UNITED OILFIELD SERVICES, INC.
UNDERWRITING AGREEMENT
Denver, Colorado
September ___, 1997
▇.▇. ▇▇▇▇ & Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
United Oilfield Services, Inc., a Texas corporation (the "Company"),
proposes to issue and sell through you (the "Underwriter") 1,000,000 shares of
the Company's $.01 par value common stock (the "Shares"). The offering of the
Shares is further described in the Registration Statement filed on Form S-1 with
the United States Securities and Exchange Commissions (the "Commission").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce the
Underwriter to enter into this Agreement, the Company represents and warrants as
follows:
(a) The Company has filed a Registration Statement (No. 333-_________) on
Form S-1 pursuant to the Securities Act of 1933 (the "Act"), as amended, and the
Registration Statement was declared effective on ______________, 1997 (the
"Effective Date"). The Company has furnished to the Underwriter and to its legal
counsel such copies, including original signature pages, as required under the
rules and regulations of the Commission. As used in this Agreement, the term
"Registration Statement" means the Registration Statement, including its
Prospectus, the exhibits and financial statements, and all amendments including
any amendments after the effective date of the Registration Statement. The term
"Prospectus" means the prospectus filed as a part of Part I of the Registration
Statement, including all pre-effective and post-effective amendments and
supplements thereto.
(b) The Registration Statement and all other documents previously filed or
filed after the date hereof with the Commission conform and will conform with
all of the requirements of the Act in all material respects. Neither the
Registration Statement, the Prospectus nor the other material filed or to be
filed with the Commission contains nor will contain any untrue statements of
material fact nor are there or will there be any omissions of material facts
required to be stated therein or that are necessary to make the statements
therein not misleading, except that this warranty does not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by and with respect to you, or any dealer
through you, expressly for use in the Registration Statement or Prospectus or
any amendment or supplement thereto.
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(c) The Company has obtained a CUSIP number for its common stock and the
Company has used its best efforts to qualify the Shares for offering in every
state reasonably designated by the Underwriter. The materials previously filed
or filed after the date hereof with any state do not and will not contain any
untrue statements of material fact nor are there or will there be any omissions
of material facts required to be stated therein or that are necessary to make
the statements therein not misleading.
(d) Karlins, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Klodosky, P.C., whose reports appear in the
Prospectus are, and during the periods covered by their reports were,
independent accountants as required by the Securities Act and the applicable
Rules and Regulations. The financial statements and schedules (including the
related notes) included in the Registration Statement, any preliminary
Prospectus or the final Prospectus, present fairly the financial position, the
results of operations, and changes in financial position of the entities
purported to be shown thereby at the dates and for the periods indicated; and
such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated.
The financial information and related notes and schedules included
in the Registration Statement, any preliminary Prospectus or the final
Prospectus comply in all material respects with the requirements of the
Securities Act and the Rules and Regulations and present fairly the financial
position of the Company and its subsidiaries as of the dates indicated, and the
results of operation for the periods therein specified. Such financial
information, including the related notes and schedules, have been prepared on a
basis consistent with the historical financial statements included in the
Registration Statement, the Preliminary Prospectus and the Final Prospectus and
give effect to assumptions made on a reasonable basis to give effect to
historical and proposed transactions described in the Registration Statement,
any preliminary Prospectus and the final Prospectus. The financial information
and statistical data, and other data, set forth in the final Prospectus under
the captions "Prospectus Summary--Financial and Operating Data," "Selected
Financial Data," "Dilution" and "Capitalization" are derived from and prepared
on a basis consistent with such financial information.
(e) The outstanding capital stock of the Company has been duly and validly
authorized, issued and is fully paid and nonassessable and conforms to all
statements made in the Registration Statement and Prospectus with respect
thereto. The Shares, Warrants (as defined in paragraph 6 hereof) and Warrant
Shares (as defined in paragraph 6 hereof) have been duly and validly authorized
and, when issued and delivered against payment as provided in this Agreement,
will be validly issued, fully paid and nonassessable. The Shares and Warrant
Shares, upon issuance, will not be subject to the preemptive rights of any
shareholders of the Company. The Warrants, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms. A
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sufficient number of shares of common stock have been reserved for issuance upon
exercise of the Warrants. The Shares, Warrant Shares and Warrants will conform
to all statements in the Registration Statement and Prospectus. Upon delivery of
and payment for the Warrants to be sold by the Company as set forth in this
Agreement, the Underwriter and its designees will receive good and marketable
title thereto, free and clear of all liens, encumbrances, charges and claims
except those created by, through or under the Underwriter and except
restrictions on transfer arising under federal and state securities laws and
their rules and regulations. The Company will have on the Effective Date (as
defined in paragraph 1(a) hereof) of the Registration Statement and at the time
of delivery of such Warrants full legal right and power and all authorization
and approval required by law to sell, transfer and deliver such Warrants in the
manner provided hereunder.
(f) The Company has been legally incorporated and is now, and always
during the period of the offering will be, a validly existing corporation under
the laws of the State of Texas, lawfully qualified to conduct the business for
which it was organized and which it proposes to conduct. The Company is, and
will continue to be, qualified to conduct business as a foreign corporation in
each jurisdiction where the nature of its business requires such qualification.
(g) The Company has an authorized capitalization of 15,000,000 shares of
common stock ($.01 par value) and 3,000,000 shares of preferred stock. If all
Shares are sold, the Shares will represent at least 20% of the Company's shares
of common stock outstanding after the public offering. Common stock underlying
outstanding options and warrants except the Warrants will be deemed to
outstanding for purposes of determining the number of shares of the Company's
common stock outstanding after the public offering. There are no outstanding
options, warrants or other rights to purchase securities of the Company, however
characterized, except as described in the Registration Statement. There are no
securities of the Company, however characterized, held in its treasury. With
respect to the offer to sell, sale, offer to purchase or purchase of any of its
securities, the Company has not made any intentional or reckless violation of
the antifraud provisions of the federal securities laws, rules or regulations
promulgated thereunder or the laws, rules or regulations of any jurisdiction
wherein such securities transactions or solicitations occurred.
(h) The Company has caused each of its officers and directors and has used
its best efforts to cause each of its other shareholders to enter into an
agreement with the Underwriter pursuant to the terms of which each such person
has agreed not to sell any shares owned directly or indirectly by such person
for a period of 12 months from the effective date of the Registration Statement
without the Underwriter's prior written consent. The Company has obtained such
an agreement from shareholders owning at least ___% of the Company's outstanding
common stock and no shareholders have refused to sign such an agreement.
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(i) The Company has no subsidiaries except as described in the
Registration Statement. As described in the Registration Statement, the
Company's business strategy includes the acquisition of additional business
operations. However, the Company has no agreement, plans, arrangements or
understandings with respect to acquiring additional subsidiaries, businesses,
existing business operations or engaging in mergers with or the acquisition of
any companies.
(j) Except as disclosed in the Registration Statement and the Prospectus,
the Company does not have any contingent liabilities, obligations, or claims nor
has it received threats of claims or regulatory action. Further, except as
disclosed in the Registration Statement and the Prospectus, subsequent to the
date information is given in the Registration Statement and Prospectus, and
prior to the close of the offering: (a) there shall not be any material adverse
change in the management or condition, financial or otherwise, of the Company or
in its business taken as a whole; (b) there shall not have been any material
transaction entered into bv the Company other than transactions in the ordinary
course of business; (c) the Company shall not have incurred any material
obligations, contingent or otherwise, which are not disclosed in the
Registration Statement and the Prospectus; (d) there shall not have been nor
will there be any change in the capital or long term debt (except current
payments) of the Company; and (e) the Company has not and will not have paid or
declared any dividends or other distributions on its common shares.
(k) The Company's securities, however characterized, are not subject to
preemptive rights.
(l) The Company will have the legal right and authority to enter into this
Underwriting Agreement upon its execution, to effect the proposed sale of the
Shares, to execute the Warrants and to effect all other transactions
contemplated by this Agreement.
(m) The Company knows of no person who rendered any services in connection
with the introduction of the Company to the Underwriter. No broker's or other
finder's fees are due and payable by the Company and none will be paid by it.
(n) The Company is eligible to use Form S-l for the offering of the
Shares.
(o) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any securities
except as required to be described in the Registration Statement.
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(p) The Company will not file any amendment or supplement to the
Registration Statement, Prospectus, or exhibits if the Underwriter and its
counsel have not been furnished a copy three days prior to any such filing, or
if the Underwriter or its counsel have objected in writing to the filing of the
amendment or supplement.
(q) The Company possesses adequate certificates or permits issued by the
appropriate federal, state and local regulatory authorities necessary to conduct
its business and to retain possession of its properties. The Company has not
received any notice of any proceeding relating to the revocation or modification
of any of these certificates or permits.
(r) The Company has filed all tax returns required to be filed and is not
in default in the payment of any taxes which have become due pursuant to any law
or any assessment.
(s) The Company has marketable title to all properties including
intellectual properties described in the Registration Statement as owned by it.
The properties are free and clear of all liens, charges, encumbrances, or
restrictions, however characterized, except as described in the Registration
Statement. All of the contracts, leases, subleases, patents, copyrights,
licenses and agreements, however characterized, under which the Company holds
its properties as described in the Registration Statement are in full force and
effect. The Company is not in default under any of the material terms or
provisions of any contracts, leases, subleases, patents, copyrights, licenses or
agreements under which the Company holds its properties. There are no known
claims against the Company concerning the Company's rights under the leases,
subleases, patents, copyrights, licenses and agreements and concerning its right
to continued possession of its properties.
(t) All original documents and other information relating to the Company's
affairs has and will continue to be made available upon request to the
Underwriter or to its counsel at the Underwriter's office or at the office of
the Underwriter's counsel and copies of any such documents will be furnished
upon request to the Underwriter and to its counsel. Included within the
documents made available have been at least the Articles of Incorporation and
any Amendments, Minutes of all of the meetings of the Incorporators, Directors
and Share holders, all financial statements and copies of all contracts, leases,
patents, copyrights, licenses or agreements to which the Company is a party or
in which the Company has an interest
(u) The Company has appointed American Securities Transfer & Trust, Inc.
Denver, Colorado, as the Company's transfer agent. The Company will continue to
retain a transfer agent reasonably satisfactory to the Underwriter for so long
as the Company is subject to the reporting requirements under Section 12(g)or
Section 15(d) of the Securities Exchange Act of 1934. The Company will make
arrangements to have available at the office
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of the transfer agent sufficient quantities of the Company's common stock
certificates as may be needed for the quick and efficient transfer of the
Shares.
(v) The Company will use the proceeds from the sale of the Shares as set
forth in the Registration Statement and Prospectus.
(w) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(x) The Company is not in material default under any of the contracts,
leases, licenses or agreements to which it is a party. The proposed offering of
the Shares will not cause the Company to become in material default under an of
its contracts, leases, subleases, patents, copyrights, licenses or agreements
nor will it create a conflict between the Company and any of the contracting
parties to the contracts, leases and other agreements. Further, the Company is
not in material default in the performance of any obligation, agreement or
condition contained in any debenture, note or other evidence of indebtedness or
any indenture or loan agreement of the Company. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
compliance with the terms of this Agreement will not conflict with or result in
a breach of any of the material terms, conditions or provisions of, or
constitute a material default under, the Articles of Incorporation or Bylaws of
the Company, as amended, or any note, indenture, mortgage, deed of trust, or
other agreement or instrument to which the Company is a party or by which it or
any of its property is bound, or any existing law, order, rule, regulation,
writ, injunction, or decree of any government, governmental instrumentality,
agency or body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company or its property. The consent, approval,
authorization, or order of a court or governmental instrumentality, agency or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act, under the Blue Sky or
securities laws of any state or jurisdiction, or the rule of the NASD (as
defined herein). There are no contracts or other documents which are required to
be filed as exhibits to the Registration Statement by the Act or its rules and
regulations which have not been so filed. Each contract to which the Company is
a party has been duly and validly executed, is in full force and effect in all
material respects in accordance with its respective terms, and no contracts have
been assigned by the Company, except as disclosed in the Registration Statement
and Prospectus. The Company knows of no present situation, condition or fact
which would prevent compliance with the terms of such contracts. Except for
amendments or modifications of contracts in the ordinary course of business and
except as disclosed in the Registration Statement and Prospectus, the Company
has no intention of exercising any right which would cancel any of its
obligations under any contract, and has no knowledge
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that any other party to any contract, in which the Company has an interest, has
any intention not to render full performance under such contract.
(y) The Company has not made any representation, whether oral or in
writing, to anyone, whether an existing shareholder or not, that any of the
Shares will be reserved or directed to them during the proposed public offering.
(z) Except as disclosed in the Registration Statement and Prospectus,
there is and prior to the close of the offering of the Shares to the public
there will be, no action, suit or proceeding before any court or governmental
agency, authority or body pending or to the knowledge of the Company threatened
which might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business or the prospects of the
Company, or would materially affect the properties or assets of the Company.
(aa) No unregistered securities of the Company, of an affiliate or of a
predecessor of the Company have been sold within three years prior to the date
hereof, except as disclosed in the Registration Statement.
(bb) Except as set forth in the Effective Prospectus and the Final
Prospectus, there is, and at the Closing Date there will be, no action, suit or
proceeding before any court, arbitration tribunal or governmental agency
pending, or to the knowledge of the Company, threatened, which might result in
judgments against the Company not adequately covered by insurance or which
collectively might result in any material adverse change in the condition
(financial or otherwise), the business or the prospects of the Company, or which
would materially affect the properties or assets of the Company.
(cc) Neither the Company nor any of its subsidiaries has, directly or
indirectly, at any time (x) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law; (y) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by all applicable
laws; or (z) violated nor is it in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(dd) Neither the Company nor any of its subsidiaries has any liability,
known or unknown, matured or not matured, absolute or contingent, assessed or
unassessed, imposed or based upon any provision of, or has received notice of
any potential liability under, any foreign, federal, state or local law, rule or
regulation or the common law, or any tort, nuisance or absolute liability
theory, or under any code, order, decree, judgment or injunction applicable to
the Company or any of its subsidiaries relating to public health or
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safety, worker health or safety or pollution, damage to or protection of the
environment, including, without limitation, laws relating to damage to natural
resources, emissions, discharges, releases or threatened releases of hazardous
materials into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), or otherwise
relating to the manufacture, processing, use treatment, storage, generation,
disposal, transport or handling of hazardous materials. As used herein,
"hazardous material" includes chemical substances, wastes, pollutants,
contaminants, hazardous or toxic substances, constituents, materials or wastes,
whether solid, gaseous or liquid in nature.
(ee) The Company knows of no promoter, founder, affiliate, control person
or other person who by contract or otherwise exerts any influence over
management policies or decisions, either directly or indirectly except as set
forth in the Registration Statement and Prospectus.
All of the above representations and war warranties shall survive the
performance or termination of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER. The Underwriter
represents and warrants as follows:
(a) It is registered as a broker-dealer with the Commission, in good
standing with the Colorado Division of Securities and is registered, to the
extent registration is required, with the appropriate governmental agency in
each state in which it offers or sells the shares and is a member of the
National Association of Securities Dealers, Inc. ("NASD") and will use its best
efforts to maintain such registrations, qualifications and memberships
throughout the term of the offering.
(b) To the knowledge of the Underwriter, no action or proceeding is
pending against the Underwriter or any of its officers or directors concerning
the Underwriter's activities as a broker or dealer that would affect the
Company's offering of the Shares.
(c) The Underwriter will offer the Shares only in those states and in the
quantities that are identified in the Blue Sky Memorandum from the Company's
counsel to the Underwriter that the offering of the Shares has been qualified
for sale under the applicable state statutes and regulations. The Underwriter,
however, may offer the Shares in other states if (i) the transaction is exempt
from the registration requirements in that state, (ii) the Company's counsel has
received notice ten days prior to the proposed sale, and (iii) the Company's
counsel does not object within said ten day period.
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(d) The Underwriter, in connection with the offer and sale of the Shares
and in the performance of its duties and obligations under this Agreement,
agrees to use its best efforts to comply with all applicable federal laws; the
laws of the states or other jurisdictions in which the Shares are offered and
sold; and the Rules and Regulations of the NASD.
(e) The Underwriter is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado with all requisite
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
(f) This Agreement has been duly authorized, executed and delivered by the
Underwriter and is a valid agreement on the part of the Underwriter.
(g) Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will result in any breach of any of the terms
or conditions of, or constitute a default under, the articles of incorporation
or bylaws of the Underwriter or any indenture, agreement or other instrument to
which the Underwriter is a party or violate any order directed to the
Underwriter of any court or any federal or state regulatory body or
administrative agency having jurisdiction over the Underwriter or its
affiliates.
(h) The Underwriter knows of no person who rendered any services in
connection with the introduction of the Company to the Underwriter. No person
acting by, through or under the Underwriter will be entitled to receive from the
Underwriter or from the Company any finder's fees or similar payments.
(i) The written information provided by the Underwriter for inclusion in
the Registration Statement and Prospectus consists of certain information on the
front and back Prospectus cover pages, and that set forth under "Underwriting"
in the Prospectus.
(j) The Underwriter will, reasonably promptly after the Closing date,
supply the Company with such information as the Company may reasonably request
to be supplied to the securities commissions of such states in which the Shares
have been qualified for sale.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. EMPLOYMENT OF THE UNDERWRITER. In reliance upon the representations and
warranties and subject to the terms and conditions of this Agreement:
(a) The Company employs the Underwriter as its exclusive agent to sell for
the Company's account the Shares, on a cash basis only, at a price of $______
per Share. The Underwriter agrees to use its best efforts, as agent for the
Company, to sell the Shares
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subject to the terms and conditions set forth in this Agreement. It is
understood between the parties that there is no firm commitment by the
Underwriter to purchase any or all of the Shares.
(b) The obligation of the Underwriter to offer the Shares is subject to
receipt by it of written advice from the Commission that the Registration
Statement is effective, is subject to the Shares being qualified for offering
under applicable laws in the states as may be reasonably designated by the
Underwriter, is subject to the absence of any prohibitory action by any
governmental body, agency or official, and is subject to the terms and
conditions contained in this Agreement and in the Registration Statement
covering the offering to which this Agreement relates.
(c) The Company and the Underwriter agree that unless the Shares to be
offered, as set forth in the Registration Statement and Prospectus, are sold
within 30 days after the Effective Date (which period may be extended for an
additional period not to exceed 30 days by mutual agreement between the Company
and the Underwriter), the agency between the Company and the Underwriter will
terminate. If the agency between the Company and the Underwriter terminates, the
full proceeds which have been paid for the Shares shall be returned to the
purchasers. Prior to the sale of all of the Shares to be offered, all proceeds
received from subscriptions will be deposited in an escrow account entitled
"United Oilfield Services, Inc. Escrow Account" with Colorado State Bank, N.A.,
Denver, Colorado.
(d) The Company, the Underwriter and Colorado State Bank, N.A., Denver,
Colorado, will, prior to the beginning of the offering of the Shares, enter into
a fund escrow agreement in form satisfactory to the parties. The parties
mutually agree to faithfully perform their obligations under the fund escrow
agreement. The Underwriter will promptly deliver the funds into the escrow
account in accordance with Rule 15(c)2-4 of the Securities Exchange Act of 1934,
as amended, but in any event not to exceed five business days after receipt of
such funds.
(e) The Underwriter shall have the right to associate with other
underwriters and dealers as it may determine and shall have the right to grant
to such persons such concessions out of the commissions to be received by the
Underwriter as the Underwriter may determine, under and pursuant to a Select
Dealers Agreement in the form filed as an exhibit to the Registration Statement.
(f) Subject to the sale of all of the Shares, the Company agrees to pay to
the Underwriter a sales commission computed at the rate of $_____ (8 1/2% of the
public offering price) for each of the Shares sold by the Underwriter at the
public offering price of $____ per Share; provided however that the Company
shall have delivered a list of potential purchasers to the Underwriter 10 days
prior to the date hereof and sales to persons named in such list
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will entitle the Underwriter to a 4% sales commission in lieu of the 8 1/2%
sales commission set forth herein. This commission shall be payable upon the
release of the funds which have been deposited in the escrow account.
4. EXPENSES OF THE UNDERWRITER.
(a) Subject to the sale of all of the Shares and subject to the provisions
of paragraph 13(e) hereof, the Company shall reimburse the Underwriter for its
expenses on a nonaccountable basis in an amount equal to 3% of the gross
proceeds received in the offering. The Underwriter acknowledges that it has
received $25,000 of the nonaccountable expense allowance as of the date hereof.
Subject to the provisions of paragraph 13(e) hereof, the remaining
nonaccountable expense allowance is due on the release of the funds in the
escrow account to the Company.
(b) Except as stated in subparagraph 13(e) of this Agreement, the
Underwriter agrees that out of its nonaccountable expense allowance the
Underwriter will pay all costs incurred or to be incurred by the Underwriter or
by its personnel in connection with the offering of the Shares, except those to
be paid by the Company as described in paragraph 5 hereof.
5. EXPENSES OF THE COMPANY. The Company agrees that it will pay the
following fees and expenses:
(a) All fees and expenses of its legal counsel who will be engaged to
prepare certain information, documents and papers for filing with the Commission
and with state or local securities authorities;
(b) All fees and expenses of its accountants incurred in connection with
the offering of the Shares and the preparation of all documents and filings made
as part of the offering;
(c) All costs in issuing and delivering the Shares;
(d) All costs of printing and delivering to the Underwriter and dealers as
many copies of the Registration Statement and amendments, preliminary
Prospectuses and definitive Prospectuses as reasonably requested by the
Underwriter;
(e) All of the Company's mailing, telephone, travel, clerical and other
office costs incurred or to be incurred in connection with the offering of the
Shares;
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(f) All fees and costs which may be imposed by the Commission, the various
state or local securities authorities and the NASD for review of the offering of
the Shares;
(g) All other expenses incurred by the Company in performance of its
obligations under this Agreement.
6. WARRANTS.
(a) Subject to the sale of all of the Shares, the Company agrees to sell
to the Underwriter warrants to purchase common stock ("Warrants") for a purchase
price of $100 entitling the Underwriter to purchase shares of the Company's
common stock in an amount equal to 10% of the Shares sold in the offering.
(b) The Warrants may not be exercised for a period of 12 months following
the Effective Date. However, if the Company plans to merge, reorganize or take
any other action that would terminate the Warrants, the Warrants will be
exercisable immediately prior to such action. The Company will provide the
Underwriter with notice of any tender offer being made for the Company's shares
as soon as practicable after the Company becomes aware of such tender offer. The
Warrants will be exercisable for a period of four years, such period to begin 12
months after the Effective Date. If the Warrants are not exercised during their
term, they will by their terms automatically expire. The purchase price of the
shares underlying the Warrants will be 120% of the offering price of the Shares
hereunder during the period that the Warrants are exercisable. The Company will
set aside and at all times have available a sufficient number of shares of its
common stock to be issued upon the exercise of the Warrants. The shares
underlying the warrants are hereinafter called "Warrant Shares" which term shall
include all shares of common stock that have been issued upon the exercise of
the Warrants and all unissued shares of common stock underlying the Warrants.
The Warrants may not be sold, transferred, assigned, or hypothecated for a
period of 12 months after the Effective Date except to officers of the
Underwriter, except as a result of the death of any such officer and except to
successors to the Underwriter's business.
(c) The Warrants will be evidenced by certificates issued by the Company
and delivered to the Underwriter, which shall contain such terms and conditions
as are required by the Underwriter, including anti-dilution provisions
reasonably acceptable to the Underwriter relating to stock splits, stock
dividends and other like matters. Any transfer of the Warrants by the
Underwriter to any person must be made in compliance with the Act.
(d) The Underwriter agrees that the Warrants and any certificates
representing the Warrant Shares will bear the following legend:
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"The securities represented by this Certificate may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Securities Act of 1933
(the "Act"), or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the
satisfaction of the Company."
(e) Upon written request of the Underwriter made at any time within the
period beginning one year and ending five years after the Effective Date, the
Company will file, no more than once, a registration statement under the Act,
registering the Warrants and Warrant Shares. The Company will use its best
efforts to qualify or register the Warrants and Warrant Shares for sale in at
least the same states as the Shares were registered or qualified. If Warrants
are registered or qualified, the Company agrees to take whatever actions are
necessary so that during the next 12 months after the effective date of such
registration or qualification, a current registration statement relating to the
Warrant Shares will be effective with the Commission. The Company agrees to use
its best efforts to cause the registration statement to become effective. All
expenses of such registration or qualification including, but not limited to,
legal, accounting, and printing fees, will be borne by the Company.
(f) The Company agrees that, if at any time within the period beginning
one year and ending 5 years after the Effective Date, it should file a
registration statement with the Commission pursuant to the Act or file a
Regulation A Offering Statement under the Act, regardless of whether some of the
holder(s) of the Warrants and Warrant Shares have availed itself (themselves) of
the right provided in paragraph 6(e) above, the Company, at its own expense,
will offer the holders the opportunity to register or qualify the Warrants and
Warrant Shares, limited in the case of a Regulation A offering to the amount of
the available exemption. This paragraph is not applicable to a registration
statement filed by the Company with the Commission on Form S-8 or any other
inappropriate form.
(g) In addition, the Company will cooperate, within the period beginning
one year and ending five years after the Effective Date, with the then holder(s)
of at least 51% of the Warrant Shares in preparing and signing any registration
statement or Regulation A Offering Statement, in addition to the registration
statements and Regulation A Offering Statements discussed above, required in
order to sell or transfer the Warrants or Warrant Shares and will supply all
information required, but such additional registration statement or Offering
Statement shall be at the then holders' cost and expense.
(h) The Company will not be required to pay any underwriting commissions,
discounts or similar expenses relating to the Warrants and/or Warrant Shares
that are registered or qualified pursuant to paragraph 6(e), (f) or (g) of this
Agreement.
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7. THREAT OF REGULATORY ACTION. The Company and the Underwriter agree to
advise each other immediately and confirm in writing the receipt of any threat
of or the initiation of any steps or procedures which would impair or prevent
the right to offer the Shares or the issuance of any "suspension orders" or
other prohibitions or preventing or impairing the proposed offering of the
Shares. In the case of the happening of any such event, neither the Company nor
the Underwriter will acquiesce in such steps, procedures or suspension orders if
such acquiescence would adversely affect the other party and, in such event,
each party agrees to actively defend any such actions or orders unless both
parties agree in writing to acquiesce in such actions or orders or unless
counsel for each party advises the parties that the probability of successfully
defending against such actions or orders is remote.
8. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees with the
Underwriter as follows:
(a) The Company will advise the Underwriter as soon as the Company is
advised of any comments by the Commission, of any request made by the Commission
for an amendment to the Registration Statement or Prospectus or for supplemental
information, and of any order or of the institution of any adverse proceedings
with respect to the offering of the Shares. The Company will immediately deliver
to the Underwriter copies of any papers involved.
(b) The Company will use its best efforts to qualify the sale of the
Shares in such states as shall be reasonably designated by the Underwriter. The
officers, directors, promoters and shareholders of the Company will comply with
applicable state escrow requirements, including those pertaining to the escrow
of shares, provided that the period of escrow shall not exceed two years from
the Effective Date and provided that the period of escrow shall only be based
upon the passage of time.
(c) The Company will provide the Underwriter and its counsel with copies
of all applications for the registration of Shares filed with the various state
authorities and will provide the Underwriter and its counsel with copies of all
comments and orders received from these authorities.
(d) The Company will deliver to the Underwriter and to other
broker-dealers as directed by the Underwriter as many copies of preliminary
Prospectuses as the Underwriter may reasonably request. The Company will deliver
to the Underwriter and to other broker-dealers as requested by the Underwriter
as many copies of the definitive Prospectus as the Underwriter may reasonably
request during the period of the offering and for 25 days thereafter.
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(e) The Company will furnish the Underwriter for so long as the Company's
common stock is registered under the Securities Exchange Act of 1934 with:
(i) Within 90 days after the close of each fiscal year of the
Company, a financial report of the Company and its subsidiaries on a
consolidated basis, such report to include such information in such form
as the Company shall be required to include in reports for that fiscal
year to be filed with the Commission and such report to he certified by
independent public accountants;
(ii) Within 60 days after the end of each quarterly fiscal period of
the Company other than the last quarterly fiscal period in any fiscal
year, copies in printable form of the financial statements of the Company
and its subsidiaries on a consolidated basis, for that period and as of
the end of that period, which financial statements shall include a
narrative discussion of such financial statements and of the business
conducted by the Company and its subsidiaries during such fiscal quarter
and such information in such form as the Company shall be required to
include in reports for that period to be filed with the Commission, all
subject to year-end adjustment, signed by the principal financial or
accounting officer of the Company;
(iii) As soon as is available, a copy of each report of the Company
mailed to shareholders or filed with the Commission;
(iv) Copies of all news, press or public information releases 24
hours prior to when such are made; and
(v) Upon request in writing from the Underwriter, such other
information as may reasonably be requested concerning the properties,
business and affairs of the Company and its subsidiaries.
(f) The Company agrees to notify the Underwriter immediately within the 90
day period after the Effective Date of any event that materially affects the
Company or its securities and that should be set forth in an amendment or
supplement to the Prospectus in order to make the statements made therein not
misleading. Similarly, the Company agrees to as soon as possible thereafter
prepare and furnish to the Underwriter as many copies as the Underwriter may
request of an amended Prospectus or a supplement to the Prospectus in order that
the Prospectus as amended or supplemented will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or that is necessary in order to make the statements made therein not
misleading.
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(g) The Company will file with the appropriate state securities
commissioners any sales and other reports required by the rules and regulations
of such agencies and will supply copies to the Underwriter.
(h) The Company will make a filing under Section 12(g) of the Securities
Exchange Act of 1934, as amended, on Form 8-A with respect to its common stock
and will cause it to become effective on or before the Effective Date. The
Company agrees to deliver a copy of the Form 8-A to the Underwriter and to its
counsel when filed.
(i) Except with the Underwriter's approval, the Company agrees that the
Company will not do the following until (a) the completion of the offering of
the Shares, or (b) the termination of this Agreement, or (c) 90 days after the
Effective Date, whichever occurs later:
(i) Undertake or authorize any change in its capital structure or
authorize, issue, or permit any public or private offering of additional
securities;
(ii) Authorize, create, issue, or sell any funded obligations, notes
or other evidences of indebtedness, except in the ordinary course of
business and within 12 months of their creation;
(iii) Consolidate or merge with or into any other corporation; or
(iv) Create any mortgage or any lien upon any of its properties or
assets except in the ordinary course of its business.
(j) For so long as the Company's common stock is registered under the
Securities Exchange Act of 1934, as amended, the Company will hold an annual
meeting of shareholders for the election of directors within 180 days after the
end of each of the Company's fiscal years and, within 180 days, after the end of
each of the Company's fiscal years, will provide the Company's shareholders with
the audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the Securities Exchange Act of 1934, as amended, and shall
be included in an annual report meeting the requirements of the Rule. Further,
the Company agrees to make available to the Underwriter and the Company's
shareholders in printable form within 60 days after the end of each fiscal
quarter of the Company (other than the last fiscal quarter in any fiscal year)
reasonably itemized financial statements of the Company and its subsidiaries for
the fiscal quarter just ended and a narrative discussion of such financial
statements and the business conducted bv the Company and its subsidiaries during
such quarter.
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(k) As soon as practical, but in any event not later than 15 months after
the Effective Date, the Company will make generally available to its securities
holders, according to Section 11(a) of the Act, a consolidated statement of
operations of the Company and its subsidiaries in reasonable detail covering a
period of at least 12 months beginning after the Effective Date and will advise
the Underwriter in writing that such statement has been made available.
(l) Within 30 days after the successful termination of the offering of the
Shares, the Company agrees to submit information about the Company to be
included in various securities manuals, including ▇▇▇▇▇'▇ OVER-THE-COUNTER
MANUAL and Standard & Poor's STANDARD CORPORATION RECORDS to facilitate
secondary trading in the Shares.
(m) The Company agrees to cause the stock certificates of all of the
current shareholders of the Company and of any future officers or directors of
the Company to be clearly legended as being restricted against transfer without
compliance with the Act and to cause the Company's transfer agent to put stop
transfer instructions against such stock certificates.
(n) Subject to the sale of all of the Shares, the Company agrees that for
a period of two years from the Effective Date, the Underwriter shall have a
preferential right to purchase for its account or to sell for the account of the
Company or its subsidiaries any securities with respect to which the Company or
its subsidiaries may seek a public or private offering for cash. The Company
will consult the Underwriter with regard to any such covered offering for cash
and will offer the Underwriter the opportunity to purchase or sell any such
securities on terms not less favorable to the Company or its subsidiaries than
it or they can secure elsewhere. The Underwriter shall have 20 days in which to
accept such offer. If the Underwriter rejects such offer, the Company shall be
able to sell such securities on terms not less favorable than those offered to
the Underwriter. If such securities are not sold within a period of 120 days,
the Underwriter shall once again have the rights specified herein with respect
to the sale or purchase of such securities.
(o) The officers and directors of the Company at the time of the filing of
the Company's Registration Statement and at the effective date of the Company's
Registration Statement must be reasonably acceptable to the Underwriter.
9. COMPANY'S INDEMNIFICATION. The Company shall indemnify and hold
harmless each Underwriter and their respective officers, directors, employees
and agents against any and all loss, claim, damage or liability, joint or
several, to which such Underwriter or such person ("covered person") may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, or liability (or action with respect thereto) arises out of or is based
upon (a) any violation of any registration requirements; (b) any improper use of
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sales literature by the Company; (c) any untrue statement or alleged untrue
statement made by the Company in Paragraph 1 hereof; (d) any untrue statement or
alleged untrue statement of a material fact contained (i) in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus, or the Final
Prospectus or any amendment or supplement thereto, or (ii) in any application or
other document, executed by the Company specifically for such application or
based upon written information furnished by the Company, filed in order to
qualify the Shares under the securities laws of the states where filings were
made (any such application, document, or information being hereinafter called
"Blue Sky Application"); or (e) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Final Prospectus or any
amendment or supplement thereto or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and shall reimburse the Underwriter or covered person for any legal
or other reasonable expenses incurred by such Underwriter or covered person in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them shall promptly
refund them; except that the Company shall not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an 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 through the Underwriter
specifically for use in the preparation of the Registration Statement, any
Preliminary Prospectus, and the Final Prospectus or any amendment or supplement
thereto, or any Blue Sky Application.
10. UNDERWRITER'S INDEMNIFICATION. The Underwriter shall indemnify and
hold harmless the Company against any and all loss, claim, damage or liability,
joint or several, to which the Company may become subject under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability (or action in
respect thereto) arises out of or are based upon (a) any untrue statement or
alleged untrue statement of a material fact contained (i) in the Registration
Statement, any Preliminary Prospectus, or the Final Prospectus or any
amendment or supplement thereto or (ii) in any Blue Sky Application; or (b) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Final Prospectus or any amendment or supplement
thereto or in any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading; except that
such indemnification shall be available in each such 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 reliance upon information and in
conformity with written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation thereof; and shall
reimburse any legal or other expenses reasonably incurred by the Company in
connection with the investigation or defending against any such loss, claim,
damage, liability, or action.
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10A. RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Paragraph 9 or 10 above of written notice of the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such section, notify the indemnifying party
in writing of the claim or the commencement of that action; the failure to
notify the indemnifying party shall not relieve it of any liability which it may
have to an indemnified party, except to the extent that the indemnifying party
did not otherwise have knowledge of the commencement of the action and the
indemnifying party's ability to defend against the action was prejudiced by such
failure. Such failure shall not relieve the indemnifying party from any other
liability which it may have to the indemnified party or any person identified in
Paragraph 11 below. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under such
section for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of
investigation.
11. CONTRIBUTION. If the indemnification provided for in Paragraphs 9 and
10 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages, or liabilities referred to in Paragraphs 9 or 10 above (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriter on the other from the offering of
the Shares; or (b) if the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as is appropriate to reflect the
relative benefits referred to in clause (a) above but also the relative fault of
the Company on the one hand and the Underwriter on the other in connection with
the statements or omissions which resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Underwriter shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
commission and un-itemized expenses received by the Underwriter, in each case as
set forth in the table on the cover page of the Final Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Company or the Underwriter and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such untrue statement or omission. For purposes of this Paragraph 11, the term
"damages" shall include any counsel fees or other expenses reasonably incurred
by the Company or the Underwriter
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in connection with investigating or defending any action or claim which is the
subject of the contribution provisions of this Paragraph 11. Notwithstanding the
provisions of this Paragraph 11, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
sold by it and distributed to the public were offered to the public exceeds the
amount of any damages which the Underwriter has otherwise been required to pay
by reason of any such untrue statements or omissions. No person adjudged guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise.
11A. REIMBURSEMENT OF UNDERWRITER. In addition to its obligations under
Paragraph 9 of this Agreement, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any loss, claim, damage, or liability
described in Paragraph 9 of this Agreement, it will reimburse the Underwriter on
a monthly basis (or more often, if requested) for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of any
such interim reimbursement payments are so held to have been improper, the
Underwriter shall promptly return such amounts to the Company together with
interest, compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit rating) announced
from time to time by Colorado State Bank of Denver, Denver, Colorado (the "Prime
Rate"). Any such interim reimbursement payments that are not made to the
Underwriter within 30 days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request until the date paid.
11B. REIMBURSEMENT OF THE COMPANY. In addition to their obligations under
Paragraph 10 of this Agreement, the Underwriter agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage or
liability described in Paragraph 10 of this Agreement, it will reimburse the
Company on a monthly basis (or more often, if requested)
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for all reasonable legal or other expenses incurred by the Company in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Underwriter's obligation to reimburse
the Company for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any portion, or all, of any such interim reimbursement payments are
so held to have been improper, the Company shall promptly return such amounts to
the Underwriter together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments that are not
made to the Company within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request until the date paid.
12. CONDITIONS PRECEDENT TO THE CLOSING OR RELEASE DATE. All obligations
of the Underwriter and the Closing or Release Date (as defined below) under this
Agreement are subject to the following conditions precedent:
(a) Counsel for the Underwriter shall have completed a review of the form
and content of the Registration Statement and Prospectus, of the organization
and present legal status of the Company and of the legality and validity of the
authorization and issuance of the issued and outstanding stock of the Company
and of the Shares.
(b) The Company shall have performed all of its obligations under this
Agreement. All of the statements, representations and warranties contained in
this Agreement shall be complete and true.
(c) From the date of this Agreement until the completion of the offering,
no material adverse changes shall have occurred in the business, properties and
assets of the Company other than changes occurring in the ordinary course of
business.
(d) From the date of this Agreement until the completion of the offering,
no claims or litigation shall have been instituted or threatened against the
Company for substantial amounts or which would materially adversely affect the
Company, its business or its property and no reasonable basis exists for such
claims or threats. Further, no proceeding shall have been instituted or
threatened against the Company before any regulatory body wherein an unfavorable
ruling would have a material adverse effect on the Company.
(e) From the date of this Agreement until the completion of the offering
of the Shares, no material adverse change shall have occurred in the operation,
financial condition, management or credit of the Company or in any conditions
affecting the prospects of its business.
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(f) From the date of this Agreement until the completion of the offering,
the Company shall not have sustained any loss on account of fire, flood,
accident or calamity of such character as materially adversely affects its
business or property, regardless of whether or not the loss has been insured.
(g) The Commission shall have declared the Company's Form 8-A effective
and the Shares shall have been approved for trading on either of the NASDAQ
SmallCap Market or American Stock Exchange.
(h) The Underwriter shall have received from the independent public
accountants for the Company two letters addressed to the Underwriter, one dated
the Effective Date and one dated the date of the release of the funds from the
Escrow Account ("Release Date") to the Company, to the effect that they are
independent public accountants with respect to the Company within the meaning of
the Act and the published Rules and Regulations. In the letter dated the date of
this Agreement, they shall state their conclusions and findings with respect to
such financial, accounting, and statistical information and other matters
contained in the Registration Statement as have been approved by the Underwriter
prior to the execution of this Agreement. In the letter dated the Release Date,
they shall state as of such date their conclusions and findings with respect to
the financial information and other matters covered by their letter dated the
date of this Agreement, the purpose of the letter to be delivered on the Release
Date being to update in all respects the conclusions and findings set forth in
the prior letter or letters.
(i) On the Release Date, the Underwriter shall have received from the
president or vice president of the Company and the treasurer of the Company
certificates dated as of such date, in form satisfactory to the Underwriter, to
the effect that:
(i) The representations and warranties of the Company contained in
paragraph 1 of this Agreement are complete and true.
(ii) All of the conditions precedent in paragraphs 12(b)-12(g) of
this Agreement have been performed and the representations of these
conditions precedent are true.
(iii) No stop order or other proceedings have been instituted or
threatened by the Commission or any state authority which would adversely
affect the offering of the Shares.
(iv) This Agreement and the Warrants have been duly authorized and
executed and constitute valid agreements of the Company and with respect
to the Warrants are binding agreements and are enforceable according to
their terms.
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(v) The respective signers have each carefully examined the
Registration Statement and definitive Prospectus and any amendments and
supplements, and to the best of their knowledge the Registration Statement
and definitive Prospectus and any amendments and supplements contain all
statements required to be stated therein. All statements contained therein
are true and correct, and neither the Registration Statement, definitive
Prospectus nor any amendment, supplement or sticker thereto includes any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading. Since the Effective Date of the Registration Statement,
there has occurred no event required to be stated therein or necessary to
make the statements therein not misleading, and since the Effective Date
of the Registration Statement, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been so
set forth.
(j) On the Effective Date and on the closing date, the Underwriter shall
have received from the Company's legal counsel a Blue Sky memorandum setting
forth the states in which the Shares may be sold and the number of Shares that
may be sold in each such state.
(k) On the Release Date the Company and the Underwriter shall have
received a written opinion from the Company's counsel stating that:
(i) The Company has filed a Registration Statement on Form S-1
relating to the Shares with the Commission pursuant to the Act, the
Registration Statement has become effective under the Act, and the
Registration Statement, Prospectus and all other documents filed with the
Commission comply as to form with all requirements of the Act in all
material respects (except for the financial statements and other financial
data included therein, as to which counsel need express no opinion). The
Company has also filed Form 8-A under the Securities Exchange Act of 1934
which has become effective.
(ii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Texas,
and has the corporate power and authority to own its properties and to
carry on its business as described in the Registration Statement and
Prospectus.
(iii) The Company and its subsidiaries duly qualified and in good
standing as foreign corporations authorized to do business in all
jurisdictions in which the character of the properties owned or held under
lease or the nature of the business conducted requires such qualification
except where the failure to qualify would not have a material adverse
effect on the business of the Company.
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(iv) To the best knowledge of counsel and after reasonable
investigation, the Company possesses adequate licenses, certificates,
authorizations or permits issued by the appropriate federal, state and
local regulatory authorities necessary to conduct its business as
described in the Prospectus and to retain possession of its properties.
Counsel is unaware of any notice of any proceeding relating to the
revocation or modification of any of these certificates or permits having
been received by the Company.
(v) That certain Agreement and Plan of Reorganization of even date
herewith has become effective, is legally binding in accordance with its
terms and United Wellhead Services, Inc., Flare King, Inc. and Hi-Tech
Compression, Inc. are, as of the date hereof, wholly owned subsidiaries of
the Company; Counsel is unaware of any other subsidiaries of the Company.
(vi) This Agreement and the Warrants to be issued to the Underwriter
or its designatees have been fully authorized and executed by the Company
and constitute valid agreements of the Company except that no opinion need
be expressed as to the validity of the indemnification provisions insofar
as they are or may be held to be violative of public policy (under either
state or federal law), the availability of specific performance or other
equitable remedies, the effects of bankruptcy, insolvency, moratorium and
all other similar laws and decisions affecting the rights of creditors
generally.
(vii) The authorized and outstanding capital stock of the Company is
as set forth in the Prospectus; the Common Stock of the Company and the
Warrants to be issued to the Underwriter conform in all material respects
to the statements concerning them in the Prospectus; the outstanding
Common Stock of the Company contain no preemptive rights; the Shares to be
sold in the offering and the Articles of Incorporation and the Warrants
have been, and the Common Stock issuable upon exercise of the Warrants,
will be, duly and validly authorized and, upon issuance thereof and
payment therefor validly issued, fully paid and nonassessable, and will
not be subject to the preemptive rights of any shareholder of the Company.
(viii) A sufficient number of shares of Common Stock have been duly
reserved for issuance upon the exercise of the Warrants.
(ix) To the best knowledge of counsel and after reasonable
investigation, the Company is not in default of any of the contracts,
leases or agreements to which it is a party.
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(x) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Common Stock or the Warrants contemplated by this Agreement, except
for those consents, approvals, authorizations, and orders which the
Company has obtained and which are in full force and effect under the
Securities Act, the Exchange Act, and under applicable state securities
laws in connection with the purchase and distribution of such securities
by the Underwriter, and the clearance of the underwriting compensation by
the NASD.
(xi) The issuance and sale of the Shares as described in the
Prospectus and the Warrants, the consummation of the transactions herein
contemplated, and the compliance with the terms of this Agreement will not
conflict with or result in a breach of any of the terms, conditions, or
provisions of or constitute a default under the articles of incorporation
or by-laws of the Company; nor, to such counsel's knowledge, will they
conflict with or result in a breach of any of the terms, conditions, or
provisions of any note, indenture, mortgage, deed of trust, or other
agreement or instrument to which the Company is a party or by which the
Company or any of its property is bound, other than for which the Company
has received a consent or waiver of such conflict, breach or default, or
where such conflict or breach would not have a material adverse effect on
the business of the Company; or any existing law (provided this paragraph
shall not relate to federal or state securities laws), order, rule,
regulation, writ, injunction, or decree known to such counsel of any
government, governmental instrumentality, agency, body, arbitration
tribunal, or court, domestic or foreign, having jurisdiction over the
Company or its property.
(xii) Counsel is unaware of any contracts or other documents
required to be described in the Registration Statement or in the
Prospectus or to be filed as exhibits to the Registration Statement which
have not been described or filed as required.
(xiii) Counsel is unaware of any contracts or documents that have
not been disclosed in the Prospectus that are material to the
representations in the Prospectus and that would require disclosure in
order to make statements made not misleading.
(xiv) To the best knowledge of counsel and after reasonable
investigation, and except as described in the Prospectus, the Company has
marketable title to all properties described in the Prospectus as owned by
it; the properties are free and clear of all liens, charges, encumbrances
or restrictions; all of the leases, subleases and other agreement under
which the Company holds its properties are in full force and effect; the
Company is not in default under any of the material terms or provisions of
any of the leases, subleases or other agreements; and there are no claims
against
▇.▇. ▇▇▇▇ & Company, Inc.
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September ___, 1997
the Company concerning its rights under the leases, subleases and other
agreements and concerning its right to continued possession of its
properties.
(xv) Counsel has no knowledge of any promoter, affiliate, parent or
control person of the Company except as are described in the Registration
Statement and Prospectus.
(xvi) To the knowledge of counsel, the Company has paid all taxes
which are shown as due and owing on the financial statements included in
the Registration Statement and Prospectus.
(xvii)To the best knowledge of counsel and after reasonable
investigation, no stop order or other proceedings have been instituted or
threatened by the Commission or any state or local authority which would
adversely affect the offering of the Shares.
(xviii) To the best knowledge of counsel and after reasonable
investigation, no claim or litigation has been instituted or threatened
against the Company.
(xix) To the best knowledge of counsel and after reasonable
investigation, all material documents and contracts relating to the
Company's affairs have been furnished to the Underwriter's counsel.
(xx) To the best knowledge of counsel and after reasonable
investigation, neither the Company nor its affiliates is currently
offering any securities for sale except as described in the Registration
Statement.
(xxi) On the basis of a reasonable inquiry by such counsel,
including participation in conferences with representatives of the Company
and its accountants at which the contents of the Registration Statement
and the Prospectus and related matters were discussed, and without
expressing any opinion as to the financial statements or other financial
data contained therein: (i) nothing has come to such counsel's attention
which leads them to believe that the Registration Statement and the
Prospectus, do not comply as to form in all material respects with the
require ments of the Securities Act; and (ii) nothing has come to their
attention which leads them to believe that the Registration Statement or
the Prospectus contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
▇.▇. ▇▇▇▇ & Company, Inc.
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September ___, 1997
As to all factual matters, including without limitation the issuance of
stock certificates and receipt of payment therefor, the states in which the
Company transacts business, and the adoption of resolutions reflected by the
Company's minute book, such counsel may rely on the certificate of an
appropriate officer of the Company. Counsel's opinion as to the validity and
enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any indemnification
or contribution provisions thereof, or as the validity or enforceability of any
such contract or agreement may be limited by bankruptcy or other laws relating
to or affecting creditors' rights generally and by equitable principles.
13. TERMINATION.
(a) This Agreement may be terminated by the Underwriter by notice to the
Company in the event that the Company shall have failed or been unable to comply
with any of the terms, conditions or provisions of this Agreement on the part of
the Company to be performed, complied with or fulfilled within the respective
times herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by the Underwriter in
writing.
(b) This Agreement may be terminated bv the Underwriter bv notice to the
Company if the Underwriter believes in its sole judgment that any adverse
changes have occurred in the management of the Company, that material adverse
changes have occurred in the financial condition or obligations of the Company
or if the Company shall have sustained a loss by strike, fire, flood, accident
or other calamity of such a character as, in the sole judgment of the
Underwriter, may interfere materially with the conduct of the Company's business
and operations regardless of whether or not such loss shall have been insured.
(c) This Agreement may be terminated by the Underwriter by notice to the
Company at any time if, in the sole judgment of the Underwriter, payment for and
delivery of the Shares is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on the New York
or American Stock Exchange, or trading in securities generally on either such
Exchange shall have been suspended, or a general moratorium shall have been
established by federal or state authorities, or (ii) a war or other national
calamity shall have occurred, or (iii) substantial and material changes in the
condition of the market (either generally or with reference to the sale of the
Shares to be offered hereby) beyond normal fluctuations are such that it would
be undesirable, impracticable or inadvisable in the sole judgment of the
Underwriter to proceed with this Agreement or with the public offering or (iv)
of any matter materially adversely affecting the Company.
▇.▇. ▇▇▇▇ & Company, Inc.
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September ___, 1997
(d) In the event any action or proceeding shall be instituted or
threatened against the Underwriter, either in any court of competent
jurisdiction, before the Commission or any state securities commission
concerning its activities as a broker or dealer that would prevent the
Underwriter from acting as such, at any time prior to the effective date
hereunder, or in any court pursuant to any federal, state, local or municipal
statute, a petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of the Underwriter's assets or if the
Underwriter makes an assignment for the benefit of creditors, the Company shall
have the right on three days' written notice to the Underwriter to terminate
this Agreement without any liability to the Underwriter of any kind except for
the payment of expenses as provided paragraphs 4(a) and 5 herein.
(e) Any termination of this Agreement pursuant to this paragraph 13 shall
be without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party hereto,
except that in such event (i) the Underwriter shall provide the Company with a
statement of its accountable expenses, which shall include but are not limited
to, the Underwriter's counsel fees, consultants' fees, entertainment expenses,
travel expenses, postage expenses, office costs, advertising costs, clerical
costs, due diligence meeting expenses, duplication expenses, long-distance
telephone expenses, and general and administrative expenses incurred in
connection with the proposed offering and (ii) if such accountable expenses are
more than the amount of the nonaccountable expense payments the Company has made
to the Underwriter, the Underwriter shall bear such excess or if such
accountable expenses are less than the amount of the nonaccountable expense
payments the Underwriter has received from the Company, the Underwriter shall
return the difference to the Company.
14. FEE UPON OCCURRENCE OF CERTAIN EVENTS. If after signing this Agreement
and before the closing of the offering of the Shares, the Company agrees to a
merger, consolidation or other business combination, or to any acquisition of
its assets, or if the holders of at least 50% of the Company's outstanding
common stock agree to sell or transfer their common stock, the Company will pay
the hereinafter described fee to the Underwriter upon consummation of any such
transaction if the offering of the Shares is thereafter abandoned by the Company
or the Underwriter. If the Company and/or the Company's shareholders receive
only cash in any such transaction, the fee that the Company will pay to the
Underwriter is $100,000 in cash which will be paid upon consummation of the
transaction. In all other cases, the fee payable to the Underwriter by the
Company will have a value of $100,000 but the actual form of such fee and the
time of the payment thereof will be negotiated between the Company and the
Underwriter.
15. NOTICES. All notices shall be in writing and shall be delivered at or
mailed to the following addresses to the following addresses with written
confirmation thereafter:
▇.▇. ▇▇▇▇ & Company, Inc.
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September ___, 1997
To the Company:
UNITED WELLHEAD SERVICES, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
To the Underwriter:
▇.▇. ▇▇▇▇ & COMPANY, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
16. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the Company and the Underwriter (including the participating
dealers as provided in paragraphs 9 and 10) and their successors. Nothing
expressed in this Agreement is intended to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under this Agreement. However, the representations, warranties and
indemnity and defense obligations of the Company included in this Agreement also
inure to the benefit of any person who controls the Underwriter and
participating dealers within the meaning of Section 15 of the Act and the
representations, warranties, indemnities and defense obligations of the
Underwriter and participating dealers inure to the benefit of each officer who
signs the Registration Statement, each director of the Company and each person
who controls the Company within the meaning of Section 15 of the Act.
17. MISCELLANEOUS PROVISIONS.
(a) Time shall be of the essence of this Agreement.
(b) This Agreement shall be construed according to the laws of the State
of Colorado.
(c) The representations and warranties made in this Agreement shall
survive the termination of this Agreement and shall continue in full force and
effect regardless of any investigation made by the party relying upon any such
representation or warranty.
(d) This Agreement is made solely for the benefit of the Company and its
officers, directors and controlling persons within the meaning of Section 15 of
the Act and of the Underwriter and its officers, directors and controlling
persons within the meaning of Section 15 of the Act, and their respective
successors, heirs and personal representatives, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
▇.▇. ▇▇▇▇ & Company, Inc.
Page 30
September ___, 1997
"successor" as used in this Agreement shall not include any purchaser, as such,
of the Shares.
(e) The Underwriter will provide upon closing a list of all the names and
addresses of all participating dealers and shall provide the Company with such
changes of the addresses or names of such participating dealers as occur and of
which the Underwriter is notified. Further, the Underwriter shall use its best
efforts to maintain the current names and addresses of all participating dealers
during the terms of this Agreement.
If this Agreement correctly sets forth our understanding, please indicate
your acceptance in the space provided below for that purpose.
Very truly yours,
UNITED OILFIELD SERVICES, INC.,
a Texas corporation
By:____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
Confirmed and accepted as of the date of this Agreement:
▇.▇. ▇▇▇▇ & COMPANY, INC.,
a Colorado corporation
By:___________________________
▇▇▇▇ ▇. ▇▇▇▇, President
