the Company and the Company's officers, directors and
employees in a registered public offering, up to 3,000,000 shares of $0.001 par
value common stock (the "Shares") as described in the Prospectus dated May __,
1998 (the "Prospectus").
In the Offering, the Company is offering a minimum of 300,000 and a maximum
of 3,000,000 Shares at a purchase price of $1.00 per Share aggregating
respectively $300,000 and $3,000,000 (the "Offering"). An investor must purchase
a minimum of 20,000 Shares (i.e. $20,000) although the Company reserves to sell
a lesser number of Shares in its sole discretion. All Shares are offered subject
to the right of the Company to reject any subscription for Shares in whole or in
part and subject to certain other conditions. The terms of the Offering are more
particularly described in the Prospectus. In connection with the Offering by the
Company, the Company may retain certain Selected Dealers, including you, all of
which shall be members of the National Association of Securities Dealers, Inc.
(the "Selected Dealers").
2. Appointment as Selected Dealer. You are hereby invited to become a
Selected Dealer and by your confirmation indicated by signing this Agreement,
you agree to act in such capacity and to use your best efforts to find
purchasers for up to a maximum of $300,000 of the Shares in the Offering (10% of
the total amount offered) in accordance with the terms and conditions set forth
in this Agreement, provided that you shall have no obligation to sell any of the
Shares.
3. Prospectus. The Company shall provide you with such number of copies of
the Prospectus and such number copies of any amendments and supplements thereto
as you may reasonably request.
4. Solicitation of Subscriptions. You hereby agree to solicit, as a
nonexclusive agent of the Company, investors to purchase Shares in the Offering
in accordance with the terms as set forth in the Prospectus.
(a) Acceptance Standards. No Subscription Agreement shall be effective
unless and until accepted by the Company and the Company reserves the right
to reject any such subscription and to accept or reject subscriptions in
the order of their receipt by the Escrow Agent or otherwise. The Company
will not consider any proposed subscription until the Subscription
Agreement has been completed in full and signed by the investor.
(b) Solicitation Procedures. Each person desiring to purchase Shares
will be required to sign and complete a Subscription Agreement. Each
investor will make his or her check payable to the order of "The Bank of
Denver, Fan Energy Inc., Escrow Account" in the amount of the purchase
price of the Share. You agree to promptly deliver the original Subscription
Agreement as signed by the investors, together with the investor's
subscription funds directly to the Escrow Agent on or before noon of the
first business day following the date of receipt of the investor's funds.
You are not permitted to sign a Subscription Agreement for any investor.
The Bank of Denver, Denver, Colorado is the Escrow Agent in connection with
the Offering in accordance with the terms of the Fund Escrow Agreement. You
agree to sign and become a party to the Fund Escrow Agreement and to sign a
counterpart of the agreement at or before the time when you first transmit
investor funds to the Escrow Agent.
Upon receipt of the investor's funds from the Company or a Selected
Dealer, the Escrow Agent will deposit the funds in the Escrow Account.
Until such time as at least $300,000 in investor funds have been deposited
with the Escrow Agent by the Selected Dealer(s) and the Company, the
Company will have no right to obtain any funds held in the Escrow Account
by the Escrow Agent and no subscriber shall have any right to return of his
funds, except as described in the Fund Escrow Agreement. The right of the
Company or you to receive funds from the Escrow Account is subject to the
terms of the Fund Escrow Agreement.
You agree to offer the Shares only in jurisdictions which you are
properly qualified or registered, as required by applicable law, to offer
or sell securities, and which jurisdictions are identified to you by the
Company as a jurisdiction where the offering may be lawfully made. At or
prior to the delivery of funds by the Escrow Agent to the Company, as
described in the Fund Escrow Agreement, you agree to deliver to the
Company, if so requested by the Company, a certificate stating (i) the
identification of each subscriber whose funds you transmitted to the Escrow
Agent, together with the number of Shares purchased, and the number of
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purchasers in each state and (ii) that your representations and warranties
contained in Section 8 hereof are true and correct with the same effect as
though expressly then made and that you have complied with the covenants
contained in Section 9 hereof.
5. Due Diligence. You agree to conduct your own investigation to determine
that all materials facts upon which each person who purchases the Shares might
rely in making his or her investment decision have been accurately and
adequately disclosed in the Prospectus to the extent you deem necessary. The
Company agrees to furnish to you any and all information which you reasonably
request or deem necessary to review in connection with any investigation which
you choose to make.
6. Compensation. Subject to the terms and conditions set forth herein, and
in consideration of your services to the Company, the Company shall pay to you,
at such time as offering proceeds are delivered by the Escrow Agent to the
Company, a selling commission equal to 10% of the gross offering proceeds for
the Shares sold through you. All compensation under this Agreement will be paid
on a per Share basis on the date that funds are delivered by the Escrow Agent to
the Company in accordance with the Fund Escrow Agreement or within two business
days thereafter. Payment of this compensation is subject to the following
conditions:
(i) No compensation will be paid until the minimum offering
amount (300,000 Shares for proceeds of $300,000) has been reached and
such amounts have been delivered to the Escrow Agent and the proceeds
of all checks have cleared the collection process;
(ii) No compensation will be paid with respect to a subscription
for Shares which are rejected for any reason by the Company or with
respect to any Shares for which good funds are not ultimately
collected by the Escrow Agent; or
(iii) No compensation will be payable with respect to
transactions in jurisdictions where such payments may not legally be
made.
7. Representations, Warranties and Agreements of the Company. The Company
represents and warrants to, and agrees with you as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Nevada with the full
corporate power and authority to conduct its business as described in the
Prospectus. The Company is duly licensed or qualified to do business and in
good standing as a foreign corporation in all jurisdictions in which the
nature of the activities conducted by it or the character of the assets
owned or leased by it makes such license or qualification necessary.
(b) The Company has an authorized capitalization as set forth in the
Prospectus and all of the then outstanding shares of capital stock of the
Company will have been, and the Shares to be sold in the Offering will be,
duly authorized and all shall be validly issued, fully paid and
nonassessable.
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(c) The Company does not have outstanding any options to purchase, or
any rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue to sell, any
equity securities or any such warrants, convertible securities or
obligations, other than as disclosed in the Prospectus.
(d) Except as disclosed in the Prospectus, there are no actions, suits
or proceedings pending or threatened against the Company, or against or
affecting any of its directors or officers, before or by any federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling or
decision or finding would materially and adversely affect the Company or
its business. The Company has, and at all times during the offering period
will have, complied in all material respects with all laws, regulations and
orders applicable to it or its business, the violation of which would have
a material adverse effect upon its business. The Company has, and at all
times during the offering period will have, in all material respects
performed all its obligations required to be performed by it, and is not,
and at all times during the Offering Period, will not be, in default under
any material contract or other instrument to which it is a party.
(e) The Company is not in violation of its Articles of Incorporation
or Bylaws.
(f) The Shares have been duly authorized and, when issued and
delivered to the purchasers thereof against payments therefor and in the
manner described in the Prospectus, will be validly issued, fully paid and
nonassessable. The description of the common stock contained in the
Prospectus is complete and accurate in all material respects.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles. The performance of this
Agreement and the consummation of the transactions contemplated hereby will
not result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, instrument to which
the Company is a party or by which the Company or any of its properties is
bound, or under any statute or under any order, rule or regulation of any
court or other regulatory agency applicable to the Company or its business.
No consent, approval, authorization or order of any court or regulatory
agency or body is required for the consummation by the Company of the
transactions on its part contemplated in this Agreement, except as such may
be required under federal and state securities laws.
(h) Except as reflected in or contemplated by the Prospectus, since
the respective dates as of which information is given in the Prospectus,
there has not been, and on the termination date of the Offering there will
not have been, any material adverse change in the condition of the Company,
financial or otherwise.
(i) At each time that proceeds from the sale of the Shares are
delivered by the Escrow Agent in accordance with the Fund Escrow Agreement,
the Company shall cause the Escrow Agent to pay to you the compensation
described in Section 6 above. Also, at such time or within two business
days thereafter, the Company shall cause its transfer agent to issue and to
deliver to purchasers of the Shares certificates representing the Shares
purchased in the offering with the proceeds delivered by the Escrow Agent.
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8. Representations and Warranties of the Selected Dealer. You hereby
represent, warrant and agree with the Company and us that:
(a) Power and Authority. You have been duly incorporated or organized
and are validly existing in good standing under the laws of the state of
your organization, with all requisite power and authority to conduct your
business and to perform the obligations contemplated herein.
(b) Due Authorization and Enforceability. This Agreement has been duly
and validly authorized, executed and delivered by you or on your behalf and
constitutes your valid, binding and enforceable agreement, except to the
extent that (i) the enforceability of this Agreement by be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally or by general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law), and (ii) the indemnification provisions of
this Agreement by be held to violate public policy (under either federal or
state law) in the context of the offer or sale of securities.
(c) Absence of Legal or Contractual Conflicts. Your execution and
delivery of this Agreement, and the performance of your obligations
hereunder, will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, your articles of
incorporation or bylaws, any agreement or instrument to which you are a
party or by which you are bound, or any judgment, decree, order or, to your
knowledge, any statute, rule or regulation applicable to you.
(d) Adequacy of Prospectus. The information contained in the
Prospectus relating to you or the plan of distribution of the Shares, if
any, is complete and correct and does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(e) Broker-Dealer Qualifications. You are (i) a broker-dealer duly
registered pursuant to the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) a member in good standing of
the National Association of Securities Dealers, Inc. and (iii) duly
registered as a broker-dealer under the applicable statutes and regulations
of each state in which you will offer and sell the Shares, except such
states in which you are exempt from registration or such registration is
not otherwise required. You will maintain your registration in good
standing, or your exemption from such registration, through the term of the
offering and you will comply with all statutes and other requirements
applicable to you with respect to your brokerage activities within those
jurisdictions.
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(f) No Disqualifications. Neither you or any of your directors,
officers, predecessors or agents nor any beneficial owner of 10% or more of
any class of your equity securities, nor any of their respective affiliates
(nor any other person serving in a similar capacity):
(i) has been convicted within 10 years prior to the date hereof
of any crime or offense involving the purchase or sale of any
security, involving the making of a false statement with the
Securities and Exchange Commission ("SEC"), or arising out of such
person's conduct as an underwriter, broker, dealer, municipal
securities dealer or investment advisor;
(ii) is subject to any order, judgment or decree of any court of
competent jurisdiction temporarily or preliminarily enjoining or
restraining, or is subject to any order, judgment, or decree of any
court of competent jurisdiction, entered within five years prior to
the date hereof, permanently enjoining or restraining such person from
engaging in or continuing any conduct or practice in connection with
the purchase or sale of any security, involving the making of a false
filing with the SEC or arising out of the conduct of the business of
an underwriter, broker, dealer, municipal securities dealer or
investment advisor;
(iii) is subject to an order of the SEC entered pursuant to
Section 15(b), 15B(a), or 15B(c) of the Exchange Act, or is subject to
an order of the SEC entered pursuant to Section 203(e) or (f) of the
Investment Advisors Act of 1940;
(iv) is suspended or expelled from membership in, or suspended or
barred from association with a member of, an exchange registered as a
national securities exchange pursuant to Section 6 of the Exchange
Act, an association registered as a national securities association
under Section 15A of the Exchange Act, or a Canadian securities
exchange or association for any act or omission constituting conduct
inconsistent with just and equitable principles of trade;
(v) is subject to a United States Postal Service false
representation order entered within five years prior to the date
hereof; or is subject to a restraining order or preliminary injunction
entered under Section 3007 of Title 39, United States Code, with
respect to any conduct alleged to constitute postal fraud;
(vi) has been or has been named as an underwriter of any
securities covered by any registration statement which is the subject
of any pending proceeding or examination under Section 8 of the
Securities Act of 1933, as amended (the "1933 Act"), or is the subject
of any refusal order or stop order entered thereunder within five
years prior to the date hereof;
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(vii) has taken or failed to take any other act or are subject to
any other order or proceedings, that would make unavailable any
limited offering exemption from registration or qualification
requirements of federal or state securities laws;
(viii) has filed a registration statement that is the subject of
a currently effective stop order entered pursuant to any state's
securities law within five years prior to the date hereof;
(ix) has been convicted within five years prior to the date
hereof of any felony or misdemeanor in connection with the offer,
purchase or sale of any security or any felony involving fraud or
deceit, including but not limited to forgery, embezzlement, obtaining
money under false pretenses, larceny or conspiracy to defraud;
(x) is currently subject to any state administrative enforcement
order or judgment entered by that state's securities administrator
within five years prior to the date hereof or is subject to any
state's administrative enforcement order or judgment in which fraud or
deceit, including but not limited to making untrue statements of
material facts and omitting to state material facts, was found and the
order or judgment was entered within five years prior to the date
hereof;
(xi) is subject to any state's administrative enforcement order
or judgment that prohibits, denies or revokes the use of any exemption
from registration in connection with the offer, purchase or sale of
securities; or
(xii) is currently subject to any order, judgment or decree of
any court of competent jurisdiction temporarily or preliminarily
restraining or enjoining, or is subject to any order, judgement or
degree of any court of competent jurisdiction permanently restraining
or enjoining, such party from engaging in or continuing any conduct or
practice in connection with the purchase or sale of any security or
involving the making of any false filing with the state entered within
five years prior to the date hereof.
9. Covenants of Selected Dealer. You hereby covenant with the Company and
us as follows:
(a) Delivery of Prospectus. You or a person acting on your behalf
shall furnish to each offeree, concurrently with making an offer to such
offeree, a copy of the Prospectus, as it may have been amended or
supplemented by the Company, and shall maintain adequate records of each
person to whom a Prospectus has been delivered. Neither you nor any of your
agents will give any information or make any representation with respect to
the Company or its business or affairs other than the information or
representations contained in the Prospectus.
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(b) Conduct of Solicitation. You or a person acting on your behalf
will cause each person interest in acquiring Shares to complete and
executive a Subscription Agreement (a copy of which is an exhibit to the
Fund Escrow Agreement) in accordance with Section 4(b) hereof. You will not
execute any Subscription Agreement for any person and will not invest in
the Shares through any person's discretionary trading account without the
written approval of such person. You will abide by, and take reasonable
precautions to ensure compliance with, all provisions contained in the
Prospectus and this Agreement regulating the terms and manner of conducting
the offering.
(c) Compliance With Federal Securities Laws. You will comply with all
applicable requirements of the 1933 Act and the rules and regulations
promulgated thereunder. You any person acting on your behalf will exercise
reasonable care to ensure that a purchaser is not an underwriter within the
meaning of Section 2(11) of the 1933 Act.
(d) Compliance With Blue Sky Laws. You will comply with all applicable
requirements of any state securities or "blue sky" law or rule or
regulation promulgated thereunder. You will not offer or sell any of the
Shares in any jurisdiction (i) prior to receiving instructions (oral or
written) from the Company that offers may be made in such jurisdiction and
(ii) except in compliance with all applicable securities or "blue sky"
laws. With respect to any state which limits the number of offers and sales
which may be made, you shall offer for sale no more than such number of
Shares as the Company may advise you may be offered and/or sold.
(e) Maintenance of Records. You will retain in your records and make
available to the Company, for a period of at least five years, information
concerning each person who purchased the Shares.
10. Indemnification.
(a) The Company will indemnify and hold harmless the Selected Dealer
and its officers and directors from and against all losses, claims, damages
or liabilities, joint and several, to which any of the aforesaid parties
may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement of a material fact
contained in the Prospectus, any amendment or supplement thereto, or in any
"blue sky" filing or other document executed by the Company or on its
behalf specifically for the purpose of qualifying any or all of the Shares
for sale under the securities laws of any jurisdiction or based upon
written information furnished under the securities laws thereof (any such
filing, document or information being hereinafter referred to as a "Blue
Sky Application") or (ii) the omission to state in the Prospectus, any
amendment or supplement thereto, any registration statement, or any Blue
Sky Application a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
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they were made, not misleading; and will reimburse the Selected Dealer and
its officers and directors for any legal or other expenses reasonably
incurred by the Selected Dealer and its officers and directors in
connection with investigating or defending such loss, claim, damage or
liability arises out of, or is based upon any untrue statement or omission
concerning the Selected Dealer or otherwise made in reliance upon and in
conformity with instructions or information furnished to the Company by the
Selected Dealer or by any of its officers, directors, employees or agents.
(b) The Selected Dealer will indemnify and hold harmless the Company,
its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, against all
losses, claims, damages or liabilities to which any of the aforesaid
parties may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon: (i) any untrue statement of a material fact
contained in the Prospectus, any amendment or supplement thereto, or any
Blue Sky Application, in each case to the extent, but only to the extent,
the such untrue statement concerns the Selected Dealer or otherwise was
made in reliance upon and in conformity with instructions or information
furnished to the Company by the Selected Dealer or by any of its officers,
directors, employees or agents; (ii) the omission to state in the
Prospectus, any amendment or supplement thereto, or in any Blue Sky
Application a material fact required to be stated therein or necessary to
make the statement therein, in light of the circumstances under which they
were made, not misleading, in each case to the extent, but only to the
extent, the such untrue statement or omission concerns the Selected Dealer
or otherwise was made in reliance upon and in conformity with instructions
or information furnished to the Company by the Selected Dealer or by any of
its officers, directors, employees or agents; (iii) any unauthorized use of
sales materials or use of representatives; or (iv) any misrepresentation by
the Selected Dealer in this Agreement or any breach of warranty by the
Selected Dealer with respect to this Agreement. The Selected Dealer will
also reimburse the Company, its officers and directors, or such controlling
person in connection with investigating or defending any loss, claim,
damage, liability or action referred to above.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof. In case any such
action shall be brought against any indemnified person and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent the it shall
desire, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel satisfactory to such indemnified
party.
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11. Survival Clause. The respective indemnities, agreements (including,
without limitation, the agreements set forth in Section 10 hereof),
representations, warranties and other statements of the Company and the Selected
Dealer, as set forth in this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Selected Dealer or the Company, and shall survive
any closing and termination of this Agreement and the receipt of any payment for
the Shares.
12. Commencement Date, Term and Termination of this Agreement.
(a) This Agreement shall become effective as of the date first above
written.
(b) The Company shall have the right to terminate this Agreement at
any time during the Offering period if any representations or warranties of
the Selected Dealer hereunder shall be found to have been incorrect or
misleading or the Selected Dealer shall fail, refuse or be unable to
perform any of its agreements or obligations hereunder.
(c) The Agreement shall terminate at the conclusion of the offering as
described in the Fund Escrow Agreement.
Notwithstanding termination of the Agreement, the obligations of the parties
under Sections 6, 7, 9(e) and 10 shall survive.
13. Notices. All communications hereunder shall be in writing and if sent
to the Selected Dealer shall be mailed, delivered or telecopied to the Selected
Dealer at the address set forth above: and if sent to the Company shall be
mailed, delivered or telecopied to Xxx Xxxxxx, Vice President, Fan Energy Inc.,
0000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, and to such other addresses
and persons as may reasonably be furnished in writing by the parties hereto.
14. Governing Law. This Agreement and all matters related hereto shall be
governed by and construed in accordance with the internal laws of the state of
Colorado applicable to agreements made and to be performed entirely within such
state. Any legal action, suit or proceeding with respect to any matter relating
to or arising out of or in connection with the offering or this Agreement shall
be brought in the federal and state courts located in Denver, Colorado and, by
execution and delivery of this Agreement, each of the Company and the Selected
Dealer hereby further irrevocably agrees, accepts and submits to, for itself and
in respect of any of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The provisions of this Agreement shall be
construed as of this Agreement had been drafted by both parties.
15. Entire Agreement. This Agreement contains the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect thereto.
16. Waivers and Preservation of Remedies. No delay on the part of either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of either party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege.
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17. Counterparts. This Agreement may be executed by one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together continue one and the
same instrument.
18. Parties and Successors. This Agreement shall be binding upon and inure
solely to the benefit of the Company, the Selected Dealer and to the extent
provided in Section 10 hereof, to each person indemnified therein, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. This Agreement may not be assigned by either party without the prior
written consent of the other party. No purchaser of any Shares shall be deemed a
successor or assign by reason of such purchase.
19. Severability. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, or is challenged by any state or federal
regulatory agency in the administration of any statute or regulation, the
validity, legality and enforceability of the remaining provisions hereof shall
in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
FAN ENERGY INC.
By
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Xxxxxx X. Xxxxxxx, Xx., Chairman
AGREED AND ACCEPTED:
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By
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Name
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Title
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