Exhibit 1.1
Draft of October 27, 1997
3,850,000 SHARES
PETROLEUM DEVELOPMENT CORPORATION
Common Stock
Underwriting Agreement
dated OCTOBER [___], 1997
Underwriting Agreement
October [___], 1997
PENNSYLVANIA MERCHANT GROUP LTD
Four Falls Corporate Center
West Conshohocken, Pennsylvania 19428-2961
As Representative of the Several Underwriters
Ladies and Gentlemen:
INTRODUCTORY. Petroleum Development Corporation, a Nevada corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of 3,500,000 shares of its Common
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Stock, par value $0.01 per share (the "Common Stock"); and the stockholders of
the Company named in Schedule B (collectively, the "Selling Stockholders")
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severally propose to sell to the Underwriters an aggregate of 350,000 shares of
Common Stock. The 3,500,000 shares of Common Stock to be issued and sold by the
Company and the 350,000 shares of Common Stock to be sold by the Selling
Stockholders are collectively called the "Firm Common Shares". In addition, the
Company has granted to the Underwriters an option to purchase up to an
additional 577,500 shares (the "Optional Common Shares") of Common Stock, as
provided in Section 2. The Firm Common Shares and, if and to the extent such
option is exercised, the Optional Common Shares are collectively called the
"Common Shares". Pennsylvania Merchant Group Ltd has agreed to act as the
representative of the several Underwriters (in such capacity, the
"Representative") in connection with the offering and sale of the Common Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2 (File
No. 333-36369), which contains a form of prospectus to be used in connection
with the public offering and sale of the Common Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively, the "Securities Act"),
including any information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A or Rule 434 under the Securities Act, is
called the "Registration Statement". Any registration statement filed by the
Company pursuant to Rule 462(b) under the Securities Act is called the
"Rule 462(b) Registration Statement", and from and after the date and time of
filing of the Rule 462(b) Registration Statement the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. Such
prospectus, in the form first used by the Underwriters to confirm sales of the
Common Shares, is called the "Prospectus"; provided, however, if the Company
has, with the consent of Pennsylvania Merchant Group Ltd, elected to rely upon
Rule 434 under the Securities Act, the term
"Prospectus" shall mean the Company's prospectus subject to completion (each, a
"preliminary prospectus") dated September 30, 1997 (such preliminary prospectus
is called the "Rule 434 preliminary prospectus"), together with the applicable
term sheet (the "Term Sheet") prepared and filed by the Company with the
Commission under Rules 434 and 424(b) under the Securities Act and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the
Prospectus or the Term Sheet, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX").
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to XXXXX (except as may be permitted by Regulation S-
T under the Securities Act), was identical to the copy thereof delivered to
the Underwriters for use in connection with the offer and sale of the
Common Shares. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will
comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times, did not and will
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating
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to any Underwriter furnished to the Company in writing by the
Representative expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or
filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representative three (3) complete manually signed copies
of the Registration Statement and of each consent and certificate of
experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the
Prospectus, as amended or supplemented, in such quantities and at such
places as the Representative has reasonably requested.
(c) Distribution of Offering Materials By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Common Shares, any offering material in connection with
the offering and sale of the Common Shares other than a preliminary
prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or
any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a
"Material Adverse Change"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except
for dividends paid to the Company or other subsidiaries,
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any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of
capital stock.
(h) Independent Accountants. KPMG Peat Marwick LLP, which has expressed
its opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as
required by the Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(collectively, the "Exchange Act").
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial
position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Consolidated Financial
Data", "Selected Consolidated Financial Data," "Capitalization" and
"Quarterly Results of Operations" fairly present the information set forth
therein on a basis consistent with that of the audited financial statements
contained in the Registration Statement.
(j) Preparation of Other Data. The data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Operating Data", "--Summary
Reserve Data", "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview", "Business--Properties" and "--Natural
Gas Leases" present fairly and accurately the data specified therein as of
the dates or for the periods indicated. Such data has been prepared in
accordance with practices generally accepted in the Company's industry and,
to the extent applicable, on a basis consistent with that of the Summary
Reserve Report included as Appendix A to the Prospectus.
(k) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and, in the case of the Company, to enter into
and perform its obligations under this Agreement. Each of the Company and
each subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions (other
than the State of West Virginia) where the
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failure to so qualify or to be in good standing would not, individually or
in the aggregate, result in a Material Adverse Change. Except as set forth
in the Prospectus, all of the issued and outstanding capital stock of each
subsidiary has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim. The Company does not own or control, directly
or indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21 to the Registration Statement.
(l) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in
the Prospectus). The Common Stock (including the Common Shares) conforms in
all material respects to the description thereof contained in the
Prospectus. All of the issued and outstanding shares of Common Stock
(including the shares of Common Stock owned by Selling Stockholders) have
been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with federal and state securities laws.
None of the outstanding shares of Common Stock were issued in violation of
any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company or any of its subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(m) Stock Exchange Listing. The Common Stock (including the Common
Shares) is registered pursuant to Section 12(g) of the Exchange Act and is
listed on the Nasdaq National Market, and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act or delisting the Common Stock
from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. (the "NASD") is contemplating terminating such registration
or listing.
(n) Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required. Neither the Company nor any of its subsidiaries is
in violation of its charter or by-laws or is in default (or, with the
giving of notice or lapse of time, would be in default) ("Default") under
any indenture, mortgage, loan or credit agreement, note, contract,
franchise, lease or other instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, the Company's Amended and Restated Credit
Agreement with First National Bank of Chicago), or to which any of the
property or assets of the Company or any of its
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subsidiaries is subject (each, an "Existing Instrument"), except for such
Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change. The Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby
and by the Prospectus (i) have been duly authorized by all necessary
corporate action and will not result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary, (ii) will not
conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, or require
the consent of any other party to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change and
(iii) will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company or
any subsidiary. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory
authority or agency, is required for the Company's execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been
obtained or made by the Company and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the
NASD.
(o) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any
of its subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters,
where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or
such subsidiary and (B) any such action, suit or proceeding, if so
determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement. No material labor dispute with the
employees of the Company or any of its subsidiaries, or with the employees
of any principal supplier of the Company, exists or, to the best of the
Company's knowledge, is threatened or imminent.
(p) Intellectual Property Rights. The Company and its subsidiaries own
or possess sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
businesses as now conducted; and the expected expiration of any of such
Intellectual Property Rights would not result in a Material Adverse Change.
Neither the Company nor any of its subsidiaries has received any notice of
infringement or conflict with asserted Intellectual Property Rights of
others, which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Change.
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(q) All Necessary Permits, etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by
the appropriate local, state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, could result in
a Material Adverse Change.
(r) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as
owned in the financial statements referred to in Section 1(A) (i) above (or
elsewhere in the Prospectus), in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of
such property and do not materially interfere with the use made or proposed
to be made of such property by the Company or such subsidiary. The real
property, improvements, equipment and personal property held under lease by
the Company or any subsidiary are held under valid and enforceable leases,
with such exceptions as are not material and do not materially interfere
with the use made or proposed to be made of such real property,
improvements, equipment or personal property by the Company or such
subsidiary.
(s) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against
any of them. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1(A)(i) above
in respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined.
(t) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after
receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(u) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in
such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses including, but
not limited to, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction and acts of vandalism. The Company has no reason to believe
that it or any subsidiary will not be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Change. The Company and its
subsidiaries are in good standing under the applicable xxxxxxx'x
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compensation plan or program in each state in which the Company and its
subsidiaries have employees. Neither the Company nor any subsidiary has
been denied any insurance coverage which it has sought or for which it has
applied.
(v) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Common Shares.
(w) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(x) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(y) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
"Environmental Laws"),
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which violation includes, but is not limited to, noncompliance with any
permits or other governmental authorizations required for the operation of
the business of the Company or its subsidiaries under applicable
Environmental Laws, or noncompliance with the terms and conditions thereof,
nor has the Company or any of its subsidiaries received any written
communication, whether from a governmental authority, citizens group,
employee or otherwise, that alleges that the Company or any of its
subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental
authority, no investigation with respect to which the Company has received
written notice, and no written notice by any person or entity alleging
potential liability for investigatory costs, cleanup costs, governmental
responses costs, natural resources damages, property damages, personal
injuries, attorneys' fees or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated
by the Company or any of its subsidiaries, now or in the past
(collectively, "Environmental Claims"), pending or, to the best of the
Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(aa) Periodic Review of Costs and Liabilities of Environmental
Compliance. In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review and the amount of its established
reserves, the Company has reasonably concluded that such associated costs
and liabilities would not, individually or in the aggregate, result in a
Material Adverse Change.
(bb) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b),(c),(m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which
the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its
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subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of
their ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(cc) Reserve Information. The historical information underlying the
estimates of the reserves of the Company supplied by the Company to Xxxxxx
& Company, Inc., independent petroleum engineers (the "Petroleum
Engineers"), for the purposes of preparing the reserve reports of the
Company referenced and included in the Prospectus (the "Reserve Reports"),
including, without limitation, production volumes, sales prices for
production, contractual pricing provisions under oil or gas sales or
marketing contracts or under hedging arrangements, costs of operations and
development, and working interest and net revenue information relating to
the Company's ownership interests in properties, was true and correct in
all material respects on the date of such Reserve Reports; the estimates of
future capital expenditures and other future exploration and development
costs supplied to the Petroleum Engineers were prepared in good faith and
with a reasonable basis; the information provided by the Petroleum
Engineers for purposes of preparing the Reserve Reports was prepared in
accordance with customary industry practices; to the best of the Company's
knowledge, the Petroleum Engineers were, as of the date of the Reserve
Reports prepared by them, and are, as of the date hereof, independent
petroleum engineers with respect to the Company; other than normal
production of reserves and intervening spot market product price
fluctuations, and except as disclosed in the Registration Statement and the
Prospectus, the Company is not aware of any facts or circumstances that
would result in a materially adverse change in the reserves in the
aggregate, or the aggregate present value of future net cash flows
therefrom, as described in the Prospectus and as reflected in the Reserve
Reports; estimates of such reserves and the present value of the future net
cash flows therefrom as described in the Prospectus and reflected in the
Reserve Reports comply in all material respects to the applicable
requirements of the Rules and Regulations.
(dd) Royalties; No Claims. Except as described or reflected in the
financial statements set forth in the Prospectus, as of the last balance
sheet reflected in the Prospectus; (1) all royalties, rentals, deposits and
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other amounts due on the oil and gas properties of the Company and its
subsidiaries have been properly and timely paid, and no proceeds from the
sale or production attributable to the oil and gas properties of the
Company and its subsidiaries are currently being held in suspense by any
purchaser thereof, except where such amounts due would not, singly or in
the aggregate, have a Material Adverse Change, and (2) there are no claims
under take-or-pay contracts pursuant to which material gas purchasers have
any make-up rights affecting the interest of the Company or any of its
subsidiaries in their oil and gas properties, except where such claims
would not, singly or in the aggregate, have a Material Adverse Change.
(ee) No Brokers or Finders. Other than as contemplated by this
Agreement, there is no broker, finder or other party that is entitled to
receive from the Company or the Selling Stockholders any brokerage or
finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
Any certificate signed by an officer of the Company and delivered to
the Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents, warrants and covenants to each Underwriter as
follows:
(a) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by or on behalf of such Selling Stockholder and is a
valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as rights to indemnification hereunder
may be limited by applicable law and except as the enforcement hereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(b) The Custody Agreement and Power of Attorney. Each of the (i) Custody
Agreement signed by such Selling Stockholder and the Company, as custodian
(the "Custodian"), relating to the deposit of the Common Shares to be sold
by such Selling Stockholder (the "Custody Agreement") and (ii) Power of
Attorney appointing certain individuals named therein as such Selling
Stockholder's attorneys-in-fact (each, an "Attorney-in-Fact") to the extent
set forth therein relating to the transactions contemplated hereby and by
the Prospectus (the "Power of Attorney"), of such Selling Stockholder has
been duly authorized, executed and delivered by such Selling Stockholder
and is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(c) Title to Common Shares to be Sold; All Authorizations Obtained. Such
Selling Stockholder has, and on the First Closing Date and the Second
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Closing Date (as defined below) will have, good and valid title to all of
the Common Shares which may be sold by such Selling Stockholder pursuant to
this Agreement on such date and the legal right and power, and all
authorizations and approvals required by law to enter into this Agreement
and its Custody Agreement and Power of Attorney, to sell, transfer and
deliver all of the Common Shares which may be sold by such Selling
Stockholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(d) Delivery of the Common Shares to be Sold. Delivery of the Common
Shares which are sold by such Selling Stockholder pursuant to this
Agreement will pass good and valid title to such Common Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
other claim.
(e) Non-Contravention; No Further Authorizations or Approvals Required.
The execution and delivery by such Selling Stockholder of, and the
performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a Default
under, or require the consent of any other party to any agreement or
instrument to which such Selling Stockholder is a party or by which he is
bound or under which he is entitled to any right or benefit, any provision
of applicable law or any judgment, order, decree or regulation applicable
to such Selling Stockholder of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such
Selling Stockholder. No consent, approval, authorization or other order of,
or registration or filing with, any court or other governmental authority
or agency, is required for the consummation by such Selling Stockholder of
the transactions contemplated in this Agreement, except such as have been
obtained or made and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws and from the NASD.
(f) No Registration or Other Similar Rights. Such Selling Stockholder
does not have any registration or other similar rights to have any equity
or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement.
(g) No Further Consents, etc. No consent, approval or waiver is required
under any instrument or agreement to which such Selling Stockholder is a
party or by which he is bound or under which he is entitled to any right or
benefit, in connection with the offering, sale or purchase by the
Underwriters of any of the Common Shares which may be sold by such Selling
Stockholder under this Agreement or the consummation by such Selling
Stockholder of any of the other transactions contemplated hereby.
(h) Disclosure Made by Such Selling Stockholder in the Prospectus. All
information furnished by or on behalf of such Selling Stockholder in
writing expressly for use in the Registration Statement and Prospectus is,
and on the First Closing Date and the Second Closing Date will be, true,
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correct, and complete in all material respects, and does not, and on the
First Closing Date and the Second Closing Date will not, contain any untrue
statement of a material fact or omit to state any material fact necessary
to make such information not misleading. Such Selling Stockholder confirms
as accurate the number of shares of Common Stock set forth opposite such
Selling Stockholder's name and related footnote disclosure in the
Prospectus under the caption "Principal and Selling Stockholders" (both
prior to and after giving effect to the sale of the Common Shares).
(i) No Price Stabilization or Manipulation. Such Selling Stockholder has
not taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Common Shares.
(j) Confirmation of Company Representations and Warranties. Such Selling
Stockholder has no reason to believe that the representations and
warranties of the Company contained in Section 1(A) hereof are not true and
correct, is familiar with the Registration Statement and the Prospectus and
has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement or the Prospectus which has had or
may have a Material Adverse Effect and is not prompted to sell shares of
Common Stock by any information concerning the Company which is not set
forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Stockholder and
delivered to the Representative or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to each
Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
(a) The Firm Common Shares. Upon the terms herein set forth, (i) the
Company agrees to issue and sell to the several Underwriters an aggregate
of 3,500,000 Firm Common Shares and (ii) each of the Selling Stockholders
agrees to sell to the several Underwriters an aggregate of 350,000 Firm
Common Shares, each Selling Stockholder selling the number of Firm Common
Shares set forth opposite such Selling Stockholder's name on Schedule B.
----------
On the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set
forth, the Underwriters agree, severally and not jointly, to purchase from
the Company and the Selling Stockholders the respective number of Firm
Common Shares set forth opposite their names on Schedule A. The purchase
----------
price per Firm Common Share to be paid by the several Underwriters to the
Company and the Selling Stockholders shall be $[___] per share.
(b) The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be
made at the offices of Pennsylvania Merchant Group Ltd, Four Falls
Corporate Center, West Conshohocken, Pennsylvania (or such other place as
may be agreed to by the Company and the Representative) at 9:00 a.m. New
York time, on [___], or such other time and date not later than 1:30 p.m.
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New York time, on [___] as the Representative shall designate by notice to
the Company (the time and date of such closing are called the "First
Closing Date"). The Company and the Selling Stockholders hereby acknowledge
that circumstances under which the Representative may provide notice to
postpone the First Closing Date as originally scheduled include, but are in
no way limited to, any determination by the Company, the Selling
Stockholders or the Representative to recirculate to the public copies of
an amended or supplemented Prospectus or a delay as contemplated by the
provisions of Section 10.
(c) The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 577,500 Optional
Common Shares from the Company at the purchase price per share to be paid
by the Underwriters for the Firm Common Shares. The option granted
hereunder is for use by the Underwriters solely in covering any over-
allotments in connection with the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time (but not
more than once) upon notice by the Representative to the Company, which
notice may be given at any time within 30 days from the date of this
Agreement. Such notice shall set forth (i) the aggregate number of Optional
Common Shares as to which the Underwriters are exercising the option,
(ii) the names and denominations in which the certificates for the Optional
Common Shares are to be registered and (iii) the time, date and place at
which such certificates will be delivered (which time and date may be
simultaneous with, but not earlier than, the First Closing Date; and in
such case the term "First Closing Date" shall refer to the time and date of
delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representative and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional
Common Shares are to be purchased, (a) each Underwriter agrees, severally
and not jointly, to purchase the number of Optional Common Shares (subject
to such adjustments to eliminate fractional shares as the Representative
may determine) that bears the same proportion to the total number of
Optional Common Shares to be purchased as the number of Firm Common Shares
set forth on Schedule A opposite the name of such Underwriter bears to the
----------
total number of Firm Common Shares and (b) the Company agrees to sell such
number of Optional Common Shares as provided in the aforementioned notice
from the Underwriters. The Representative may cancel the option at any
time prior to its expiration by giving written notice of such cancellation
to the Company.
(d) Public Offering of the Common Shares. The Representative hereby
advises the Company and the Selling Stockholders that the Underwriters
intend to offer for sale to the public, as described in the Prospectus,
their respective portions of the Common Shares as soon after this Agreement
has been executed and the Registration Statement has been declared
effective as the Representative, in its sole judgment, has determined is
advisable and practicable.
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(e) Payment for the Common Shares. Payment for the Common Shares to be
sold by the Company shall be made at the First Closing Date (and, if
applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Company. Payment for the Common Shares
to be sold by the Selling Stockholders shall be made at the First Closing
Date by wire transfer of immediately available funds to each of the
respective Selling Stockholders, as appropriate.
It is understood that the Representative has been authorized, for
its own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for,
the Firm Common Shares and any Optional Common Shares the Underwriters have
agreed to purchase. Pennsylvania Merchant Group Ltd, individually and not
as the Representative of the Underwriters, may (but shall not be obligated
to) make payment for any Common Shares to be purchased by any Underwriter
whose funds shall not have been received by the Representative by the First
Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Each Selling Stockholder hereby agrees that he or she will pay
all stock transfer taxes, stamp duties and other similar taxes, if any,
payable upon the sale or delivery of the Common Shares to be sold by such
Selling Stockholder to the several Underwriters, or otherwise in connection
with the performance of such Selling Stockholder's obligations hereunder.
(f) Delivery of the Common Shares. The Company and the Selling
Stockholders shall deliver, or cause to be delivered, to the Representative
for the accounts of the several Underwriters certificates for the Firm
Common Shares to be sold by them at the First Closing Date, against the
irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The Company shall also deliver,
or cause to be delivered, to the Representative for the accounts of the
several Underwriters, certificates for the Optional Common Shares the
Underwriters have agreed to purchase from the Company at the First Closing
Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The certificates for the Common
Shares shall be in definitive form and registered in such names and
denominations as the Representative shall have requested at least two full
business days prior to the First Closing Date (or the Second Closing Date,
as the case may be) and shall be made available for inspection on the
business day preceding the First Closing Date (or the Second Closing Date,
as the case may be) at a location in Philadelphia, Pennsylvania as the
Representative may designate. Time shall be of the essence, and delivery at
the time and place specified in this Agreement is a further condition to
the obligations of the Underwriters.
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(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
p.m. on the second business day following the date the Common Shares are
released by the Underwriters for sale to the public, the Company shall
deliver or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representative shall request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
A. COVENANTS OF THE COMPANY. The Company further covenants and agrees
with each Underwriter as follows:
(a) Representative's Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the later of
the First Closing Date or such date, as in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered
in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), prior to amending or supplementing the Registration
Statement (including any registration statement filed under Rule 462(b)
under the Securities Act) or the Prospectus, the Company shall furnish to
the Representative for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Representative reasonably objects.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representative in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing
of any post-effective amendment to the Registration Statement or any
amendment or supplement to any preliminary prospectus or the Prospectus,
(iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any proceedings to remove, suspend or terminate from
listing or quotation the Common Stock from any securities exchange upon
which the it is listed for trading or included or designated for quotation,
or of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order
at the earliest possible moment. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. If, during the Prospectus Delivery Period, any event shall
occur or condition exist as a result of which it is necessary to amend or
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supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if in the opinion of the Representative or counsel for
the Underwriters it is otherwise necessary to amend or supplement the
Prospectus to comply with law, the Company agrees to promptly prepare
(subject to Section 3(A)(a) hereof), file with the Commission and furnish
at its own expense to the Underwriters and to dealers, amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representative, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representative may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representative and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of)
the state securities or blue sky laws or Canadian provincial Securities
laws of those jurisdictions designated by the Representative, shall comply
with such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the distribution of the Common
Shares. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service
of process in any such jurisdiction where it is not presently qualified or
where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the
Common Shares for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain
the withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Common Shares sold by it in the manner described under the
caption "Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall maintain, at its expense, a
registrar and transfer agent for the Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representative an
earnings statement (which need not be audited) covering the twelve-month
period ending at the end of the Company's first fiscal quarter that ends
more than one year after the effectiveness of the Registration Statement
and satisfying the provisions of Section 11(a) of the Securities Act.
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(i) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission all
reports and documents required to be filed under the Exchange Act.
(j) Agreement Not To Offer or Sell Additional Securities. During the
period of 180 days following the date of the Prospectus, the Company will
not, without the prior written consent of Pennsylvania Merchant Group Ltd
(which consent may be withheld at the sole discretion of Pennsylvania
Merchant Group Ltd), directly or indirectly, sell, offer, contract or grant
any option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any shares
of Common Stock, options or warrants to acquire shares of the Common Stock
or securities exchangeable or exercisable for or convertible into shares of
Common Stock (other than as contemplated by this Agreement with respect to
the Common Shares); provided, however, that the Company may issue shares of
its Common Stock or options to purchase its Common Stock, or Common Stock
upon exercise of options, pursuant to any stock option, stock bonus or
other stock plan or arrangement described in the Prospectus, but only if
the holders of such shares, options, or shares issued upon exercise of such
options, agree in writing not to sell, offer, dispose of or otherwise
transfer any such shares or options during such 180 day period without the
prior written consent of Pennsylvania Merchant Group Ltd (which consent may
be withheld at the sole discretion of the Pennsylvania Merchant Group Ltd).
(k) Future Reports to the Representative. During the period of five
years hereafter the Company will furnish to the Representative at Four
Falls Corporate Center, West Conshohocken, Pennsylvania 19428, Attention:
Xxxxxxx X. Xxxxxx: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance
sheet of the Company as of the close of such fiscal year and statements of
income, stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Current Report on Form 8-K or other report filed by the Company
with the Commission, the NASD or any securities exchange; and (iii) as soon
as available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
B. COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling Stockholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such Selling
Stockholder will not, without the prior written consent of Pennsylvania
Merchant Group Ltd (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish
an open "put equivalent position" within the meaning of Rule 16a-1(h) under
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the Exchange Act, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined
in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of
the foregoing, for a period commencing on the date hereof and continuing
through the close of trading on the date 180 days after the date of the
Prospectus.
(b) Delivery of Forms W-8 and W-9. To deliver to the Representative
prior to the First Closing Date a properly completed and executed United
States Treasury Department Form W-8 (if the Selling Stockholder is a non-
United States person) or Form W-9 (if the Selling Stockholder is a United
States Person).
The Representative, on behalf of the several Underwriters, may, in its
sole discretion, waive in writing the performance by the Company or any Selling
Stockholder of any one or more of the foregoing covenants or extend the time for
their performance, except that the Representative shall not extend the offer or
sales prohibition set forth in the Agreement Not to Offer or Sell Additional
Securities beyond the 180-day period established in Section 3(B)(a).
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its, and the
Selling Stockholders' Obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all expenses
incident to the issuance and delivery of the Common Shares (including all
printing and engraving costs), (ii) all fees and expenses of the registrar and
transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments and
supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Common Shares for offer and sale under
the state securities or blue sky laws or the provincial securities laws of
Canada, and, if requested by the Representative, preparing and printing a "Blue
Sky Survey" or memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations and exemptions, (vii) the
filing fees incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the NASD's review and approval of the
Underwriters' participation in the offering and distribution of the Common
Shares, (viii) the fees and expenses associated with including the Common Shares
on the Nasdaq National Market, and (ix) all other fees, costs and expenses
referred to in Item 14 of Part II of the Registration Statement. Except as
provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
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The Selling Stockholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under this Agreement which are not otherwise specifically
provided for herein, including but not limited to (i) fees and expenses of
counsel and other advisors for such Selling Stockholders, (ii) fees and expenses
of the Custodian and (iii) expenses and taxes incident to the sale and delivery
of the Common Shares to be sold by such Selling Stockholders to the Underwriters
hereunder (which taxes, if any, may be deducted by the Custodian under the
provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Stockholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth in Sections 1(A) and 1(B) hereof as of the date hereof and as of the First
Closing Date as though then made and, with respect to the Optional Common
Shares, as of the Second Closing Date as though then made, to the timely
performance by the Company and the Selling Stockholders of its their respective
covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representative
shall have received from KPMG Peat Marwick LLP, independent public or
certified public accountants for the Company, a letter dated the date
hereof addressed to the Underwriters, in form and substance satisfactory to
the Representative, containing statements and information of the type
ordinarily included in accountant's "comfort letters" to underwriters,
delivered according to Statement of Auditing Standards No. 72 (or any
successor bulletin), with respect to the audited and unaudited financial
statements and certain financial information contained in the Registration
Statement and the Prospectus (and the Representative shall have received an
additional three (3) conformed copies of such accountants' letter). In
addition, the Representative shall have received from KPMG Peat Marwick LLP
a letter which sets forth the financial statement impact, if any, of the
Company's issuance and sale of shares of Common Stock and warrants to
purchase shares of Common Stock consummated on September 15, 1997.
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities
Act) in the manner and within the time period required by Rule 424(b)
under the
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Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
or, if the Company elected to rely upon Rule 434 under the Securities Act
and obtained the Representative's consent thereto, the Company shall have
filed a Term Sheet with the Commission in the manner and within the time
period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing
Date and, with respect to the Optional Common Shares, the Second Closing
Date, in the judgment of the Representative there shall not have occurred
any Material Adverse Change.
(d) Opinion of Counsel for the Company. On each of the First Closing
Date and the Second Closing Date the Representative shall have received the
favorable opinion of Xxxxx, Xxxxxx & Heckscher LLP, counsel for the
Company, dated as of such Closing Date, the form of which is attached as
Exhibit A (and the Representative shall have received an additional three
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(3) conformed copies of such counsel's legal opinion).
(e) Opinion of Counsel for the Underwriters. On each of the First
Closing Date and the Second Closing Date the Representative shall have
received the favorable opinion of Xxxxxxxx Xxxxxxxxx, counsel for the
Underwriters, dated as of such Closing Date, with respect to the matters
set forth in paragraphs (i), (vii) (with respect to subparagraph (i) only,
(viii), (ix), (x), (xi), (xii) and (xiii) (with respect to the captions
"Description of Capital Stock" and "Underwriting" under subparagraph (i)
only) and the next-to-last paragraph of Exhibit A (and the
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Representative shall have received an additional three (3) conformed copies
of such counsel's legal opinion).
(f) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date the Representative shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer
or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the
effect set forth in subsection (b)(ii) of this Section 5, and further to
the effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse Change;
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(ii) the representations, warranties and covenants of the Company set
forth in Section 1(A) of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such Closing
Date; and
(iii) the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date the Representative shall have received from KPMG Peat
Marwick LLP, independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to
the Representative, to the effect that they reaffirm the statements made in
the letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out of
procedures shall be no more than three business days prior to the First
Closing Date or Second Closing Date, as the case may be (and the
Representative shall have received an additional three (3) conformed copies
of such accountants' letter).
(h) Opinion of Counsel for the Selling Stockholders. On the First
Closing Date the Representative shall have received the favorable opinion
of Duane, Morris & Xxxxxxxxx LLP, counsel for the Selling Stockholders,
dated as of such Closing Date, the form of which is attached as Exhibit B
---------
(and the Representative shall have received an additional three (3)
conformed copies of such counsel's legal opinion).
(i) Selling Stockholders' Certificate. On each of the First Closing Date
and the Second Closing Date the Representative shall have received a
written certificate executed by each Selling Stockholder, dated as of such
Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Stockholder set forth in Section 1(B) of this Agreement are true and
correct with the same force and effect as though expressly made by such
Selling Stockholder on and as of such Closing Date; and
(ii) such Selling Stockholder has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to such Closing Date.
(j) Selling Stockholders' Documents. On the date hereof, the Company and
the Selling Stockholders shall have furnished for review by the
Representative copies of the Powers of Attorney and Custody Agreements
executed by each of the Selling Stockholders and such further information,
certificates and documents as the Representative may reasonably request.
(k) Lock-Up Agreement. On the date hereof, the Company shall have
furnished to the Representative an agreement in the form of Exhibit C
---------
hereto from each director, officer and Selling Stockholder of the Company,
and such agreement shall be in full force and effect on each of the First
Closing Date and the Second Closing Date.
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(l) Expense Allowance. On the First Closing Date, the Representative
shall have received from the Company the amount of $150,000 in payment of
the agreed upon non-accountable expense allowance.
(m) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Representative and counsel for the
Underwriters shall have received such information, documents and opinions
as they may reasonably require for the purposes of enabling them to pass
upon the issuance and sale of the Common Shares as contemplated herein, or
in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representative by notice to the Company and the Selling Stockholders at any time
on or prior to the First Closing Date and, with respect to the Optional Common
Shares by notice to the Company, at any time prior to the Second Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6, Section 8 and Section 9 shall at
all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated by the Representative pursuant to Section 5, Section 7, Section 11 or
Section 17, or if the sale to the Underwriters of the Common Shares on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company or the Selling Stockholders to perform any agreement
herein or to comply with any provision hereof, the Company agrees to reimburse
the Representative and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representative and the Underwriters in connection with the proposed purchase and
the offering and sale of the Common Shares, including but not limited to fees
and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not
become effective until the later of (i) the execution of this Agreement by the
parties hereto and (ii) notification by the Commission to the Company and the
Representative of the effectiveness of the Registration Statement under the
Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company or the Selling
Stockholders to any Underwriter, except that the Company and the Selling
Stockholders shall be obligated to reimburse the expenses of the Representative
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of any Underwriter
to the Company or the Selling Stockholders, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
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SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters. The Company and each of the
Selling Stockholders, jointly and severally, agrees to indemnify and hold
harmless each Underwriter, its officers and employees, and each person, if
any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense,
as incurred, to which such Underwriter or such controlling person may
become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of the Company), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based (i) upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be
a part thereof pursuant to Rule 430A or Rule 434 under the Securities Act,
or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; or (iii) in whole or in part upon any inaccuracy
in the representations and warranties of the Company or the Selling
Stockholders contained herein; or (iv) in whole or in part upon any failure
of the Company or the Selling Stockholders to perform their respective
obligations hereunder or under law; or (v) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any matter covered
by clause (i) or (ii) above, provided that the Company or any Selling
Stockholder shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final judgment
that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by
Pennsylvania Merchant Group Ltd) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information furnished to the Company and the Selling Stockholders by the
Underwriters expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
-24-
prospectus, the foregoing indemnity agreement shall not inure to the
benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Common Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. Notwithstanding any provision herein to the
contrary, the liability of each Selling Stockholder under this Agreement
shall not exceed the net proceeds (before deducting offering expenses)
received by such Selling Stockholder from the sale of Common Shares in this
offering. The indemnity agreement set forth in this Section 8(a) shall be
in addition to any liabilities that the Company and the Selling
Stockholders may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, the Selling Stockholders and each
person, if any, who controls the Company or any Selling Stockholder within
the meaning of the Securities Act or the Exchange Act, against any loss,
claim, damage, liability or expense, as incurred, to which the Company, or
any such director, officer, Selling Stockholder or controlling person may
become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of such Underwriter), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the
Registration Statement, any preliminary prospectus, the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company and the Selling Stockholders
by the Underwriters expressly for use therein; and to reimburse the
Company, or any such director, officer, Selling Stockholder or controlling
person for any legal and other expense reasonably incurred by the Company,
or any such director, officer, Selling Stockholder or controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action. Each of the
Company and each of the Selling Stockholders, hereby acknowledges that the
only information that the Underwriters have furnished to the Company and
the Selling Stockholders expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or
-25-
supplement thereto) are the statements set forth (A) as the last two
paragraphs on the inside front cover page of the Prospectus concerning
stabilization and passive market making by the Underwriters and (B) in the
table in the first paragraph and as the second, sixth and seventh
paragraphs under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity
agreement set forth in this Section 8(b) shall be in addition to any
liabilities that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (Pennsylvania Merchant Group
Ltd in the case of Section 8(b) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
party.
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(d) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement, compromise or consent to
the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been
a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in
Section 8 is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders, on the
one hand, and the Underwriters, on the other hand, from the offering of the
Common Shares pursuant to this Agreement or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders,
on the one hand, and the Underwriters, on the other hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders, on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the Common
Shares pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Shares
pursuant to this Agreement (before deducting expenses) received by the Company
and the Selling Stockholders, and the total underwriting discount received by
the Underwriters, in each case as set forth on the front cover page of the
Prospectus (or, if Rule 434 under the Securities Act is used, the corresponding
location on the Term Sheet) bear to the aggregate initial public offering price
of the Common Shares as set forth on such cover. The relative fault of the
Company and the Selling Stockholders, on the one hand, and the Underwriters, on
the other hand, shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
-27-
alleged omission to state a material fact or any such inaccurate or alleged
inaccurate representation or warranty relates to information supplied by the
Company or the Selling Stockholders, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
----------
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
----------
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representative, to purchase the Common Shares which such
-28-
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Common Shares and the aggregate number of Common Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Common Shares
to be purchased on such date, and arrangements satisfactory to the non-
defaulting Underwriters and the Company for the purchase of such Common Shares
are not made within 48 hours after such default, this Agreement shall terminate
without liability of any party (except any defaulting Underwriter as set forth
in the following paragraph) to any other party except that the provisions of
Section 4, Section 6, Section 8 and Section 9 shall at all times be effective
and shall survive such termination. In any such case either the non-defaulting
Underwriters or the Company shall have the right to postpone the First Closing
Date or the Second Closing Date, as the case may be, but in no event for longer
than seven days in order that the required changes, if any, to the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement may be terminated by the Representative by notice given to
the Company and the Selling Stockholders if at any time (i) trading or quotation
in any of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq Stock Market, or trading in securities generally on
either the Nasdaq Stock Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established on any of such stock exchanges by the Commission or the NASD; (ii) a
general banking moratorium shall have been declared by any of federal, New York
or Delaware authorities; (iii) there shall have occurred any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective substantial change in
United States' or international political, financial or economic conditions, as
in the judgment of the Representative is material and adverse and makes it
impracticable to market the Common Shares in the manner and on the terms
described in the Prospectus or to enforce contracts for the sale of securities;
(iv) in the judgment of the Representative there shall have occurred any
Material Adverse Change; or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Representative may interfere materially with the conduct
of the business and operations of the Company regardless of whether or not such
loss shall have been insured. Any termination pursuant to this Section 11 shall
be without liability on the part of (a) the Company or the Selling Stockholders
to any Underwriter, except that the Company and the Selling Stockholders shall
be obligated to reimburse the expenses of the Representative and the
Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company or the Selling Stockholders, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 shall at all times
be effective and shall survive such termination.
-29-
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Stockholders, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representative:
Pennsylvania Merchant Group Ltd
Four Falls Corporate Center
West Conshohocken, Pennsylvania 19428-2961
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxxxxx Xxxxxxxxx
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxx, Esq.
If to the Company:
Petroleum Development Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Facsimile: 304-842-6256
Attention: Xxxxxx X. Xxxxxxxx
with a copy to:
Duane, Morris & Xxxxxxxxx LLP
0000 X. Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000-1608
Facsimile: 000-000-0000
Attention: Xxxxxxxx X. Xxxx, Esq.
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If to the Selling Stockholders:
Duane, Morris & Xxxxxxxxx LLP
0000 X. Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000-1608
Facsimile: 000-000-0000
Attention: Xxxxxxxx X. Xxxx, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, [and personal representatives], and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING STOCKHOLDERS TO SELL
AND DELIVER COMMON SHARES. If one or more of the Selling Stockholders shall fail
to sell and deliver to the Underwriters the Common Shares to be sold and
delivered by such Selling Stockholders at the First Closing Date pursuant to
this Agreement, then the Underwriters may at their option, by written notice
from the Representative to the Company and the Selling Stockholders, either
(i) terminate this Agreement without any liability on the part of any
Underwriter or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company
or the Selling Stockholders, or (ii) purchase the shares which the Company and
other Selling Stockholders have agreed to sell and deliver in accordance with
the terms hereof. If one or more of the Selling Stockholders shall fail to sell
and deliver to the Underwriters the Common Shares to be sold and delivered by
such Selling Stockholders pursuant to this Agreement at the First Closing Date
or the Second Closing Date, then the Underwriters shall have the right, by
written notice from the Representative to the Company and the Selling
Stockholders, to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required
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changes, if any, to the Registration Statement and the Prospectus or any other
documents or arrangements may be effected.
SECTION 18. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
* * * * * * * * *
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Custodian the enclosed
copies hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
Very truly yours,
PETROLEUM DEVELOPMENT CORPORATION
By:
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
SELLING STOCKHOLDERS
---------------------------------------
Xxxxxx X. Xxxx or Attorney-in-Fact
---------------------------------------
Xxxxxx X. Xxxxxxxx or Attorney-in-Fact
---------------------------------------
Xxxx X. Xxxxxxxxx or Attorney-in-Fact
---------------------------------------
Xxxxxx X. Xxxxx or Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representative in West Conshohocken, Pennsylvania as of the date first
above written.
PENNSYLVANIA MERCHANT GROUP LTD
Acting as Representative of the
several Underwriters named in
the attached Schedule A.
BY: PENNSYLVANIA MERCHANT GROUP LTD
By:
----------------------------
X. X. Xxxxxxxx
-33-
SCHEDULE A
Underwriters NUMBER OF FIRM
COMMON SHARES TO
BE PURCHASED
Pennsylvania Merchant Group Ltd.................... [ ]
---------------
Total......................................... 3,850,000
SCHEDULE
Selling Stockholder NUMBER OF FIRM
COMMON SHARES TO
BE SOLD
Xxxxxx X. Xxxx
c/o Petroleum Development Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000............. 100,000
Xxxxxx X. Xxxxxxxx
c/o Petroleum Development Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000............. 100,000
Xxxx X. Xxxxxxxxx
c/o Petroleum Development Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000............. 100,000
Xxxxxx X. Xxxxx
c/o Petroleum Development Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000............. 50,000
-------------------
Total:................................. 350,000
EXHIBIT A
OPINION OF DUANE, MORRIS & HECKSCHER LLP
AS COUNSEL TO THE COMPANY
Opinion of counsel for the Company to be delivered pursuant to
Section 5(d) of the Underwriting Agreement.
References to the Prospectus in this Exhibit A include any supplements
---------
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the State of Nevada and in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions (other than the State of Nevada) where the failure to so qualify
or to be in good standing would not, individually or in the aggregate, result in
a Material Adverse Change.
(iv) Each significant subsidiary (as defined in Rule 405 under the
Securities Act) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and, to
the best knowledge of such counsel, is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(v) All of the issued and outstanding capital stock of each such
significant subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or, to the best knowledge of such counsel, any pending or threatened
claim.
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(vi) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conform to the descriptions thereof set forth in
the Prospectus. All of the outstanding shares of Common Stock (including the
shares of Common Stock owned by Selling Stockholders) have been duly authorized
and validly issued, are fully paid and nonassessable and, to the best of such
counsel's knowledge, have been issued in compliance with the registration and
qualification requirements of federal and state securities laws. The form of
certificate used to evidence the Common Stock is in due and proper form and
complies with all applicable requirements of the charter and by-laws of the
Company and the Revised Statutes of the State of Nevada. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.
(vii) No stockholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to subscribe for
or purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the Revised Statutes of the State of Nevada or (ii)
to the best knowledge of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, except as rights to indemnification thereunder may
be limited by applicable law and except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(ix) The Common Shares to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale pursuant to the
Underwriting Agreement and, when issued and delivered by the Company pursuant to
the Underwriting Agreement against payment of the consideration set forth
therein, will be validly issued, fully paid and nonassessable.
(x) Each of the Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order suspending
the effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period required
by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective or issue dates
(other than the financial statements and
A-2
supporting schedules included or incorporated by reference therein or in
exhibits to or excluded from the Registration Statement, as to which no opinion
need be rendered) comply as to form in all material respects with the applicable
requirements of the Securities Act.
(xii) The Common Shares have been approved for listing on the Nasdaq
National Market.
(xiii) The statements (i) in the Prospectus under the captions "Risk
Factors--Governmental Regulation", "--Anti-Takeover Provisions", "--Shares
Eligible for Future Sale", "Management's Discussion and Analysis and Results of
Operations--Liquidity", "Business--Governmental Regulation", "Business--Legal
Proceedings", "Certain Transactions", "Description of Capital Stock", "Shares
Eligible for Future Sale" and "Underwriting" and (ii) in Item 15 of the
Registration Statement, insofar as such statements constitute matters of law,
summaries of legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or legal conclusions, has been reviewed by such
counsel and fairly present and summarize, in all material respects, the matters
referred to therein.
(xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein.
(xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto;
and the descriptions thereof and references thereto are correct in all material
respects.
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Underwriting Agreement and consummation of the transactions contemplated thereby
and by the Prospectus, except as required under the Securities Act, applicable
state securities or blue sky laws and from the NASD.
(xvii) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder (other
than performance by the Company of its obligations under the indemnification
section of the Underwriting Agreement, as to which no opinion need be rendered)
(i) have been duly authorized by all necessary corporate action on the part of
the Company; (ii) will not result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary; (iii) will not constitute a
breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, (A) the Company's Credit Agreement with First
National Bank of Chicago, as lender, or (B) to the best knowledge of such
A-3
counsel, any other material Existing Instrument; or (iv) to the best knowledge
of such counsel, will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company or any
subsidiary.
(xviii) The Company is not, and after receipt of payment for the Common
Shares will not be, an "investment company" within the meaning of Investment
Company Act.
(xix) Except as disclosed in the Prospectus under the caption "Shares
Eligible for Future Sale" to the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by the Underwriting Agreement.
(xx) To the best knowledge of such counsel, neither the Company nor any
subsidiary is in violation of its charter or by-laws or any law, administrative
regulation or administrative or court decree applicable to the Company or any
subsidiary or is in Default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material Existing Instrument,
except in each such case for such violations or Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus or
any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the Business
Laws of the Commonwealth of Pennsylvania or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or the Second Closing Date,
as the case may be, shall be satisfactory
A-4
in form and substance to the Underwriters, shall expressly state
that the Underwriters may rely on such opinion as if it were addressed to them
and shall be furnished to the Representative) of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for the
Underwriters; provided, however, that such counsel shall further state that they
believe that they and the Underwriters are justified in relying upon such
opinion of other counsel, and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials.
A-5
EXHIBIT B
OPINION OF DUANE, MORRIS & HECKSCHER LLP
AS COUNSEL FOR THE SELLING STOCKHOLDERS
The opinion of such counsel pursuant to Section 5(h) shall be rendered
to the Representative at the request of the Company and shall so state therein.
References to the Prospectus in this Exhibit B include any supplements thereto
---------
at the Closing Date.
(i) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of, and is a valid and binding agreement of, such
Selling Stockholder, enforceable in accordance with its terms, except as rights
to indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(ii) The execution and delivery by such Selling Stockholder of, and the
performance by such Selling Stockholder of his obligations under, the
Underwriting Agreement and his Custody Agreement and its Power of Attorney will
not contravene or conflict with, result in a breach of, or constitute a default
under any agreement of such Selling Stockholder, or, to the best of such
counsel's knowledge, violate or contravene any provision of applicable law or
regulation, or violate, result in a breach of or constitute a default under the
terms of any other agreement or instrument to which such Selling Stockholder is
a party or by which it is bound, or any judgment, order or decree applicable to
such Selling Stockholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over such Selling
Stockholder.
(iii) Such Selling Stockholder has good and valid title to all of the
Common Shares which may be sold by such Selling Stockholder under the
Underwriting Agreement and has the legal right and power, and all authorizations
and approvals required to enter into the Underwriting Agreement and its Custody
Agreement and its Power of Attorney, to sell, transfer and deliver all of the
Common Shares which may sold by such Selling Stockholder under the Underwriting
Agreement and to comply with his other obligations under the Underwriting
Agreement, its Custody Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of such Selling
Stockholder has been duly authorized, executed and delivered by such Selling
Stockholder and is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
B-1
(v) Assuming that the Underwriters purchase the Common Shares which are
sold by such Selling Stockholder pursuant to the Underwriting Agreement for
value, in good faith and without notice of any adverse claim, the delivery of
such Common Shares pursuant to the Underwriting Agreement will pass good and
valid title to such Common Shares, free and clear of any security interest,
mortgage, pledge, lien encumbrance or other claim.
(vi) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any court or
governmental authority or agency, is required for the consummation by such
Selling Stockholder of the transactions contemplated in the Underwriting
Agreement, except as required under the Securities Act, applicable state
securities or blue sky laws, and from the NASD.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws of the
Commonwealth of Pennsylvania or the federal law of the United States, to the
extent they deem proper and specified in such opinion, upon the opinion (which
shall be dated the First Closing Date or the Second Closing Date, as the case
may be, shall be satisfactory in form and substance to the Underwriters, shall
expressly state that the Underwriters may rely on such opinion as if it were
addressed to them and shall be furnished to the Representative) of other counsel
of good standing whom they believe to be reliable and who are satisfactory to
counsel for the Underwriters; provided, however, that such counsel shall further
state that they believe that they and the Underwriters are justified in relying
upon such opinion of other counsel, and (B) as to matters of fact, to the extent
they deem proper, on certificates of the Selling Stockholders and public
officials.
B-2
EXHIBIT C
[Date]
Pennsylvania Merchant Group Ltd
As Representative of the Several Underwriters
Four Falls Corporate Center
West Conshohocken, Pennsylvania 19428-2961
RE: ______________________ (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain
shares of Common Stock of the Company ("Common Stock") or securities convertible
into or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you will
act as the representative of the underwriters. The undersigned recognizes that
the Offering will be of benefit to the undersigned and will benefit the Company
by, among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not, without the prior written consent of Pennsylvania
Merchant Group Ltd (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 180 days after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock held by the undersigned except in compliance with the foregoing
restrictions.
C-1
With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any
Common Stock owned either of record or beneficially by the undersigned,
including any rights to receive notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned.
_____________________________________
Printed Name of Holder
By: _________________________________
Signature
_____________________________________
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
C-2
