DOUBLE EAGLE PETROLEUM AND MINING CO.
UNDERWRITING AGREEMENT
October , 1996
Rocky Mountain Securities & Investments, Inc.
As Representative of the Several
Underwriters Named in Schedule I Hereto
000 Xxxxxx'x Xxx Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Gentlemen:
Double Eagle Petroleum and Mining Co., a Wyoming corporation (the
"Company"), hereby confirms its agreement with you (the "Representative") and
with the other Members of the Underwriting Group, including the Representative,
named in Schedule I hereto (hereinafter "the Underwriting Group") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company's authorized and outstanding capitalization when the offering
of the securities contemplated hereby is permitted to commence and at the
Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus (hereinafter defined) included therein. The Company
proposes to issue and sell to the Underwriting Group an aggregate of 1,000,000
units ("Unit" or "Units"), each Unit consisting of one (1) share of the
Company's $0.10 par value common stock ("Common Stock") and one (1) Common Stock
Purchase Warrant ("Warrant" or "Warrants") at a price of $3.00 per Unit.
Each Warrant will entitle the holder to purchase one (1) share of Common
Stock at an exercise price of $3.00 per share ("Warrant Exercise Price") during
the five-year period commencing on the effective date of the Registration
Statement ("Effective Date"). The Warrants will be redeemable on thirty (30)
days prior written notice at a redemption price of $0.02 per Warrant if (a) the
closing high bid price of the Common Stock has exceeded $4.00 per share for at
least the last 20 of the 30 trading days immediately preceding the mailing of
the notice of redemption, (b) the Company has in effect a current registration
statement with the applicable regulatory authorities registering the Common
Stock issuable upon exercise of the Warrants. The shares of the Company's Common
Stock underlying the Warrants are referred to herein as the "Warrant Shares."
The Representative shall also have an over-allotment option to purchase all
or part of an additional number of Units (the "Over-Allotment") as will be equal
to not more than fifteen (15%) of the total number of Units initially offered,
for a period of forty-five (45) days from the Effective Date, as provided in
Section 3.1 hereof. The Over-Allotment shall be exercisable by the Underwriter,
in whole or in part, from time to time during the aforementioned forty-five (45)
day period.
The Company proposes to issue and sell to the Representative on the Closing
Date, for a total purchase price of $100, warrants to purchase common stock
substantially identical to the Common Stock comprising a part of the Units at
100% of the initial per Unit offering price on the Effective Date of the
Registration Statement (the "Unit Common Stock Warrant") and warrants to
purchase Warrants comprising a part of the Units (the "Unit Warrant") (the Unit
Common Stock Warrant and the Unit Warrant are together referred to as the
"Underwriter's Warrants"), as provided in Section 3.3 hereof.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriting Group to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each member of the
Underwriting Group that:
2.1 Registration Statement and Prospectus. A Registration Statement on Form
SB-2 (File No. ) with respect to the Units, including the related Prospectus,
copies of which have heretofore been delivered by the Company to the
Representative, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations ("Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and said Registration Statement has
been filed with the Commission under the Act; one or more amendments to said
Registration Statement, copies of which have heretofore been delivered to the
Representative, has or have heretofore been filed; and the Company may file on
or prior to the Effective Date of the Registration Statement additional
amendments to said Registration Statement, including the final Prospectus.
Included in such Registration Statement are a sufficient number of additional
shares of the Company's Common Stock which are reserved against exercise of the
over-allotment option.
As of the Effective Date, the capitalization of the Company shall consist
of no more than 3,000,000 shares of capital stock, either outstanding or subject
to issuance upon the exercise of outstanding options, warrants or purchase
rights or upon the conversion of outstanding convertible securities. Any changes
in the number of shares of Common Stock issued and outstanding at or prior to
the Effective Date of the Registration Statement must be approved by the
Representative. Without the Representative's prior consent, there shall be no
warrants, options or rights outstanding as of the Effective Date of the
Registration Statement to purchase Common Stock other than as described in the
Registration Statement.
As used in this Agreement, the term "Registration Statement" refers to and
means said Registration Statement on Form SB-2 and all amendments thereto,
including the Prospectus, the information incorporated therein by reference, all
exhibits and financial statements, as it becomes effective; the term
"Prospectus" refers to and means the Prospectus included in the Registration
Statement when it becomes effective or as filed in final form in accordance with
the requirements of Rule 424(b) of the Rules and Regulations; and the term
"Preliminary Prospectus" refers to and means any prospectus included in said
Registration Statement before it becomes effective. The term "Effective Date"
throughout this Agreement refers to the date the Commission declares the
Registration Statement effective pursuant to Section 8 of the Act.
2.2 Accuracy of Registration Statement and Prospectus. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Units, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and to the best of
the Company's knowledge has not included at the time of filing any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading, except with respect to matters
subsequently amended prior to the Effective Date. On the Effective Date and on
the Closing Date, the Registration Statement and Prospectus will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations for the purposes of the public offering of the
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Units, and all statements of material fact contained in the Registration
Statement and Prospectus will be true and correct, and neither the Registration
Statement nor the Prospectus will include 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 not misleading; provided, however, the
Company does not make any representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus in
reliance upon written information furnished on behalf of the Underwriting Group
specifically for use therein. The Company will not at any time hereafter file
any amendments to the Registration Statement or in accordance with Rule 424(b)
of the Rules and Regulations of which the Representative shall not have been
previously advised in advance of filing or to which the Representative shall
reasonably object in writing.
2.3 Financial Statements. The financial statements of the Company together
with related schedules and notes as set forth in the Registration Statement and
Prospectus will present fairly the financial position of the Company and the
results of its operations and the changes in its financial position at the
respective dates and for the respective periods for which they apply; such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods concerned
except as otherwise stated therein.
2.4 Independent Public Accountant. ........................... have
certified or shall certify certain of the fiscal year end financial statements
filed or to be filed with the Commission as part of the Registration Statement
and Prospectus and are independent certified public accountants within the
meaning of the Act and the Rules and Regulations.
2.5 No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to the
dates as of which information is given in the Registration Statement and
Prospectus, and prior to the Closing Date, (i) there shall not be any material
adverse change in the condition, financial or otherwise, of the Company or in
its business taken as a whole; (ii) there shall not have been any material
transaction entered into by the Company other than transactions in the ordinary
course of business; (iii) the Company shall not have incurred any material
liabilities, obligations or claims, contingent or otherwise, which are not
disclosed in the Prospectus; (iv) except in the ordinary course of business and
with the consent of the Representative, there shall not have been nor will there
be any change in the capital stock or long-term debt (except current payments)
of the Company; and (v) the Company has not and will not have paid or declared
any dividends or other distributions on its capital stock.
2.6 No Defaults. Other than as disclosed in the Registration Statement or
Prospectus, the Company is not in any material default which has not been waived
in the performance of any obligation, agreement or condition contained in any
debenture, note or other evidence of indebtedness or any indenture or loan
agreement of the Company. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or by-laws of the Company, any note,
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound, or any
existing law, order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization, or order of any court or
governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the Act or under the securities laws of any state or
jurisdiction.
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2.7 Incorporation and Standing. The Company is and at the Closing Date and
the Over-Allotment Closing Date will be duly incorporated and validly existing
in good standing as a corporation under the laws of the State of Wyoming with
authorized and outstanding capital stock as set forth in the Registration
Statement and the Prospectus, and with full power and authority (corporate and
other) to own its property and conduct its business, present and proposed, as
described in the Registration Statement and Prospectus; the Company has full
power and authority to enter into this Agreement; and the Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned or leased) or the
nature of its business makes such qualification necessary.
2.8 Legality of Outstanding Stock. The outstanding capital stock of the
Company has been duly and validly authorized, issued and is fully paid and
nonassessable and will conform to all statements with regard thereto contained
in the Registration Statement and Prospectus. No sales of securities have been
made by the Company in violation of the registration or anti-fraud provisions of
the Act or in violation of any other federal law or laws of any state or
jurisdiction.
2.9 Legality of Securities. The Units, Common Stock, Warrants, Common Stock
underlying the Warrants ("Warrant Shares"), Underwriter's Warrants, and the
Common Stock and Warrants issuable upon the exercise of the Underwriter's
Warrants have been duly and validly authorized and, when issued and delivered
against payment therefor as provided in this Agreement, will be validly issued,
fully paid and nonassessable. The Common Stock and Warrant Shares and the Common
Stock underlying the Underwriter's Warrants, upon issuance, will not be subject
to the preemptive rights of any shareholders of the Company. The Warrants and
the Underwriter's Warrants, when sold and delivered, will constitute valid and
binding obligations of the Company enforceable in accordance with the terms
thereof. A sufficient number of shares of Common Stock of the Company has been
reserved for issuance upon exercise of the Warrants, the Unit Common Stock
Warrants and the Warrants issuable upon the exercise of the Unit Warrants. The
Common Stock, the Warrants, the Warrant Shares, the Underwriter's Warrants and
the Common Stock and Warrants issuable upon the exercise of the Underwriter's
Warrants will conform to all statements with regard thereto in the Registration
Statement and Prospectus.
2.10 Prior Sales. No unregistered securities of the Company, of an
affiliate or of a predecessor of the Company have been sold within three years
prior to the date hereof, except as set forth in the Registration or otherwise
disclosed to the Representative in writing.
2.11 Litigation. Except as set forth in the Registration Statement and
Prospectus, there is and at the Closing Date there will be no action, suit or
proceeding before any court, arbitration tribunal or governmental agency,
authority or body pending or to the knowledge of the Company threatened which
might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business or the prospects of the
Company, or would materially affect the properties or assets of the Company.
2.12 Underwriter's Warrants. Upon delivery of and payment for the
Underwriter's Warrants to be sold by the Company as set forth in Section 3.3 of
this Agreement, the Representative and designees of the Representative will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of such Underwriter's Warrants full
legal right and power and all authorization and approval required by law to
sell, transfer and deliver such Underwriter's in the manner provided hereunder.
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2.13 Finder. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect to the offer and sale of the Units
hereunder except as previously disclosed in writing to the Representative.
2.14 Exhibits. There are no contracts or other documents which are required
to be filed as exhibits to the Registration Statement by the Act or by the Rules
and Regulations which have not been so filed and each contract to which the
Company is a party and to which reference is made in the Prospectus has been
duly and validly executed, is in full force and effect in all material respects
in accordance with their respective terms, and none of such contracts have been
assigned by the Company; and the Company knows of no present situation or
condition or fact which would prevent compliance with the terms of such
contracts, as amended to date. Except for amendments or modifications of such
contracts in the ordinary course of business, the Company has no intention of
exercising any right which it may have to cancel any of its obligations under
any of such contracts, and has no knowledge that any other party to any of such
contracts has any intention not to render full performance under such contracts.
2.15 Tax Returns. The Company has filed all federal and state tax returns
which are required to be filed by it and has paid all taxes shown on such
returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which the Company is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
2.16 Property. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes not
due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company, subject
only to such exceptions as are not material and do not adversely affect the
present or prospective business of the Company.
2.17 Authority. The execution and delivery by the Company of this Agreement
has been duly authorized by all necessary corporate action and this Agreement is
the valid, binding and legally enforceable obligation of the Company.
2.18 Lock-Up. Prior to the Effective Date of the Registration Statement,
the Company shall cause each of its officers, directors and 5% or greater
shareholders of the Company to execute and deliver an agreement to the
Representative that such person will not sell, pledge or otherwise dispose of
any shares of the Company's Common Stock owned directly or indirectly by such
person or beneficially by such person (as defined by the Securities Exchange Act
of 1934 and rules promulgated thereunder) on the Effective Date of the
Registration State for a period thereafter of one (1) year without the
Representative's prior written consent, which consent shall not be unreasonably
withhold. All such agreements shall be in form and substance satisfactory to the
Representative and the Representative's Counsel and shall be delivered to the
Representative and the Representative's Counsel prior to the Effective Date of
the Registration Statement.
2.19 Use of Form SB-2. The Company is eligible to use Form SB-2 for the
offer and sale of the Units, the Common Stock, the Warrants, the Warrant Shares,
Underwriter's Warrants and the underlying Common Stock and securities underlying
such Underwriter's Warrants.
2.20 NASDAQ or Exchange Listing. On the Effective Date, the Company's
securities must be qualified for initial inclusion or maintaining inclusion on
NASDAQ Small Cap. The Company agrees to have its eligible securities designated
as a NASDAQ National Market System security or listing on a national securities
exchange as soon as the Company meets the qualifications for such designation or
listing.
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2.21 Transfer and Warrant Agent, Daily Transfer Sheets and DTC Position
Listing Report. The Company shall designate a transfer and warrant agent
acceptable to the Underwriter for the Company's securities. For a period of two
(2) years from the Effective Date, the Company, at its expense, shall provide
the Underwriter, if so requested in writing, with copies of the Company's daily
Common Stock and Warrant transfer sheets and the DTC special security position
listing reports. The Company agrees not to change its transfer agent for two (2)
years without the prior written consent of the Underwriter.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 3
PURCHASE AND SALE OF THE UNITS
3.1 Purchase of Units and Over-Allotment Option. The Company hereby agrees
to sell to members of the Underwriting Group named in Schedule I hereto
(individually referred to as "Member" and collectively referred to as "Members")
(for all of whom the Representative is acting), severally and not jointly, and
each Member of the Underwriting Group, upon the basis of the representations and
warranties herein obtained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
Units set forth opposite their respective names in Schedule I hereto at a
purchase price of $3.00 per Unit.
The Company hereby grants to the Representative an over-allotment option
for a period of forty-five (45) days after the Effective Date to purchase at a
purchase price of $3.00 per Unit up to 150,000 additional Units, each such Unit
to be identical in all respects to a Unit as described in Section 1 hereof,
solely to cover over-allotments, if any.
3.1.1 Default by a Member. If for any reason one or
more Members of the Underwriting Group shall fail or refuse
(otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of
Section 9 hereof) to purchase and pay for the number of
Units agreed to be purchased by such Member, the Company
shall immediately give notice thereof to the Representative,
and the non-defaulting Members shall have the right within
24 hours after the receipt by the Representative of such
notice, to purchase or procure one or more other Members to
purchase, in such proportions as may be agreed upon among
the Representative and such purchasing Member or Members and
upon the terms herein set forth, the Units which such
defaulting Member or Members agreed to purchase. If the
non-defaulting Members fail so to make such arrangements
with respect to all such Units, the number of Units which
each non-defaulting Member is otherwise obligated to
purchase under the Agreement shall be automatically
increased pro rata to absorb the remaining Units which the
defaulting Member or Members agreed to purchase; provided,
however, that the non-defaulting Members shall not be
obligated to purchase the Units which the defaulting Member
or Members agreed to purchase in excess of 10% of the total
number of Units which such non-defaulting Member agreed to
purchase hereunder, and provided further that the
non-defaulting Members shall not be obligated to purchase
any Units which the defaulting Member or Members agreed to
purchase if such additional purchase would cause the Member
to be in violation of the net capital rule of the Commission
or other applicable law. If the total number of Units which
the defaulting Member or Members agreed to purchase shall
not be purchased or absorbed in accordance with the two
preceding sentences, the Company shall have the right,
within 24 hours next succeeding the 14-hour period above
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referred to, to make arrangements with other underwriters or
purchasers satisfactory to the Representative for the
purchase of such Units on the terms herein set forth. In any
such case, either the Representative or the Company shall
have the right to postpone the Closing determined as
provided in Section 3.2.2 hereof for not more than seven
business days after the date originally fixed as the Closing
pursuant to said Subsection 3.2.2 in order that any
necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be
made. If neither the non-defaulting Members nor the Company
shall make arrangements within the 24-hour periods stated
above for the purchase of all the Units which the defaulting
Member or Members agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed
and without any liability on the part of the Company to any
non-defaulting Member, except the Company shall be liable
for actual expenses incurred by the Representative as
provided in Section 3.4 hereof, and without any liability on
the part of any non-defaulting Member to the Company.
3.1.2 Liability of Defaulting Member. Nothing contained
in this Section 3.1 shall relieve any defaulting Member of
its liability, if any, to the Company or to the remaining
Members of the Underwriting Group for damages occasioned by
its default hereunder.
3.2 Public Offering Price. After the Commission notifies the Company that
the Registration Statement has become effective, the Members of the Underwriting
Group propose to offer the Units to the public at an initial public offering
price of $3.00 per Unit as set forth in the Prospectus. The Members of the
Underwriting Group may allow such discounts and concessions upon sales to
selected dealers as may be determined from time to time by the Representative.
3.2.1 Payment For Units. Payment for the Units
(including Units included in the over-allotment option which
the Representative agrees to purchase) shall be made to the
Company or its order by certified or official bank check or
checks, in the amount of the purchase price by or on behalf
of the Representative at the offices of the Representative
in Denver, Colorado, upon delivery to the Representative or
its designee of certificates for the Common Stock and
Warrants comprising the Units in definitive form in such
numbers and registered in such names as the Representative
requests in writing at least three full business days prior
to such delivery. At the request of the Representative, the
Company shall deliver the component securities of the Unit
to the Members of the Underwriting Group through the
facilities of The Depository Trust Company or as otherwise
directed.
3.2.2 Closing. The time and date of delivery and
payment hereunder is herein called the "Closing Date" and
shall take place at the office of the Representative in
Denver, Colorado, or at such other location as may be
specified by the Representative, at 10:00 a.m. on the fifth
business day following the date of the Prospectus; provided,
however, that such date may be extended for not more than an
additional seven business days by the Representative. Should
the Representative elect to exercise any part of the
over-allotment option pursuant to Section 3.1 hereinabove,
the time and date of delivery and payment for said
over-allotment Units shall be as mutually agreed, but not
later than the forty-fifth (45th) calendar day after the
Effective Date or the date of the Prospectus, whichever is
later. Said date is referred to as the "Over-Allotment
Closing Date."
3.2.3 Inspection of Certificates. For the purpose of
expediting the checking and packaging of the certificates
for the securities comprising the Units and the
Underwriter's Unit Purchase Warrants, the Company agrees to
make the certificates available for inspection by the
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Representative at the main office of the Representative in
Denver, Colorado, at least two full business days prior to
the proposed delivery date.
3.3 Sale of Underwriter's Warrants. On the Closing Date, the Company will
sell to the Underwriter for a total purchase price of $100, warrants to purchase
common stock substantially identical to the Common Stock comprising a part of
the Units at 100% of the initial per Unit offering price on the Effective Date
of the Registration Statement (the Unit Common Stock Warrant) and warrants to
purchase Warrants comprising a part of the Units (the Unit Warrant) (the Unit
Common Stock Warrant and the Unit Warrant are together referred to as the
Underwriter's Warrants). The Company shall not be obligated to sell and deliver
the Underwriter's Warrants, and the Representative will not be obligated to
purchase and pay for the Underwriter's Warrants, except upon payment for the
Units pursuant to Subsection 3.2.1 hereof.
The total number of securities which may be purchased upon exercise of the
Unit Common Stock Warrant will be 10% of the number of shares of Common Stock
which are sold as a part of the Units in the offering and the total number of
securities which may be acquired upon exercise of the Unit Warrant will be 10%
of the number of Warrants included as a part of the Units, respectively,
excluding such Units as may be sold upon exercise of the Underwriter's
over-allotment option. The Underwriter's Warrants shall be non-transferable for
a period of one (1) year following the Effective Date except to the Underwriters
and selected dealers and their respective officers or partners. The Unit Common
Stock Warrant shall contain anti-dilution provisions, a cashless exercise
provision, a one-time demand registration provision, customary piggyback
registration rights and shall otherwise be in form and substance satisfactory to
the Underwriter. The Unit Common Stock Warrant will be exercisable during the
four-year period commencing one (1) year after the Effective Date. The Unit
Warrant will be exercisable during the period provided in the Warrant,
commencing one (1) year after the Effective Date.
3.4 Representative's Expense Allowance. It is understood that the Company
shall reimburse the Representative, for itself alone and not on behalf of the
other Members of the Underwriting Group, for its expenses on a nonaccountable
basis in the amount of 3% of the gross proceeds from the sale of the Units ($
.............. per Unit) including proceeds from the sale of the Units included
in the over-allotment option. The Representative acknowledges receipt of $25,000
of said non-accountable expense allowance. By the Closing Date and, if
applicable, on the Over-Allotment Closing Date, the Representative shall be
entitled to withhold the unpaid balance of such nonaccountable expense
allowance. The Representative shall be solely responsible for all expenses
incurred by it in connection with the offering including, but not limited to,
the expenses of its own counsel except as set forth in Section 5.7 hereof.
Notwithstanding the foregoing, if the Registration Statement does not become
effective, or the offering is never commenced after it becomes effective, or if
this Agreement is terminated as provided herein, the Representative will retain
so much of the non-accountable expense allowance which has been or should have
been received by the Representative from the Company as is equal to its actual
accountable out-of-pocket expenses and reimburse the remainder, if any to the
Company, provided that the amount to be reimbursed will not exceed the amount of
the non-accountable expense allowance. The Representative's expenses shall
include, but are not to be limited to, a fee to compensate the Representative
for the services and time of Representative's counsel, plus any additional
expenses and fees, including but not limited to, travel expenses, postage
expenses, duplication expenses, confirmation and other record preparation
expenses, long-distance telephone expenses, consultant and investigator expenses
and other expenses incurred by the Representative in connection with the
proposed offering.
3.5 Additional Financing. The Company agrees that if the Representative
arranges for equity financing accepted by and closed with the Company other than
as contemplated herein during a period of five (5) years from the date of this
Agreement, the Company will pay a ten percent (10%) commission to the
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Representative based on the amount of equity financing. "Arranges," as used in
this section, means locating the financing, introducing the Company to the
source of the financing, and assisting the Company, in all reasonable ways as
the Company may request, to negotiate and complete the financing.
If the Underwriter arranges for debt financing accepted by and closed with
the Company during a period of five (5) years from the date hereof, the Company
will pay a five percent (5%) commission to the Underwriter based on the amount
of debt financing.
If the Underwriter obtains an increase in the Company's line of credit,
which is accepted by and closed with the Company, the Company will pay a fee
equal to 1% of the amount of increase.
If the Underwriter arranges for the purchase or sale of assets, for a
merger, acquisition or joint venture accepted by and closed with the Company,
during a period of five (5) years from the date hereof, the Company will pay a
fee to the Underwriter for its services calculated as follows:
5% of the value of the transaction to the Company up to and including
$1,000,000,
4% of the value of the transaction to the Company greater than
$1,000,000 and up to and including $2,000,000,
3% of the value of the transaction to the Company greater than
$2,000,000 and up to and including $3,000,000,
2% of the value of the transaction to the Company greater than
$3,000,000 and up to and including $4,000,000, and
1% of the value of the transaction to the Company in excess o
$4,000,000, all from such income as received.
In addition, the Company shall reimburse the Representative for any
reasonable expenses that it incurs in arranging and closing such funding or
transactions, including fees of its counsel after receiving written approval
from the Company.
The provisions of this Section 3.5 shall survive the performance or
termination of this Agreement in accordance with Section 12.2 of this Agreement.
3.6 Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.7 Post-Closing Information. The Representative covenants that reasonably
promptly after the Closing Date, it will supply the Company with all information
required from the Representative which must be supplied to the Commission, if
any, and such additional information as the Company may reasonably request to be
supplied to the securities authorities for such states in which the Units have
been qualified for sale.
3.8 Re-Offers By Selected Dealers. On each sale by the Representative of
any of the Units to selected dealers, the Representative shall require the
selected dealer purchasing any such Units to agree to re-offer the same on the
terms and conditions of the offering set forth in the Registration Statement and
Prospectus.
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3.9 Right of First Refusal. If the Offering is consummated, the Company
will grant to the Representative a right of first refusal for a period of three
(3) years after the Effective Date to act as managing underwriter for any public
offerings of its securities contemplated by the Company or any of its
subsidiaries. The right shall continue in effect during the entire three (3)
year period despite the exercise of the right or the refusal to exercise the
right during the period. The Representative shall have thirty (30) days within
which to determine whether to exercise the right. The right shall continue
during the entire three (3) year period despite any prior exercise of the right
or the refusal to exercise the right during the period.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 Delivery of Registration Statements. The Company shall deliver to the
Representative without charge two (2) manually signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
Representative ten (10) conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements and
exhibits. The signed copies of the Registration Statement so furnished to the
Representative will include manually signed copies of any and all consents and
certificates of the independent public accountant certifying to the financial
statements included in the Registration Statement and Prospectus and signed
copies of any and all opinions, consents and certificates of any other persons
whose profession gives authority to statements made by them and who are named in
the Registration Statement or Prospectus as having prepared, certified, or
reviewed any part thereof.
4.2 Delivery of Preliminary Prospectus. The Company will cause to be
delivered to Members of the Underwriting Group and to other broker-dealers,
without charge, prior to the Effective Date as many copies of each Preliminary
Prospectus filed with the Commission bearing in red ink the statement required
by Item 501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be required by
the Representative. The Company consents to the use of such documents by Members
of the Underwriting Group and by selected dealers prior to the Effective Date of
the Registration Statement.
4.3 Delivery of Prospectus. The Company will deliver, without charge,
copies of the Prospectus at such addresses and in such quantities as may be
required by the Representative for the purposes contemplated by this Agreement
and shall deliver said printed copies of the Prospectus to Members of the
Underwriting Group and to selected dealers within one business day after the
Effective Date.
4.4 Further Amendments and Supplements. If during such period of time as in
the opinion of the Representative or its counsel the Prospectus is required to
be delivered under the Act, any event occurs or any event known to the Company
relating to or affecting the Company shall occur as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time after the Effective Date to
amend or supplement the Prospectus to comply with the Act, the Company will
forthwith notify the Representative thereof and prepare and file with the
Commission such further amendment to the Registration Statement or supplemental
or amended Prospectus as may be required and furnish and deliver to the
Representative and to others whose names and addresses are designated by the
Representative, all at the cost of the Company, a reasonable number of copies of
the amended or supplemented Prospectus which as so amended or supplemented will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the Prospectus not misleading in the
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light of the circumstances as of the date of such Prospectus, amendment, or
supplement, and which will comply in all respects with the Act; and in the event
the Representative is required to deliver a Prospectus beyond completion of its
participation in the public offering, upon request will prepare promptly such
Prospectus or Prospectuses as may be necessary to permit continued compliance
with the requirements of the Act.
4.5 Use of Prospectus. The Company authorizes the Members of the
Underwriting Group in connection with the distribution of the Units and all
selected dealers to whom any of the Units may be sold to use the Prospectus as
from time to time amended or supplemented, in connection with the offer and sale
of the Units and in accordance with the applicable provisions of the Act, the
Rules and Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Representative and other Members
of the Underwriting Group that:
5.1 Objection of Representative to Amendments or Supplements. After the
date hereof, the Company will not at any time, whether before or after the
Effective Date, file any amendment or supplement to the Registration Statement
or Prospectus unless and until a copy of such amendment or supplement has been
previously furnished to the Representative a reasonable period prior to the
proposed filing thereof, or to which the Representative or counsel for the
Representative have reasonably objected, in writing, on the ground that such
amendment or supplement is not in compliance with the Act or the Rules and
Regulations.
5.2 Company's Best Efforts to Cause Registration Statement to Become
Effective. The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed, to become
effective as promptly as reasonably practicable and will promptly advise the
Representative, and will confirm such advice in writing (i) when the
Registration Statement shall become effective and when any amendment thereto
shall have become effective and when any amendment of or supplement to the
Prospectus shall be filed with the Commission, (ii) when the Commission shall
make a request or suggestion for any amendment to the Registration Statement or
the Prospectus or for additional information and the nature and substance
thereof, (iii) of the issuance by the Commission of an order suspending the
effectiveness of the Registration Statement pursuant to Section 8 of the Act or
of the initiation of any proceedings for that purpose, (iv) of the happening of
any event which in the judgment of the Company makes any material statement in
the Registration Statement or Prospectus untrue or which requires the making of
any changes in the Registration Statement or Prospectus in order to make the
statements therein not misleading, and (v) of the refusal to qualify or the
suspension of the qualification of the Units for offer or sale in any
jurisdiction, or of the institution of any proceedings for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of any such
order or of any order preventing or suspending such use, to prevent any such
refusal to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the termination
of any such suspension.
5.3 Preparation and Filing of Amendments and Supplements. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Representative and of counsel to the Company may be necessary in
connection with the offer and sale of the Units and will use its best efforts to
cause the same to become effective as promptly as possible.
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5.4 Blue Sky Qualification. It is understood and agreed by the Company and
the Representative that it shall be a condition of the Offering that the sale of
the Units be registered or otherwise qualified for offer and sale in those
states as may be reasonably requested by the Representative. The Company
specifically agrees to attempt to register or qualify the Offering in
California, Colorado, Florida, Illinois, Kansas, New Jersey, New York, North
Carolina, Texas and Wyoming. Copies of all applications for the registration or
qualification of the Units and other securities referenced herein and related
documents (except for the Registration Statement and Prospectus) will be filed
by Representative's Counsel with the various states and shall be supplied to the
Company's legal counsel, concurrently with their transmission to the various
states. The expense of such filings, including legal fees of Representatives's
Counsel, shall be promptly paid by the Company. The Company shall advance to
Representative's Counsel a retainer of $5,000, against which the legal fees of
Representative's Counsel may be billed. Copies of all comments and orders
received from the various states shall be immediately supplied to the Company's
legal counsel. Immediately prior to the distribution of the preliminary
Prospectuses to potential investors, and prior to the Effective Date,
Representative's Counsel shall provide a written memorandum of all states
wherein the preliminary Prospectus may be distributed and wherein the Offering
has been registered or qualified for sale, cancelled, withdrawn, denied or
exempt, the date of such event(s) and the number of Units registered or
qualified for sale in each such state. After settlement and closing, the
Representative may confirm the qualification of the Company's securities in
writing to the Company and the Company's counsel. Failure by the Company or
Company's counsel to refute such confirmation shall constitute an affirmative
statement by the same advising the Representative that such qualification in
fact has taken place.
5.5 Financial Statements. The Company at its own expense will prepare and
give and will continue to give such financial statements and other information
to and as may be required by the Commission, or the proper public bodies of the
states in which the Units and underlying securities may be registered or
qualified.
5.6 Reports and Financial Statements to the Representative. During the
period of three years from the Closing Date, the Company will deliver to the
Representative, copies of each annual report of the Company, and will deliver to
the Representative: (i) within 90 days after the close of each fiscal year of
the Company, a financial report of the Company and its subsidiaries, if any, on
a consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the end
of the preceding fiscal year, a statement of operations, a statement of cash
flows and an analysis of shareholders' equity covering such fiscal year, and all
to be in reasonable detail and certified by independent public accountants for
the Company; (ii) copies of all other statements, documents, or other
information which the Company shall mail or otherwise make available to any
class of its security holders, or shall file with the Commission; and (iii) upon
request in writing from the Representative, furnish to the Representative such
other information as may reasonably be requested and which may be properly
disclosed to the Representative with reference to the property, business and
affairs of the Company and its subsidiaries, if any; provided such written
request includes an agreement to keep confidential any information which should
not be disclosed to the public.
The requirements of subparagraph (i) in the above paragraph will be
satisfied if the Company provides to the Representative copies of its Form 10-K,
Form 10-Q and Form 8-K in the form and at the time it is filed with the
Securities and Exchange Commission.
If the Company shall fail to furnish the Representative with financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days, shall
have the right to have such financial statements prepared by independent public
accountants of its own choosing and the Company agrees to furnish such
independent public accountants such data and assistance and access to such
records as they may reasonably require to enable them to prepare such statements
and to pay their reasonable fees and expenses in preparing the same.
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5.7 Expenses Paid by the Company. The Company shall bear, whether or not
the transactions contemplated hereunder are consummated or the Registration
Statement is prevented from becoming effective or this Agreement is terminated,
all costs and expenses incident to the filing of the Registration Statement with
the NASD, the cost and legal counsel fees of qualification under state
securities laws (with such legal fees not to exceed $10,000 in total without
prior approval of the Company), the fees and disbursements of legal counsel and
accountants for the Company, the cost of preparing and printing the Registration
Statement, the cost of printing as many preliminary and final Prospectuses as
the Representative may deem necessary, the cost of providing the
Representative's Counsel with two bound volumes of the Registration Statement as
amended, including all exhibits, correspondence and other documentation relating
thereto, and all expenses incurred in connection with the holding of due
diligence meetings, including the cost of the meeting room, food and beverage,
and expenses incurred by Company representatives in attending a reasonable
number of such due diligence meetings (which shall include all expenses of
presentations as reasonably requested by the Representative) with the
Representatives' representatives, prospective dealers and their representatives
and others, the expenses of delivery of preliminary and final Prospectuses to
the Representatives and dealers (the final Prospectus shall be delivered no
later than the day following the Effective Date), and any other expenses
customarily paid by an issuer; provided, however, that any amounts paid to the
Representative as an expense allowance shall not exceed the amounts provided in
Section 3.4. Except as specified above, the Company shall not be required to pay
any fees or charges for attending, or any travel or lodging expenses incurred in
attending, due diligence meetings by representatives of the Representatives or
dealers.
5.8 Reports to Shareholders. The Company represents that its Common Stock
is registered under Section 12 of the Securities Exchange Act of 1934, as
amended ("1934 Act"), and that the Company has, to the best of its knowledge,
filed in a timely manner all reports and other documents required to be filed
pursuant to Sections 13, 14, or 15(d) during the period that the Company has
been required to file such reports and documents. The Company agrees that for so
long as the Company's Common Stock is registered under the 1934 Act, the Company
will hold an annual meeting of shareholders for the election of directors within
one hundred eighty (180) days after the end of each of the Company's fiscal
years. The Company shall provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto, such financial statements will be those required by the
1934 Act and will be included in an annual report meeting the requirements of
Rule 14c-3 under the 1934 Act, provide the Company's shareholders with quarterly
summary operating financial statements, and cause its Board of Directors to
establish and maintain an audit and compensation committee.
5.9 Section 11(a) Financials. The Company will make generally available to
its security holders and will deliver to the Representative, as soon as
practicable, an earnings statement (as to which no opinion need be rendered but
which will satisfy the provisions of Section 11(a) of the Act) covering a period
of at least 12 months beginning after the Effective Date. Compliance by the
Company with Rule 158 promulgated under the Act shall satisfy the requirements
of this Section 5.9.
5.10 Post-Effective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Units, the securities comprising the
Units and the exercise of the Warrants.
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5.11 Application of Proceeds. The Company will adopt procedures for the
stewardship of the net proceeds it receives from the sale of the Units and will
apply the net proceeds from the sale of the Units substantially in the manner
specifically set forth in the Registration Statement and Prospectus unless any
deviation from such application is in accordance with the Registration Statement
and occurs only after approval by the Board of Directors of the Company and then
only after the Board of Directors has obtained the written opinion of recognized
legal counsel well versed in the federal and state securities laws as to the
propriety of any such deviation.
5.12 Undertakings of Certain Shareholders. The Company will deliver to the
Representative, prior to the execution of this Agreement, the undertaking of
each officer and director that such persons shall not sell or otherwise dispose
of any portion of the shares of common stock owned directly, indirectly or
beneficially prior to the Effective Date for a period of one (1) year from the
Effective Date without the Representative's prior written consent.
5.13 Delivery of Documents. At the Closing, the Company will deliver to the
Representative true and correct copies of the articles of incorporation of the
Company and all amendments thereto, all such copies to be certified by the
Secretary of the Company; true and correct copies of the by-laws of the Company
and of the minutes of all meetings of the directors and shareholders of the
Company held prior to the Closing Date which in any way relate to the subject
matter of this Agreement.
5.14 Cooperation With Representative's Due Diligence. At all times prior to
the Closing Date, the Company will cooperate with the Representative in such
investigation as the Representative may make or cause to be made of all the
properties, management, business and operations of the Company in connection
with the purchase and public offering of the Units, and the Company will make
available to the Representative in connection therewith such information in its
possession as the Representative may reasonably request.
5.15 Appointment of Transfer Agent and Warrant Agent. The Company has
appointed *____________________, ____________________, as Transfer Agent for the
Units and component securities and Warrant Agent for the Warrants, subject to
the Closing. The Company will not change or terminate such appointment for a
period of three years from the Effective Date without first obtaining the
written consent of the Representative, which consent shall not be unreasonably
withheld.
5.16 Compliance With Conditions Precedent. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Members of the Underwriting Group in
Section 8 hereof.
5.17 Filing of Form SR. If required under the Act, the Company agrees to
file with the Commission all required reports on Form SR in accordance with the
provisions of Rule 463 promulgated under the Act and to provide a copy of such
reports to the Representative and its counsel.
5.18 Bound Volume. The Company shall supply to the Representative and the
Representative's counsel, at the Company's cost, two bound volumes each of all
of the public offering materials within a reasonable time after the closing, not
to exceed three months.
5.19 Listing in Xxxxx'x and Standard & Poor's. As soon as possible prior to
the Effective Date, the Company agrees to use its best efforts to have the
Company listed in Xxxxx'x Over-The-Counter Manual and Standard & Poor's Standard
Corporation Records, or if already listed, the Company agrees to use its best
efforts to maintain such listings.
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5.20 NASDAQ . The Company agrees to have the Units, Common Stock and
Warrants comprising the Units eligible for quotation on NASDAQ on the Effective
Date, on the Closing Date and on the Over-Allotment Closing Date and continuing
thereafter during the entire period that the Company is in compliance with
NASDAQ maintenance requirements. The NASDAQ symbols, other than for the Common
Stock, shall be mutually agreeable to the Company and the Representative.
5.21 Secondary Trading Qualification. The Company agrees to qualify the
Units, Common Stock and Warrants for secondary trading, as soon as legally
possible, for secondary trading in such states as are requested by the
Representative from time to time.
5.22 Right of Inspection. The Company agrees that for a period of three (3)
years after the Effective Date, the Representative, at the Representative's
expense, will have the right to have a person or persons selected by the
Representative review the books and records of the Company upon seven (7) days'
written notice and at reasonable times. Such person or persons will be required
to execute a confidentiality agreement which will, in part, prohibit disclosure
of information to any party except the Representative, which information shall
be held in confidence unless otherwise specifically agreed to by the Company in
writing.
5.23 Board Member. Immediately after the Closing, the Representative shall
have the right, subject to the approval of the majority of the Board of
Directors, to select one member of the Company's Board of Directors. The
director to be selected by the Representative shall serve until the next annual
meeting of the Company's shareholders. Thereafter, the Company will have such
member renominated for an additional two terms of office, and the Company's
officers and directors will agree to vote their shares to re-elect such member.
Additionally, the Company will solicit its shareholders to vote in favor of the
Representative's nominee.
5.24 Outside Directors, Committees, Executive Compensation. The Company
agrees to have at least two outside directors on the Effective Date of the
Registration Statement, and to cause such persons to be renominated as directors
for two additional one-year terms. The Company will form independent audit and
compensation committees which shall be comprised of three of the Company's
directors. Two of these directors will be independent directors who are not
officers of the Company.
5.25 Public Relations Advisors. The Company agrees to engage the service of
a public relations advisory firm, acceptable to the Underwriter, at least sixty
(60) days prior to the Effective Date and to retain the services of such firm
for at least one (1) year following the Effective Date.
SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 Indemnification By Company. The Company agrees to indemnify and hold
harmless the Representative and the other Members of the Underwriting Group (for
the purposes of this Section 6 collectively the "Underwriters") and each
officer, director, employee, representative, agent, surety, guarantor, and each
person who controls each of the Underwriters within the meaning of Section 15 of
the 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, any
other statute, at common law, NASD requirements or otherwise and to reimburse
the persons indemnified above for any legal or other expenses (including the
cost of any investigation and preparation) incurred by them in connection with
any litigation, arbitration or any other proceeding (hereinafter referred to as
"litigation" in this Section 6), whether or not resulting in any liability, but
only insofar as such losses, claims, damages, liabilities and litigation arise
out of or are based upon this Agreement or any matter relating to the offer or
sale of the Units, including, but not limited to, any violation of any
registration requirements, any improper use of sales literature or any
15
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereto or any application or other
document filed in order to qualify the Units under the securities laws of the
states where filings were made, or 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, all as of the date when the Registration
Statement or such amendment, as the case may be, becomes effective, or any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or supplemented if the Company shall have filed with the
Commission any amendments thereof or supplements thereto), or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading as of the date of the Prospectus or such amendment or
supplement; provided, however, that the indemnity agreement contained in this
Section 6.1 shall not apply to amounts paid in settlement of any such litigation
if such settlements are effected without the consent of the Company, nor shall
it apply to the Underwriters or any other person indemnified as provided above
in respect of any such losses, claims, damages, liabilities or actions arising
out of or based upon any such untrue statements or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was made in
reliance upon information peculiarly within the knowledge of the Underwriters
and furnished in writing to the Company by the Underwriters specifically for use
in connection with the preparation of the Registration Statement and Prospectus
or any such amendment or supplement thereto. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Underwriters or any other person indemnified as provided above. The Underwriters
or any other person indemnified as provided above agree within twenty days after
the receipt by them of written notice of the commencement of any action against
them in respect of which indemnity may be sought from the Company on account of
the indemnity agreement contained in this Section 6.1 to notify the Company in
writing of the commencement thereof. The failure of the Underwriters or any
other person indemnified as provided above so to notify the Company of any such
action shall relieve the Company from any liability which it may have to such
person on account of the indemnity agreement contained in this Section 6.1, but
shall not relieve the Company from any other liability which it may have to the
Underwriters or any person identified above. In case any such action shall be
brought against the Underwriters or any other person indemnified as provided
above and the Underwriters shall notify the Company of the commencement thereof,
the Company shall be entitled to participate in (and, to the extent that it
shall wish, to direct) the defense thereof at its own expense, but such defense
shall be conducted by counsel of recognized standing and reasonably satisfactory
to the Underwriters or any other person indemnified as provided above, defendant
or defendants in such litigation. The Company agrees to notify the Underwriters
promptly of commencement of any litigation against it or any of its officers or
directors, of which it may be advised, in connection with the issue and sale of
any of the Units or any securities included therein and to furnish to the
Underwriters, at their request, copies of all pleadings therein and permit the
Underwriters to be observers therein and apprise the Underwriters of all
developments therein, all at the Company's expense.
6.2 Indemnification By Underwriters. The Underwriters agree to indemnify
and hold harmless the Company, and each director, officer, employee and agent of
the Company and each person who controls the Company within the meaning of
Section 15 of the 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 or any other statute or at common law and to reimburse persons
indemnified as above for any legal or other expenses (including the cost of any
investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities and litigation arise out of or are based
upon any statement in or omission from the Registration Statement or any
amendment thereto, or the Prospectus (as amended or as supplemented, if amended
or supplemented as aforesaid) or any application or other document filed in any
state or jurisdiction in order to qualify the Units under the securities laws
thereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
16
Underwriters on their behalf specifically for use in connection with the
preparation thereof or supplement thereto. This indemnity agreement is in
addition to any other liability which the Underwriters may otherwise have to the
Company and any other person indemnified as provided above. The Underwriters
shall not be liable for amounts paid in settlement of any such litigation if
such settlement was effected without the consent of the Underwriters. In case of
commencement of any action in respect of which indemnity may be sought from the
Underwriters on account of the indemnity agreement contained in this Section
6.2, each person agreed to be indemnified by the Underwriters shall have the
same obligation to notify the Underwriters as the Underwriters have toward the
Company in Section 6.1 above, subject to the same loss of indemnity in the event
such notice is not given, and the Underwriters shall have the same right to
participate in (and, to the extent that they shall wish, to direct) the defense
of such action at their own expense, but such defense shall be conducted by
counsel of recognized standing and satisfactory to the Company or any other
person indemnified as provided above. The Underwriters agree to notify the
Company promptly of the commencement of any litigation against the Underwriters
(and any other person indemnified as provided above), of which it may be
advised, in connection with the issue and sale of any of the securities of the
Company, and to furnish to the Company at its request copies of all pleadings
therein and apprise it of all the developments therein, all at the Underwriters'
expense, and permit the Company to be an observer therein.
6.3 Contribution. If the indemnification provided for in Sections 6.1 and
6.2 of this Agreement are, for any reason other than as specified in such
Sections, held by a court to be unavailable and the Company or any Member of the
Underwriting Group has been required to pay damages as a result of a
determination by a court, arbitration tribunal or any other person having
jurisdiction over any Member of the Underwriting Group that the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, then the Company shall contribute to the
damage paid by the Member of the Underwriting Group and the Member of the
Underwriting Group shall contribute to the damages paid by the Company, but in
each case only to the extent that such damages arise out of or are based upon
such untrue statement or omission, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Member of the Underwriting Group on the other 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 the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Member of the Underwriting Group in connection with the
statements or omissions which resulted in such damages, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Member of the Underwriting Group shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
unitemized expenses received by the Member of the Underwriting Group. The
relative fault shall be determined by reference to, among other things, whether
the untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or the Member of the Underwriting
Group and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such untrue statement or omission. For
purposes of this Section 6.3, the term "damages" shall include any counsel fees
or other expenses reasonably incurred by the Company or the Member of the
Underwriting Group in connection with investigating or defending any action or
claim which is the subject of the contribution provisions of this Section 6.3.
Notwithstanding the provisions of this Section 6.3, no Member of the
Underwriting Group shall be required to contribute any amount in excess of the
amount by which the total price at which the Units underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Member of the Underwriting Group has otherwise been required
to pay by reason of any such untrue statements or omissions. No person adjudged
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
17
such fraudulent misrepresentation. Under this Section 6.3, each Member of the
Underwriting Group's obligations to contribute are several in proportion to
their respective underwriting obligations and not joint.
The agreements contained in this Section 6 and the representations and
warranties of the Company set forth in this Underwriting Agreement shall remain
operative and in full force and effect, regardless of (a) any investigation made
by or on behalf of any Member of the Underwriting Group or any person
controlling any Member of the Underwriting Group or by or on behalf of the
Company, or any person controlling the Company, (b) acceptance of any Units and
payment therefor hereunder, and (c) any termination of any other provision of
this Underwriting Agreement. A successor of any Member of the Underwriting Group
or of the Company, or any director or officer thereof or any person controlling
any Member of the Underwriting Group or the Company, as the case may be, shall
be entitled to the benefits of the agreements contained in this Section 6.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (i) at 10:00 a.m., Denver time, on
the first full business day after the Effective Date, or (ii) upon release by
the Representative of the Units for sale after the Effective Date, whichever
shall first occur. The Representative agrees to notify the Company immediately
after the Representative shall have taken any action, by release or otherwise,
whereby this Agreement shall have become effective. This Agreement shall,
nevertheless, become effective at such time earlier than the time specified
above, after the Effective Date, as the Representative may determine by notice
to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the Underwriting Group hereunder to purchase the Units
and to make payment to the Company hereunder on the Closing Date and on the
Over-Allotment Closing Date, if any, shall be subject to the accuracy, as of the
Closing Date and the Over-Allotment Closing Date, of each of the representations
and warranties on the part of the Company herein contained, to the performance
by the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to the
following additional conditions:
8.1 Effectiveness of Registration Statement. The Registration Statement
shall have become effective and no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement or the Prospectus nor any amendment thereto shall have
been filed to which counsel to the Representative shall have reasonably objected
in writing or have not given their consent.
8.2 Accuracy of Registration Statement. The Representative shall not have
disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Representative, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein, or is necessary to make the
statements therein not misleading.
8.3 Casualty and Other Calamity. The Company shall not have sustained any
loss on account of fire, explosion, flood, accident, calamity or any other
cause, of such character as materially adversely affects its business of
18
property considered as an entire entity, whether or not such loss is covered by
insurance, and no officer or director of the Company shall have suffered any
injury, sickness or disability of a nature which would materially adversely
affect his or her ability to properly function as an officer or director of the
Company.
8.4 Litigation and Other Proceedings. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted or
threatened against the Company and there shall be no proceeding instituted or
threatened against the Company before or by any federal or state commission,
regulatory body or administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, management, licenses, operations or financial
condition or income of the Company considered as an entity.
8.5 Lack of Material Change. Except as contemplated herein or as set forth
in the Registration Statement and Prospectus, during the period subsequent to
the date of the last audited balance sheet included in the Registration
Statement, the Company (a) shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the date of the last audited
balance sheet included in the Registration Statement, and (b) except in the
ordinary course of its business, the Company shall not have incurred any
liabilities, claims or obligations (direct or contingent) or disposed of any of
its assets, or entered into any material transaction or suffered or experienced
any substantially adverse change in its condition, financial or otherwise. The
capital stock and surplus accounts of the Company shall be substantially the
same as at the date of the last audited balance sheet included in the
Registration Statement, without considering the proceeds from the sale of the
Units, other than as may be set forth in the Prospectus, and except as the
surplus reflects the result of continued losses from operations consistent with
the trend established by prior periods.
8.6 Review By and Opinion of Representative's Counsel. The authorization of
the Units, the Common Stock, the Warrants, the Warrant Shares, the Underwriter's
Unit Purchase Warrants and the Common Stock and Warrants issuable upon the
exercise of the Underwriter's Unit Purchase Warrants, the Registration
Statement, the Prospectus and all corporate proceedings and other legal matters
incident thereto and to this Agreement shall be reasonably satisfactory in all
respects to counsel to the Representative.
8.7 Opinion of Counsel. The Company shall have furnished to the
Representative an opinion, dated the Effective Date, the Closing Date and, if
applicable, the Over-Allotment Closing Date, addressed to the Representative,
from Bearman Xxxxxxxxx & Xxxxxxx, P.C., 0000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxx, 00000-0000, counsel to the Company, to the effect that based upon a
review by them of the Registration Statement, Prospectus, the Company's
certificate of incorporation, by-laws, and relevant corporate proceedings and
contracts, and examination of such laws they deem necessary and such other
investigation by such counsel as they deem necessary to express such opinion:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Wyoming, and has the corporate power
and authority to own its properties and to carry on its
business as described in the Registration Statement and
Prospectus.
(ii) The Company is duly qualified and in good standing
as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned
or held under lease or the nature of the business conducted
requires such qualification and in which the failure to
qualify would have a materially adverse effect on the
business of the Company.
19
(iii) The authorized and outstanding capital stock of
the Company is as set forth in the Registration Statement
and Prospectus; the outstanding common stock of the Company,
the Units, the Common Stock, the Warrants, and the
Underwriter's Unit Purchase Warrants conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding common stock of the Company
contains no preemptive rights; the Units and Underwriter's
Unit Purchase Warrants have been, and the Warrant Shares
issuable upon exercise of the Warrants, and the securities
issuable upon exercise of the Underwriter's Unit Purchase
Warrants will be, duly and validly authorized and, upon
issuance thereof and payment therefor in accordance with
this Agreement, validly issued, fully paid and
nonassessable, and will not be subject to the preemptive
rights of any shareholder of the Company.
(iv) The Warrants, the Underwriter's Unit Purchase
Warrants and the Warrants comprising part of the
Underwriter's Unit Purchase Warrants have been duly and
validly authorized and are valid and binding obligations of
the Company enforceable in accordance with their respective
terms.
(v) A sufficient number of shares of common stock has
been duly reserved for issuance upon the exercise of the
Warrants, the Underwriter's Unit Purchase Warrants and the
Warrants issuable upon exercise of the Underwriter's Unit
Purchase Warrants.
(vi) To such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or
other regulatory authorities are required for the valid
authorization, issuance or sale of the Units, the Common
Stock, the Warrants and the Underwriter's Unit Purchase
Warrants contemplated by this Agreement, except as such have
been obtained and are in full force and effect under the Act
and such as may be required under applicable state
securities laws in connection with the purchase and
distribution of such securities by the Representative and
the Underwriting Group and the approval of the underwriting
terms and compensation by the NASD.
(vii) The issuance and sale of the Units, the
Underwriter's Unit Purchase Warrants, and the consummation
of the transactions herein contemplated and compliance with
the terms of this Agreement will not conflict with or result
in a breach of any of the terms, conditions, or provisions
of or constitute a default under the certificate of
incorporation, or by-laws of the Company, or, to their
knowledge, any note, indenture, mortgage, deed of trust, or
other agreement or instrument known to such counsel without
any specific investigation to which the Company is a party
or by which the Company or any of its property is bound or
any existing law (provided this paragraph shall not relate
to federal or state securities laws), order, rule,
regulation, writ, injunction, or decree known to such
counsel of any government, governmental instrumentality,
agency, body, arbitration tribunal, or court, domestic or
foreign, having jurisdiction over the Company or its
property.
(viii) On the basis of a reasonable inquiry by such
counsel, including his participation in conferences with
representatives of the Company and its accountants at which
the contents of the Registration Statement and the
Prospectus and related matters were discussed, and without
expressing any opinion as to the financial statements or
other financial data contained therein: (A) nothing has come
to such counsel's attention which leads them to believe that
the Registration Statement and the Prospectus, as amended or
supplemented by any amendments or supplements thereto made
by the Company prior to the Closing Date, do not comply as
to form in all material respects with the requirements of
the Act; (B) nothing has come to their attention which leads
them to believe that the Registration Statement or the
Prospectus, as amended or supplemented by any such
amendments or supplements thereto, contains any untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
20
statements therein not misleading; (C) they do not know of
any contract or other document required to be described in
or filed as an exhibit to the Registration Statement which
is not so described or filed; and (D) the Registration
Statement has become effective under the Act, and, to the
best of their knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated by the Commission.
(ix) This Agreement has been duly authorized and
executed by the Company and is a valid and binding agreement
of the Company.
(x) The Company is not in default of any of the
contracts, licenses, leases or agreements to which it is a
party, and the offering of the Units, the Common Stock, the
Warrants and the Underwriter's Unit Purchase Warrants will
not cause the Company to become in default of any of its
contracts, licenses, leases or agreements.
(xi) The Company is not currently offering any
securities for sale except as described in the Registration
Statement.
(xii) Counsel has no knowledge of any promoter,
affiliate, parent or subsidiaries of the Company except as
are described in the Registration Statement and Prospectus.
(xiii) To the knowledge of counsel, and without making
any statement as to title, the Company owns all properties
described in the Registration Statement as being owned by
it; the properties are free and clear of all liens, charges,
encumbrances or restrictions except as described in the
Registration Statement; all of the leases, subleases and
other agreements under which the Company holds its
properties are in full force and effect; the Company is not
in default under any of the material terms or provisions of
any of the leases, subleases or other agreements; and there
are no claims against the Company concerning its rights
under the leases, subleases and other agreements and
concerning its right to continued possession of its
properties.
(xiv) To the knowledge of counsel, the Company
possesses the required licenses, certificates,
authorizations or permits issued by the appropriate federal,
state and local regulatory authorities necessary to conduct
its business as described in the Registration Statement and
to retain possession of its properties. Counsel is unaware
of any notice of any proceeding relating to the revocation
or modification of any of these licenses, certificates,
authorizations or permits having been received by the
Company.
(xv) To the knowledge of counsel, the Company has paid
all taxes which are shown as due and owing on the financial
statements included in the Registration Statement and
Prospectus.
(xvi) The Units, Common Stock and Warrants of the
Company are qualified for trading on the NASDAQ system upon
completion of the distribution of the Units by the
respective participant.
As to all factual matters including without limitation the issuance of
stock and warrant certificates and receipt of payment therefor, the states in
which the Company transacts business, the adoption of resolutions reflected by
the Company's minute book and the like, such counsel may rely on the certificate
of an appropriate officer of the Company. Counsel's opinion as to the validity
and enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any indemnification
or contribution provisions thereof, or as the validity or enforceability of any
such contract or agreement may be limited by bankruptcy or other laws relating
to or affecting creditors' rights generally and by equitable principles.
21
8.8.1 Accountant's Letter. The Representative shall
have received letters addressed to it dated the Effective
Date, the Closing Date and, if applicable, the
Over-Allotment Closing Date, respectively, and a draft of
such letter at least five days prior to the Effective Date,
the Closing Date and, if applicable, the Over-Allotment
Closing Date, from *____________________, independent public
accountants for the Company, stating that (i) with respect
to the Company they are independent public accountants
within the meaning of the Act and the applicable published
Rules and Regulations thereunder and the response to Item
509 of Regulation S-K as reflected by the Registration
Statement is correct insofar as it relates to them; (ii) in
their opinion, the financial statements examined by them of
the Company at all dates and for all periods referred to in
their opinion and included in the Registration Statement and
Prospectus, comply in all material respects with the
applicable accounting requirements of the Act and the
published Rules and Regulations thereunder with respect to
registration statements on Form SB-2; (iii) on the basis of
certain indicated procedures (but not an examination in
accordance with generally accepted accounting principles),
including a reading of the latest available interim
unaudited financial statements of the Company, whether or
not appearing in the Prospectus, inquiries of the officers
of the Company or other persons responsible for its
financial and accounting matters regarding the specific
items for which representations are requested below and a
reading of the minute books of the Company, nothing has come
to their attention which would cause them to believe that
during the period from the last audited balance sheet
included in the Registration Statement to a specified date
not more than five days prior to the date of such letter (a)
there has been any change in the capital stock or other
securities of the Company or any payment or declaration of
any dividend or other distribution in respect thereof or
exchange therefor other than as set forth in or contemplated
by the Registration Statement or Prospectus; (b) there have
been any material decreases in net current assets or net
assets as compared with amounts shown in the last audited
balance sheet included in the Prospectus so as to make said
financial statements misleading other than as set forth in
or contemplated by the Registration Statement or Prospectus;
and (c) on the basis of the indicated procedures and
discussions referred to in clause (iii) above, nothing has
come to their attention which, in their judgment, would
cause them to believe or indicate that (1) the unaudited
financial statements and schedules set forth in the
Registration Statement and Prospectus do not present fairly
the financial position and results of the Company, for the
periods indicated, in conformity with the generally accepted
accounting principles applied on a consistent basis with the
audited financial statements, and (2) the dollar amounts,
percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions
"Summary", "Risk Factors", and "Dilution", are not in
agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
8.8.2 Conformed Copies of Accountant's Letter. The
Representative shall be furnished without charge, in
addition to the original signed copies, such number of
signed or photostatic or conformed copies of such letters as
the Representative shall reasonably request.
8.9 Officer's Certificate. The Company shall have furnished to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of the
Closing Date, and, if applicable, one dated as of the Over-Allotment Closing
Date, to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct at and as of the date
of the certificate, and the Company has complied with all
22
the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the date of
the certificate.
(ii) The Registration Statement has become effective
and no order suspending the effectiveness of the
Registration Statement has been issued and to the best of
the knowledge of the respective signers, no proceeding for
that purpose has been initiated or is threatened by the
Commission.
(iii) The respective signers have each carefully
examined the Registration Statement and Prospectus and any
amendments and supplements thereto, and to the best of their
knowledge the Registration Statement and the Prospectus and
any amendments and supplements thereto contain all
statements required to be stated therein, and all statements
contained therein are true and correct, and neither the
Registration Statement nor Prospectus nor any amendment or
supplement thereto includes any untrue statement of a
material fact or omits to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading and, since the Effective Date of the
Registration Statement, there has occurred no event required
to be set forth in an amended or a supplemented Prospectus
which has not been so set forth.
(iv) Except as set forth in the Registration Statement
and Prospectus since the respective dates of the periods for
which information is given in the Registration Statement and
Prospectus and prior to the date of the certificate, (a)
there has not been any substantially adverse change,
financial or otherwise, in the affairs or condition of the
Company, and (b) the Company has not incurred any material
liabilities, direct or contingent, or entered into any
material transactions, otherwise than in the ordinary course
of business.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, no dividends or distribution whatever have been
declared and/or paid on or with respect to the common stock
of the Company.
8.10 Tender of Delivery of Securities. All of the Units being offered by
the Company and the Underwriter's Unit Purchase Warrants being purchased from
the Company shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.
8.11 Blue-Sky Registration or Qualification. The Units shall be registered
or qualified in such states as the Representative and the Company may agree
pursuant to Section 5.4, and each such registration or qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
or the Over-Allotment Closing Date. On the Effective Date of the Registration
Statement, on the Closing Date and, if applicable, the Over-Allotment Closing
Date, the Representative shall receive from counsel for the Company, written
information which contains the following:
(i) the names of the states in which applications to
register or qualify the Units, the Common Stock, the
Warrants and the Warrant Shares have been filed;
(ii) the status of such registrations or qualifications
in such states as of the date of such letter;
(iii) a list containing the name of each such state in
which the Units, the Common Stock, the Warrants and the
Warrant Shares may be legally offered and sold by a dealer
licensed in such state and the number of each which may be
legally offered and sold in each such state as of the date
of such letter.
23
(iv) with respect to the written information dated on
the Effective Date, a representation that such counsel will
continuously update such written opinion if any material
changes occur, of which counsel received actual notice, in
the information provided therein between the Effective Date
and the Closing Date and, if applicable, Over-Allotment
Closing Date;
(v) the names of the states in which the offer and sale
of the Units is exempt from registration or qualification;
and
(vi) a statement that the Members of the Underwriting
Group and selected dealers in the offering may rely upon the
information contained therein.
8.12 Approval of Representative's Counsel. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least three business days
before the Closing Date. The Representative's counsel will provide a written
memorandum stating such closing documents which it deems necessary for its
review.
8.13 Officers' Certificate as a Company Representative. Any certificate
signed by an officer of the Company and delivered to the Representative or
counsel for the Representative shall be deemed a representation and warranty by
the Company to the Representative as to the statements made therein.
SECTION 9
TERMINATION
9.1 Termination Because of Noncompliance. This Agreement may be terminated
in its entirety by the Representative by notice to the Company prior to its
effectiveness or in the event that the Company shall have failed or been unable
to comply with any of the terms, conditions or provisions of this Agreement on
the part of the Company to be performed, complied with or fulfilled (including
but not limited to those specified in Sections 2, 3, 4, 5, and 8 hereof) within
the respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by the
Representative in writing.
9.2 Other Grounds for Termination by Representative. This Agreement may be
terminated by the Representative by notice to the Company at any time if, in the
sole judgment of the Representative, payment for and delivery of the Units is
rendered impracticable or inadvisable because of:
(a) Material adverse changes in the Company's business,
business prospects, licenses, management, earnings,
properties or conditions, financial or otherwise;
(b) Any action, suit or proceedings, threatened or
pending, at law or equity against the Company, or by any
federal, state or other commissions, board or agency wherein
any unfavorable result or decision could materially
adversely affect the business, business prospects, licenses,
properties, financial condition or income or earnings of the
Company;
(c) Additional material governmental restrictions not
in force and effect on the date hereof shall have been
imposed upon the trading in securities generally, or new
offering or trading restrictions shall have been generally
established by a registered securities exchange, Commission,
NASD or other applicable regulatory authority, or trading in
securities generally on
24
any such exchange, NASDAQ or otherwise, shall have been
suspended, or a general moratorium shall have been
established by federal or state authorities;
(d) Substantial and material changes in the condition
of the market beyond normal fluctuations such that it would
be undesirable, impracticable or inadvisable in the judgment
of the Representative to proceed with this Agreement or with
the public offering of the Units;
(e) Any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war
by Congress or any other substantial national or
international calamity or emergency if, in the judgment of
the Representative, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the
sale of and payment for the Units; or
(f) Any suspension of trading in the securities of the
Company in the over-the-counter market or the interruption
or termination of quotations of any security of the Company
on the NASDAQ System.
9.3 Effect of Termination Hereunder. Any termination of this Agreement
pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party hereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Sections 3.4 and 5.7; and the Company and the Underwriting Group shall be
obligated to pay, respectively, all losses, claims, damages or liabilities,
joint or several, under Section 6.1 in the case of the Company and Section 6.2
in the case of the Underwriting Group.
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the Company
that:
10.1 Registration as Broker-Dealer and Member of NASD. The Representative
is registered as a broker-dealer with the Securities and Exchange Commission and
is registered as a securities broker-dealer in all states in which it will sell
Units and is a member in good standing of the National Association of Securities
Dealers, Inc.
10.2 No Pending Proceedings. There is not now pending or threatened against
the Representative any action or proceeding of which it has been advised, either
in any court of competent jurisdiction, before the Commission or any state
securities regulatory authority concerning activities as a broker or dealer
which are foreseen as affecting the Representative's capacity to complete the
terms of this Agreement.
10.3 Company's Right to Terminate. In the event any action or proceeding of
the type referred to in Section 10.2 above shall be instituted against the
Representative at any time prior to the Effective Date hereunder, or in the
event there shall be filed by or against the Representative in any court
pursuant to any federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of its assets or if it makes an assignment for the benefit
of creditors, the Company shall have the right on three days' written notice to
the Representative to terminate this Agreement without any liability to the
Representative of any kind except for the payment of all expenses as provided
herein.
25
10.4 Representative's Covenants. The Representative covenants and agrees
with the Company that (i) it will not offer or sell the Units in any state or
other jurisdiction where it has not been advised in writing that the Units are
qualified for the offer and sale therein or exempt from such requirements; (ii)
it will not make any representation to any person in connection with the offer
and sale of the Units covered hereby except as set forth in the Registration
Statement or as authorized in writing by the Company; and (iii) it will comply
in good faith with all laws, rules and regulations applicable to the
distribution of the securities, including the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 Notice to the Company. Whenever notice is required by the provisions
of this Underwriting Agreement to be given to the Company, such notice shall be
in writing addressed to the Company as follows:
Double Eagle Petroleum and Mining Co.
Attn: Xx. Xxxxxxx X. Xxxxxx, Chairman
and Xxxxxxx X. Xxxxxx, President
000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
with a copy to:
Bearman Xxxxxxxxx & Xxxxxxx, P.C.
Attn: Xxxx X. Xxxxxxxxx, Esq.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
11.2 Notice to the Representative. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Rocky Mountain Securities & Investments, Inc.
Attn: S. Xxxxx Xxxxxxx, President
000 Xxxxxx'x Xxx Xxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
with a copy to:
Xxxx Xxxxx Xxxx Xxxxxxxx & Xxxxx, P.C.
Attn: Xxxxxx X. Xxxxx, Esq.
000 00xx Xxxxxx, Xxxxx 0000-X
Xxxxxx, Xxxxxxxx 00000-0000
26
11.3 Effective Date of Notices. Such notices shall be effective the date
actually received, three days from the day of mailing, or on the date of
delivery set forth on the receipt if the notice is sent by registered mail or
any expedited delivery service.
SECTION 12
MISCELLANEOUS
12.1 Benefit. This Agreement is made solely for the benefit of the
Representative, the other Members of the Underwriting Group, the Company, their
respective officers, directors and controlling persons referred to in Section 15
of the Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successor" or the term
"successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Units.
12.2 Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company or its officers and
the Representative or the Members of the Underwriting Group as set forth in or
made pursuant to this Agreement and the indemnity agreements contained in
Section 6 hereof of the Company and the Underwriters (as defined in Section 6)
shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (ii) delivery of or payment for the Units, and (iii) the
Closing Date and Over-Allotment Closing Date, and any successor of the Company
and the Underwriters or any controlling person, officer or director thereof, as
the case may be, shall be entitled to the benefits hereof.
12.3 Governing Law. The validity, interpretation and construction of this
Agreement and of each part hereof will be governed by the laws of the State of
Colorado.
12.4 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto, and supersedes all agreements and
understandings including, but not limited to, the Letter of Intent dated April
4, 1996 which was understood and accepted by the Company on April 8, 1996.
12.5 Representative's Information. The statements with respect to the
public offering of the Units on the inside and outside of both the front and
back cover pages of the Prospectus and under the caption "Underwriting" in the
Prospectus constitute the written information furnished by or on behalf of the
Representative referred to in Section 2.2 hereof, in Section 6.1 hereof and
Section 6.2 hereof.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
27
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
DOUBLE EAGLE PETROLEUM AND MINING CO.
ATTEST:
By By
-------------------------------------- ---------------------------------
, Secretary Xxxxxxx X. Xxxxxx, President
By
--------------------------------------
Xx. Xxxxxxx X. Xxxxxx, Chairman
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
ROCKY MOUNTAIN SECURITIES &
INVESTMENTS, INC.
(for itself and as Representative of
the several Underwriters names in
Schedule I hereto)
By
--------------------------------------
S. Xxxxx Xxxxxxx, President
28
DOUBLE EAGLE PETROLEUM AND MINING CO.
(A Wyoming Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Units to be purchased by each
Underwriter.
Number
Name of Units
---- --------
----------
Total
==========
29
