EXHIBIT 1.1
DRAFT
5/20/97
2,000,000 Shares
ZYDECO ENERGY, INC.
Common Stock
(Par Value $0.001 Per Share)
UNDERWRITING AGREEMENT
_____________, 1997
XXXXX XXXXXX & CO., INC.
As Representative of the
several Underwriters
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
Zydeco Energy, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of 2,000,000 shares (the "Firm Shares")
of the Company's Common Stock, par value $0.001 per share (the "Common Stock"),
to you and the other underwriters named in Schedule I hereto (collectively, the
"Underwriters"), for whom you are acting as representative (the
"Representative"). The Company also has agreed to grant to you and the other
Underwriters an option ("the Option") to purchase up to an additional 300,000
shares of Common Stock (the "Option Shares"), on the terms and for the purposes
set forth in Section 1(b) hereto. The Firm Shares and the Option Shares are
collectively referred to herein as the "Shares" or the "Securities".
The Company hereby confirms as follows its agreements with the
Representative and the several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained and subject to all the terms and conditions of
this Underwriting Agreement (the "Agreement"), the Company agrees to sell to
each Underwriter and each Underwriter, severally and not jointly, agrees to
purchase from the Company at a purchase price of $[ ] per Share, the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule I
hereto, plus such additional number of Firm Shares which such Underwriter may
become obligated to purchase pursuant to Section 10 hereof.
(b) Subject to all the terms and conditions of this Agreement,
the Company grants the Option to the several Underwriters to purchase, severally
and not jointly, the Option
Shares at the same price per share as the Underwriters shall pay for the Firm
Shares. The Option may be exercised only to cover over-allotments in the sale of
the Firm Shares by the Underwriters and may be exercised in whole or in part at
any time and from time to time on or before the 30th day after the date of this
Agreement (or on the next business day if the 30th day is not a business day),
upon notice (the "Option Shares Notice") in writing or by telephone (confirmed
in writing) by the Representative to the Company no later than 5:00 p.m., New
York City time, at least two and no more than five business days before the date
specified for closing in the Option Shares Notice (the "Option Closing Date")
setting forth the aggregate number of Option Shares to be purchased and the time
and date for such purchase. On the Option Closing Date, the Company will issue
and sell to the Underwriters the number of Option Shares set forth in the Option
Shares Notice and each Underwriter will purchase such percentage of the Option
Shares as is equal to the percentage of Firm Shares that such Underwriter is
purchasing, as adjusted by the Representative in such manner as it deems
advisable to avoid fractional shares.
2. Delivery and Payment.
(a) Delivery of the Firm Shares shall be made to the
Representative for the accounts of the Underwriters against payment of the
purchase price by certified or official bank checks payable in New York Clearing
House funds drawn to the order of the Company (the "Closing") at the office of
Xxxxx Xxxxxx & Co., Inc. at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
such other location as shall be agreed upon by the Company and the
Representative. Such payment shall be made at 10:00 a.m., New York City time, on
the third full business day following the date of this Agreement, or at such
other time and date not more than seven business days after the date of this
Agreement, as may be agreed upon by the Representative and the Company (such
date is hereinafter referred to as the "Closing Date"). Time shall be of the
essence and delivery at the time and place specified in this Agreement is a
further condition of the obligation of each Underwriter hereunder.
(b) To the extent the Option is exercised, delivery of the
Option Shares against payment by the Underwriters (in the manner specified
above) will take place at the offices specified above for the Closing Date at
the time and date (which may be the Closing Date) specified in the Option Shares
Notice.
(c) Certificates evidencing the Shares shall be in definitive
form and shall be registered in such names and in such denominations as the
Representative shall request at least two business days prior to the Closing
Date or the Option Closing Date, as the case may be, by written notice to the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be.
(d) The cost of original issue tax stamps, if any, in connection
with the issuance, sale and delivery of the Firm Shares and the Option Shares by
the Company to the respective Underwriters shall be borne by the Company. The
Company will pay and save each Underwriter and any subsequent holder of the
Shares harmless from any and all liabilities with respect to or resulting from
any failure or delay in paying Federal or state stamp and other transfer taxes,
if any, which may be payable or determined to be payable in connection with the
original issuance, sale or delivery to such Underwriter of the Firm Shares and
the Option Shares.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
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(a) A registration statement on Form S-1 (No. 333-[ ]) relating
to the Shares, including a preliminary prospectus relating to the Securities and
such amendments to such registration statement as may have been required to the
date of this Agreement, has been prepared by the Company under the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (collectively
referred to as the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission. The Commission has not issued any order preventing or suspending the
use of the Prospectus (as defined below) or any Preliminary Prospectus (as
defined below) or instituted or, to the knowledge of the Company, threatened any
proceeding for that purpose. The term "Preliminary Prospectus" as used herein
means a preliminary prospectus relating to the Securities included at any time
as part of the foregoing registration statement or any amendment thereto before
it became effective under the Act and any prospectus filed with the Commission
by the Company pursuant to Rule 424(a) of the Rules and Regulations. Copies of
such registration statement and amendments and of each related Preliminary
Prospectus have been delivered to the Representative. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the Company
with the Commission. If such registration statement has become effective, a
final prospectus relating to the Securities containing information permitted to
be omitted at the time of effectiveness by Rule 430A will be filed by the
Company with the Commission in accordance with Rule 424(b) of the Rules and
Regulations promptly after execution and delivery of this Agreement. The term
"Registration Statement" means the registration statement as amended at the time
it becomes or became effective (the "Effective Date"), including all financial
statements and schedules and all exhibits, documents incorporated therein by
reference and all information contained in any final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations or in a term
sheet described in Rule 434 of the Rules and Regulations in accordance with
Section 5 hereof and deemed to be included therein as of the Effective Date by
Rule 430A of the Rules and Regulations. The term "Prospectus" means the
prospectus relating to the Shares as first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, if no such filing is required, the
form of final prospectus relating to the Shares included in the Registration
Statement at the Effective Date.
(b) On the date that any Preliminary Prospectus was filed with
the Commission, the date the Prospectus is first filed with the Commission
pursuant to Rule 424(b) (if required), at all times subsequent to and including
the Closing Date and, if later, the Option Closing Date and when any post-
effective amendment to the Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed with the Commission, the
Registration Statement, each Preliminary Prospectus and the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment or supplement thereto), including the financial statements
included in the Prospectus, did or will comply with all applicable provisions of
the Act and the Rules and Regulations and did or will contain all statements
required to be stated therein in accordance with the Act and the Rules and
Regulations. On the Effective Date and when any post-effective amendment to the
Registration Statement becomes effective, no part of the Registration Statement
or any such amendment did or will contain any untrue statement of material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading. At the Effective Date, the
date the Prospectus or any amendment or supplement to the Prospectus is filed
with the Commission and at the Closing Date and, if later, the Option Closing
Date, the Prospectus did not or will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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(c) The Company is, and at the Closing Date will be, duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company's subsidiary, Zydeco Exploration, Inc. (the "Subsidiary"),
is, and at the Closing Date will be, duly organized, validly existing and in
good standing under the laws of the State of Texas. Each of the Company and the
Subsidiary has, and at the Closing Date will have, full power and authority to
conduct all the activities conducted by it, to own or lease all the assets owned
or leased by it and to conduct its business as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus). Each of the Company and the Subsidiary is,
and at the Closing Date will be, duly licensed or qualified to do business and
in good standing as a foreign organization in all jurisdictions in which the
nature of the activities conducted by it or the character of the assets owned or
leased by it makes such licensing or qualification necessary, except where the
failure to be so qualified does not and will not have a material adverse effect,
singly or in the aggregate, on the business, properties, prospects, assets,
condition (financial or otherwise), net worth or results of operations of the
Company and the Subsidiary taken as a whole (a "Material Adverse Effect").
Except for the stock of the Subsidiary and as disclosed in the Registration
Statement, the Company does not own, and at the Closing Date will not own,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity. Complete and correct
copies of the articles or certificate of incorporation and of the bylaws of the
Company and the Subsidiary and all amendments thereto have been delivered to the
Placement Agents, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date.
(d) The outstanding shares of capital stock of each of the
Company and the Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and are not subject to any preemptive or similar
rights. The issued shares of the Subsidiary are owned by the Company free and
clear of any perfected security interest or any liens, encumbrances, claims or
other security interests, other than as described in the Registration Statement.
The Shares will be, upon such issuance and payment therefor, duly authorized,
validly issued, fully paid and nonassessable and will not be subject to any
preemptive or similar rights. The Company has and will have, a duly authorized,
issued and outstanding capitalization as set forth under the caption
"Capitalization" in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) as of the date of the table thereunder
and on the Closing Date and the Option Closing Date will have the adjusted
capitalization set forth therein as of the date of the table thereunder, based
on the assumptions set forth therein. The securities of the Company and the
Subsidiary conform in all material respects to the descriptions thereof
contained in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). Except as set forth or contemplated in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), neither the Company nor the
Subsidiary have outstanding, and at the Closing Date and, if later, the Option
Closing Date will not have outstanding, any options to purchase, or any rights
or warrants to subscribe for, or any securities or obligations convertible into,
or any contracts or commitments to issue or sell, any shares of its capital
stock or any such warrants, convertible securities or obligations.
(e) The consolidated financial statements and the related notes
and schedules thereto included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present the consolidated financial condition, results of
operations, shareholders' equity and cash flows of the Company and its
Subsidiary at the dates and for the periods specified therein. Such financial
statements and the related notes and schedules thereto have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise
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noted therein) and such financial statements as are audited have been examined
by Xxxxxx Xxxxxxxx LLP who are independent public accountants within the meaning
of the Act and the Rules and Regulations, as indicated in their reports filed
therewith. The selected financial information and statistical data set forth
under the captions "Prospectus Summary - Summary Consolidated Financial and
Operating Data" and "Selected Consolidated Financial Data" in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) have been prepared on a basis consistent with the financial
statements of the Company and its Subsidiary.
(f) Each of the Company and the Subsidiary maintain a system of
internal accounting control sufficient to provide reasonable assurance 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.
(g) The Company is not required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(h) Except as set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no actions, suits, arbitrations, claims,
governmental or other proceedings pending or threatened against or affecting the
Company, the subsidiary or any respective directors, officers, or, to the
Company's knowledge, stockholders of any of the foregoing in their capacity as
such before or by any court, regulatory body or administrative agency or any
other governmental agency or body, domestic or foreign (collectively,
"Governmental Body"), wherein an unfavorable ruling, decision or finding might
have a Material Adverse Effect. Neither the Company nor the Subsidiary is in
violation of, or in default with respect to, any law, rule, or regulation, or
any order, judgment, or decree, except as described in the Prospectus (or if the
Prospectus is not in existence, in the most recent Preliminary Prospectus) or
such as in the aggregate do not now have and can reasonably be expected in the
future not to have a Material Adverse Effect; nor is the Company or the
Subsidiary presently required under any order, judgment or decree to take any
action in order to avoid any such violation or default.
(i) Each of the Company and the Subsidiary has, and at the
Closing Date, the Option Closing Date (if any) will have, all governmental
licenses, permits, consents, orders, approvals, franchises, certificates, leases
and other authorizations (collectively, "Licenses") necessary to carry on its
business and lease or own its properties as contemplated in the Prospectus (or,
if the Prospectus is not in existence, in the most recent Preliminary
Prospectus), except in such case where the failure to have such Licenses will
not have a Material Adverse Effect. Each of the Company and the Subsidiary has,
and at the Closing Date and the Option Closing Date (if any) will have, complied
in all material respects with all laws, regulations and orders applicable to it
or its business and properties, except where the failure to so comply will not
have a Material Adverse Effect. Neither the Company nor the Subsidiary is, and,
at the Closing Date and the Option Closing Date (if any), neither of them will
be, in default (nor has any event occurred which, with notice or lapse of time
or both, would constitute a default) in the due performance and observation of
any term, covenant or condition of any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument
(collectively, a "contract or other agreement") to which either of them is, or
will be, a party or by which any of
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their respective properties is, or will be, bound or affected, which default
would have a Material Adverse Effect. To the best knowledge of the Company, no
other party under any such contract or other agreement is, or will be, in
default in any material respect thereunder. There are no governmental
proceedings or actions pending or overtly threatened in writing for the purpose
of suspending, modifying or revoking any License held, or to be held, by the
Company or the Subsidiary. Neither the Company nor the Subsidiary is in
violation of any provision of its articles of incorporation or bylaws, operating
agreement or other governing instrument, except where such violation will not
have a Material Adverse Effect.
(j) No consent, approval, authorization or order of, or any
filing or declaration with, any Governmental Body is required for the
performance of this Agreement or the consummation of the transactions
contemplated hereby, except such as have been obtained under the Act or the
Rules and Regulations and such as may be required under state securities or Blue
Sky laws or the bylaws and rules of the NASD in connection with the purchase and
distribution by the Underwriters of the Shares.
(k) The Company has full power (corporate and other) and
authority to enter into and consummate the transactions provided for in this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and, assuming that this Agreement is a binding agreement of yours,
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting the enforcement of
creditors' rights and the application of equitable principles relating to the
availability of remedies and except as rights to indemnity or contribution may
be limited by federal or state securities laws and the public policy underlying
such laws).
None of the Company's execution, delivery or performance of this
Agreement and the transactions contemplated herein, its application of the net
proceeds of the offering in the manner set forth under the caption "Use of
Proceeds" or the conduct of its business as described in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
does now or will in the future conflict with, result in any breach or violation
of any of the terms or provisions of, or constitute a default under, cause (or
permit) the maturation or acceleration of any liability or obligation or the
termination of any right under, or result in the creation or imposition of any
lien, charge, or encumbrance upon, any property or assets of the Company or the
Subsidiary pursuant to the terms of (A) the charter or by-laws of the Company or
the Subsidiary (B) any indenture, mortgage, deed of trust, voting trust
agreement, shareholders' agreement, note agreement or other agreement or
instrument to which the Company or the Subsidiary is a party or by which any of
them may be bound or to which any of their property is or may be subject or (C)
any statute, judgment, decree, order, rule or regulation applicable to the
Company or the Subsidiary of any government, arbitrator, court, regulatory body
or administrative agency or other governmental agency or body, domestic or
foreign, having jurisdiction over the Company or the Subsidiary, or any of their
activities or properties.
(l) All executed agreements or copies of executed agreements,
filed as exhibits to the Registration Statement to which the Company or the
Subsidiary is a party or by which any of them is or may be bound or to which any
of their assets, properties or businesses are or may be subject have been duly
and validly authorized, executed and delivered by the Company or such
Subsidiary, as the case may be, and constitute the legal, valid and binding
agreements of the Company or the Subsidiary, as the case may be, enforceable
against each in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement
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of creditors' rights generally, and general equitable principles relating to the
availability of remedies, and except as rights to indemnity or contribution may
be limited by federal or state securities laws and the public policy underlying
such laws). The descriptions in the Registration Statement of the contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Act and the Rules
and Regulations, and there are no transactions, contracts or other documents
which are required by the Act or the Rules and Regulations to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(m) Except as set forth in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and prior to the Closing
Date and, if later, the Option Closing Date: (i) there has not been, and will
not have been, any change in the capitalization of the Company or any material
adverse change in the business, properties, prospects, condition (financial or
otherwise), net worth or results of operations of the Company arising for any
reason whatsoever; (ii) the Company has not incurred, and will not have incurred
any material liabilities or obligations, direct or contingent; (iii) the Company
has not and will not have entered into any material transactions other than
pursuant to this Agreement; (iv) the Company has not and will not have paid or
declared any dividends or other distributions of any kind on any class of its
capital stock; (v) there has not and will not have been any change in the
capitalization of the Subsidiary or any material adverse change in the business,
properties, prospects, condition (financial or otherwise), net worth or results
of operations of any of them, in any case arising for any reason whatsoever;
(vi) the Subsidiary does not have nor will have incurred any material
liabilities or obligations, direct or contingent, (vii) the Subsidiary does not
have nor will have entered into any material transactions other than as
contemplated by this Agreement; and (viii) the Subsidiary has not or will not
have paid or declared any dividends or other distributions of any kind on any
class of its capital stock, partnership interests or other equity securities.
(n) No labor disturbance by the employees of the Company or the
Subsidiary exists or, to the Company's knowledge, is imminent which may have a
Material Adverse Effect.
(o) Since its inception, neither the Company nor the Subsidiary
has incurred any material liability arising under or as a result of the
application of the provisions of the Act or any state securities or Blue Sky
laws.
(p) Each of the Company and the Subsidiary owns, or is licensed
or otherwise has sufficient right to use, the proprietary knowledge, inventions,
patents, trademarks, service marks, trade names, logo marks and copyrights used
in or necessary for the conduct of its business (collectively "Rights") as
described in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). No claims have been asserted against the Company
or the Subsidiary by any person with respect to the use of any such Rights or
challenging or questioning the validity or effectiveness of any such Rights. The
use, in connection with the business and operations of the Company of such
Rights does not, to the Company's best knowledge, infringe on the rights of any
person.
(q) There are no contracts, agreements or understandings between
the Company or the Subsidiary and any person granting such person the right to
require the Company to file a registration statement under the Act with respect
to any securities of the
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Company owned or to be owned by such person or to require the Company to include
such securities under the Registration Statement (other than those that have
been disclosed in the Prospectus or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), that have not been waived with respect to
the Registration Statement.
(r) Neither the Company nor any of its officers, directors or
affiliates (within the meaning of the Rules and Regulations) has taken, directly
or indirectly, any action designed to stabilize or manipulate the price of any
security of the Company, or which has constituted or which might in the future
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of the Company, to facilitate the sale or resale of
the Shares or otherwise.
(s) Each of the Company or Subsidiary, as the case may be, has
good and marketable title to all interests in oil and gas properties each owns,
title investigations having been conducted by the Company or Subsidiary in
accordance with customary practice in the oil and gas industry, good and
marketable title in fee simple to all other real property each owns and good and
marketable title to all personal property each owns, in each case free and clear
of all liens, claims, security interests or other encumbrances and defects
except as such are described in the Prospectus (or, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) or such as do not
materially adversely affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiary, taken as a whole. The property (real and personal)
held under lease or option by each of the Company or the Subsidiary, as the case
may be, is held by it under valid, subsisting and enforceable leases or options
with only such exceptions as in the aggregate are not materially burdensome and
do not interfere in any material respect with the conduct of the business or
contemplated conduct of the business of the Company and the Subsidiary, taken as
a whole.
(t) The partnership agreements, participation agreements, joint
development agreements, joint operating agreements, farmout agreements, turnkey
contracts and other agreements described in the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus)
relating to the Company's or the Subsidiary's rights with respect to the
ownership, lease or operation of oil and gas properties, the acquisition of
interests in oil and gas properties or the exploration for, development of or
production of oil and gas reserves thereon constitute valid and binding
agreements of the Company or its Subsidiary and, to the best knowledge of the
Company, of the other parties thereto, enforceable in accordance with their
terms, except as enforceability may be subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(u) The Common Stock is currently listed on the Nasdaq Stock
Market's Small Cap Market (the "Nasdaq Small Cap Market").
(v) The Subsidiary is not currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on the Subsidiary's capital stock from repaying to the Company any
loans or advances to such Subsidiary from the Company or from transferring any
of the Subsidiary's property or assets to the Company.
(w) Neither the Company nor the Subsidiary nor any of their
respective employees or agents has made any payment of funds of the Company or
the Subsidiary or received, or retained any funds in violation of any law, rule
or regulation of a character required to be disclosed in the Prospectus (or, if
the Prospectus is not in existence, the most recent
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Preliminary Prospectus).
(x) The business, operations and facilities of the Company and
the Subsidiary have been, are being and will be conducted in compliance with all
applicable laws, ordinances, rules, regulations, licenses, permits, approvals,
plans, authorizations or requirements relating to occupational safety and
health, or pollution, or protection of health or the environment (including,
without limitation, those relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
substances, materials or wastes into ambient air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, gaseous or liquid in nature) of any governmental department, commission,
board, bureau, agency or instrumentality of the United States, any state or
political subdivision thereof, or any foreign jurisdiction, and all applicable
judicial or administrative agency or regulatory decrees, awards, judgments and
orders relating thereto; and neither the Company nor the Subsidiary has received
any notice from any governmental instrumentality or any third party alleging any
violation thereof or liability thereunder (including, without limitation,
liability for costs of investigating or remediating sites containing hazardous
substances and/or damages to natural resources).
(y) Each of the Company and the Subsidiary own or possess, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, know how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names necessary to carry on their businesses
as presently conducted by them, and has filed all necessary federal, state and
local and other material tax returns that are required to be filed or has
requested extensions thereof and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the extent that
any of the foregoing is due and payable.
(z) Each of the Company and the Subsidiary is insured by
insurers of recognized financial responsibility against such losses and risks as
are prudent and customary in the business in which the Company or the Subsidiary
is engaged; neither the Company nor the Subsidiary has been refused any
insurance coverage sought or applied for; and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires.
(aa) Each certificate signed by any officer of the Company and
delivered to the Representative or counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(bb) The Company has prepared and filed with the Commission
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") an appropriate registration statement form to register the
Common Stock under the Exchange Act effective upon the effectiveness of the
Registration Statement.
4. Public Offering of the Shares. It is understood that the Underwriters
will make a public offering of the Shares and at the price and upon the other
terms set forth in the Prospectus and subject to the terms and conditions
hereunder.
5. Agreements of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement,
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if not effective at the time of execution of this Agreement, and any amendments
thereto, to become effective as promptly as practicable. If required, the
Company will file the Prospectus and any amendment or supplement thereto with
the Commission in the manner and within the time period required by Rule 424(b)
under the Act. During any time when a prospectus relating to the Shares is
required to be delivered under the Act, the Company (A) will comply with all
requirements imposed upon it by the Act and the Rules and Regulations to the
extent necessary to permit the continuance of sales of or dealings in the Shares
in accordance with the provisions hereof and of the Prospectus, as then amended
or supplemented, and (B) will not file with the Commission the prospectus, any
amendment or supplement to such prospectus or any amendment to the Registration
Statement of which the Representative shall not previously have been advised and
furnished with a copy a reasonable period of time prior to the proposed filing
and as to which filing the Representative shall not have given its consent, such
consent to not be unreasonably withheld.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative (A) when the Registration
Statement, as amended, has become effective; if the provisions of Rule 430A
promulgated under the Act will be relied upon, when the Prospectus has been
filed in accordance with said Rule 430A and when any post-effective amendment to
the Registration Statement becomes effective; (B) of any request made by the
Commission for amending the Registration Statement, for supplementing any
Preliminary Prospectus or the Prospectus or for additional information, or (C)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto or any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto or the institution or threat
of any investigation or proceeding for that purpose, and will use its best
efforts to prevent the issuance of any such order and, if issued, to obtain the
lifting thereof as soon as possible.
(c) The Company will (A) take or cause to be taken all such
actions and furnish all such information as the Representative may reasonably
require in order to qualify the Shares for offer and sale under the state
securities or Blue Sky laws of such jurisdictions as the Representative may
designate, (B) continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares but not to exceed one year
from the date of this Agreement, and (C) make such applications, file such
documents and furnish such information as may be required for the purposes set
forth in clauses (A) and (B); provided, however, that the Company shall not be
required to qualify as a foreign corporation or file a general or unlimited
consent to service of process in any such jurisdiction.
(d) The Company consents to the use of the Prospectus (and any
amendment or supplement thereto) by the Underwriters and all dealers to whom the
Shares may be sold, in connection with the offering or sale of the Shares and
for such period of time thereafter as the Prospectus is required by law or the
Rules and Regulations to be delivered in connection therewith. If, at any time
when a prospectus relating to the Shares is required to be delivered under the
Act or the Rules and Regulations, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading, or if it becomes necessary at any time to
amend or supplement the Prospectus to comply with the Act or the Rules and
Regulations, the Company promptly will so notify the Representative and, subject
to Section 5(i) hereof, will prepare and file with the Commission an amendment
to the Registration Statement or an amendment or supplement to the Prospectus
which will correct such statement or omission or effect such compliance.
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(e) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company will make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act
or the Rules and Regulations, covering a period of at least 12 consecutive
months after the effective date of the Registration Statement.
(f) The Company will timely file all such reports, forms or
other documents as may be required from time to time under the Act (including a
report on Form SR, if required), the Rules and Regulations, the Exchange Act,
and the rules and regulations thereunder, and all such reports, forms and
documents filed will comply in all material respects as to form and substance
with the applicable requirements under the Act, the Rules and Regulations, the
Exchange Act and the rules and regulations thereunder.
(g) During a period of five years after the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to
its shareholders, statements of income of the Company for each quarter in
the form furnished to the Company's shareholders and certified by the
Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, shareholders' equity,
and cash flows of the Company for such fiscal year, accompanied by a copy
of the report thereon of independent public accountants;
(iii) as soon as they are available, copies of all
information (financial or other) mailed to shareholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the Company or
its affairs which was released or prepared by the Company; and
(vi) any additional information of a public nature
concerning the Company or its business which the Representative may
reasonably request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries
are consolidated, and will be accompanied by similar financial statements
for any significant subsidiary which is not so
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consolidated.
(h) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same entity as the Transfer Agent) for its Common Stock.
(i) The Company will furnish, without charge, to the
Representative or on the Representative's order, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits) and the Prospectus, and all amendments and supplements
thereto, in each case as soon as available and in such quantities as the
Representative may reasonably request.
(j) The Company will not, directly or indirectly, without the
prior written consent of the Representative, offer, sell, grant any option to
purchase or otherwise dispose (or announce any offer, sale, grant of any option
to purchase or other disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock for a period of 180 days after the date hereof, except pursuant to
this Agreement and except pursuant to employee benefit plans discussed in the
Prospectus.
(k) Neither the Company nor any of its officers or directors,
nor affiliates of any of them (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company will apply the net proceeds of the offering
received by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
6. Expenses.
(a) Whether or not the transactions contemplated in this Agreement
are consummated, or for any reason this Agreement is terminated, the Company
will pay, or reimburse if paid by the Representative, all fees and expenses
incident to the performance of the obligations of the Company under this
Agreement, including, but not limited to, (i) the preparation, printing and
filing of the Registration Statement and exhibits thereto, each Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Registration
Statement or the Prospectus, (ii) the preparation and delivery of certificates
representing the Shares, (iii) the reproduction and distribution of this
Agreement, the Warrant Agreement, the Agreement among Underwriters, any Dealer
Agreements and any Underwriters' Questionnaire, (iv) furnishing (including costs
of shipping and mailing) such copies of the Registration Statement, the
Prospectus and any Preliminary Prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold, (v) the
quotation of the Shares on the Nasdaq Small Cap Market, (vi) any filings
required to be made by the Underwriters with the NASD, (vii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 5(g), including the
reasonable fees, disbursements and other charges of counsel to the Underwriters
in connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (viii) counsel and accountants to the
Company and (ix) the transfer agent for the Shares.
(b) Whether or not the transactions contemplated by this
Agreement are
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consummated or if this Agreement shall be terminated by the Company pursuant to
any of the provisions hereof, the Company will reimburse the Representative for
all of its accountable out-of-pocket fees and expenses (including the fees,
disbursements and other charges of its counsel) incurred by it in connection
herewith, up to an aggregate amount of $125,000, which amount excludes the
expenses to be paid by the Company relating to sub-sections (vi) and (vii) of
paragraph (a) above.
7. Conditions of the Underwriters' Obligations. The obligation of each
Underwriter to purchase and pay for the Shares set forth opposite the name of
such Underwriter in Schedule I is subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date as if they had been made on and as of the Closing Date;
the accuracy on and as of the Closing Date of the statements of officers of the
Company made pursuant to the provisions hereof; the performance by the Company
on and as of the Closing Date of its covenants and agreements hereunder; and the
following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the
Act, the Registration Statement shall have been declared effective, and the
Prospectus (containing the information omitted pursuant to Rule 430A) shall have
been filed with the Commission not later than the Commission's close of business
on the second business day following the date hereof or such later time and date
to which the Representative shall have consented; if the Company does not elect
to rely on Rule 430A, the Registration Statement shall have been declared
effective not later than 9:00 A.M., New York time, on the date hereof or such
later time and date to which the Representative shall have consented; if
required, in the case of any changes in or amendments or supplements to the
Prospectus in addition to those contemplated above, the Company shall have filed
such Prospectus as amended or supplemented with the Commission in the manner and
within the time period required by Rule 424(b) under the Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall have
been instituted or threatened or, to the knowledge of the Company or the
Representative, shall be contemplated by the Commission; and the Company shall
have complied with any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise).
(b) The Company shall not have advised the Representative that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from counsel to the Underwriters, such opinion or opinions with
respect to the issuance and sale of the Firm Shares, the Registration Statement
and the Prospectus and such other related matters as the Representative
reasonably may request and such counsel shall have received such documents and
other information as they reasonably request to enable them to pass upon such
matters.
(d) On the Closing Date the Underwriters shall have received the
opinion,
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dated the Closing Date, of Xxxxxxx & Xxxxx L.L.P., counsel to the Company
("Company Counsel"), to the effect set forth below:
(i) Each of the Company and the Subsidiary is a duly
incorporated and validly existing corporation in good standing under the
laws of its jurisdiction of incorporation with the corporate power and
authority to own or lease its properties and to conduct its business as
described in the Prospectus. Each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the ownership or leasing of property or
conduct of its business requires such qualification (except for those
jurisdictions in which the failure so to qualify can be cured without
having a Material Adverse Effect);
(ii) The Company has authorized capital stock as set forth in
the Prospectus; the securities of the Company conform in all material
respects to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly
issued by the Company, are fully paid and non-assessable, and are free of
any preemptive or, to the knowledge of such counsel, other rights to
subscribe for any of the Shares; the Company has duly authorized the
issuance and sale of the Shares to be sold by it hereunder; the Shares,
when issued by the Company and paid for in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and will
conform in all material respects to the description thereof contained in
the Prospectus and will not be subject to any preemptive or, to the
knowledge of such counsel, subscription or other similar rights; and the
Shares have been duly authorized for quotation, subject only to notice of
issuance, on the Nasdaq Small Cap Market;
(iii) The Registration Statement is effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of such counsel, are threatened or contemplated under the Act;
the Registration Statement, as of the effective date, and the Prospectus,
as of the date thereof, and, if any, each amendment and supplement thereto
(except for the financial and statements, schedules and other financial and
statistical data included therein, as to which such counsel need not
express any opinion), complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations; the descriptions
contained in the Registration Statement and the Prospectus of contracts and
other documents are accurate and fairly represent in all material respects
the information required to be shown by the Act and the Rules and
Regulations; to the knowledge of such counsel, there are no contracts or
documents which are required by the Act to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement which are not described or filed as required by the Act and the
Rules and Regulations; to the knowledge of such counsel, there is not
pending or threatened against the Company any action, suit, proceeding or
investigation before or by any court, regulatory body, or administrative
agency or any other governmental agency or body, domestic or foreign, of a
character required to be disclosed in the Registration Statement or the
Prospectus which is not so disclosed therein; the statements set forth in
the Prospectus under the captions "Risk Factors," "Business and
Properties," "Description of Company's Securities," "Management," and
"Principal Stockholders," insofar as such statements constitute matters of
law or legal conclusions, have been reviewed by such counsel and are
accurate in all material respects;
-14-
(iv) The Company has full corporate right, power, and authority
to enter into this Agreement and the Warrant Agreement and to consummate
the transactions provided for herein and therein; this Agreement has been
duly authorized, executed and delivered by the Company; and this Agreement,
assuming due authorization, execution and delivery by each other party
hereto, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in
effect relating to or affecting creditors' rights generally or by general
principles of equity relating to the availability of remedies and except as
rights to indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. None of the
Company's execution, delivery or performance of this Agreement, its
consummation of the transactions contemplated herein and therein, conflicts
or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon, any property or assets of the Company or the Subsidiary pursuant to
the terms of the charter or by-laws of the Company or the Subsidiary; the
terms of any indenture, mortgage, deed of trust, voting trust agreement,
stockholder's agreement, note agreement or other agreement or instrument
filed as an exhibit to the Registration Statement to which the Company or
the Subsidiary is a party or by which the Company or the Subsidiary is or
may be bound or to which any of its properties may be subject; any statute,
rule or regulation of any regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or the Subsidiary, any of their respective activities or
properties; or any judgment, decree or order, known to such counsel after
reasonable investigation, of any Governmental Body; and no consent,
approval, authorization or order of any Governmental Body, has been or is
required for the Company's performance of this Agreement or the
consummation of the transactions contemplated hereby, except under the Act
or as may be required under state securities or Blue Sky laws;
(v) To such counsel's knowledge, except as described in the
Prospectus, no claims have been asserted against the Company or the Subsidiary
by any person to the use of any rights or challenging or questioning the
validity or effectiveness of any such rights. The use, in connection with the
business and operations of the Company and the Subsidiary of such rights does
not, to the best of such counsel's knowledge, infringe on the rights of any
person;
(vi) The Company is not required to be registered under the
Investment Company Act;
(vii) The outstanding shares of capital stock of the Subsidiary
are duly authorized, validly issued and fully paid; such shares are owned
by the Company free and clear of any perfected security interest. No
Subsidiary of the Company is currently prohibited, directly or indirectly,
by its charter documents or, to such counsel's knowledge, any contract or
agreement to which such Subsidiary is a party from paying any dividends to
the Company, from making any other distribution on such Subsidiary's
capital stock, from repaying to the Company or from transferring any of
such Subsidiary's property or assets to the Company or any other Subsidiary
of the Company, except as described or contemplated by the Prospectus.
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel has
participated in conferences with officers and representatives of the Company,
with the Representative and its counsel and with the Company's independent
public accountants, at which conferences the contents of the Registration
-15-
Statement and the Prospectus and related matters were discussed and (without
taking any further action to verify independently the statements made in the
Registration Statement and the Prospectus and, except as stated in the foregoing
opinion, without assuming responsibility for the accuracy, completeness or
fairness of such statements) nothing has come to such counsel's attention that
causes such counsel to believe that either the Registration Statement as of the
date it is declared effective and as of the Closing Date and any Option Closing
Date or the Prospectus as of the date thereof and as of the Closing Date and any
Option Closing Date contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading (it being understood that such counsel need
not express any opinion with respect to the financial statements, schedules and
other financial or statistical data included in the Registration Statement or
the Prospectus).
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials.
References to the Registration Statement and the Prospectus in
this paragraph (d) shall include any amendment or supplement thereto at the date
of such opinion.
(e) On or prior to the Closing Date, counsel to the Underwriters shall
have been furnished such documents, certificates and opinions as they may
reasonably require in order to evidence the accuracy, completeness or
satisfaction of any of the representations or warranties of the Company, or
conditions herein contained.
(f) At the time that this Agreement is executed by the Company, the
Underwriters shall have received from Xxxxxx Xxxxxxxx LLP a letter as of the
date of this Agreement in form and substance satisfactory to you (the "Original
Letter"), and on the Closing Date the Underwriters shall have received from such
firm a letter dated the Closing Date stating that, as of a specified date not
earlier than three (3) days prior to the Closing Date, nothing has come to the
attention of such firm to suggest that the statements made in the Original
Letter are not true and correct.
(g) On the Closing Date, the Underwriters shall have received a
certificate, dated the Closing Date, on behalf of the Company the principal
executive officer and the principal financial or accounting officer of the
Company to the effect that each of such persons has carefully examined the
Registration Statement and the Prospectus and any amendments or supplements
thereto and this Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date,
and the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of each of such
persons are contemplated or threatened under the Act and any and all
filings required by Rule 424 and Rule 430A have been timely made;
(iii) The Registration Statement and Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required
-16-
to be included therein, and neither the Registration Statement nor any
amendment thereto includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the Prospectus (or
any supplement thereto) nor any Preliminary Prospectus includes or included
any untrue statement of a material fact or omits or omitted 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; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus up to and
including the Closing Date, neither the Company nor the Subsidiary has
incurred, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; neither the Company nor
the Subsidiary has purchased any of its outstanding capital stock or paid
or declared any dividends or other distributions on its capital stock; the
Company nor the Subsidiary has entered into any transactions not in the
ordinary course of business; and there has not been any change in the
capital stock or, consolidated long-term debt or, any increase in the
short-term borrowings (other than any increase in short-term borrowings in
the ordinary course of business) of the Company or any material adverse
change to the business, properties, assets, net worth, condition (financial
or other), results of operations or prospects of the Company and the
Subsidiary, taken as a whole; neither the Company nor the Subsidiary has
sustained any material loss or damage to its property or assets, whether or
not insured; there is no litigation which is pending or threatened against
the Company or the Subsidiary which is required under the Act or the Rules
and Regulations to be set forth in an amended or supplemented Prospectus
which has not been set forth; and there has not occurred any event required
to be set forth in an amended or supplemented Prospectus which has not been
set forth.
References to the Registration Statement and the Prospectus in this
paragraph (g) are to such documents as amended and supplemented at the date
of the certificate.
(h) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus up to and including the Closing
Date there has not been (i) any adverse change or decrease specified in the
letter or letters referred to in paragraph (f) of this Section 7 or (ii) any
adverse change, or any development involving a prospective adverse change, in
the business or properties of the Company or the Subsidiary, which change or
decrease in the case of clause (i) or change or development in the case of
clause (ii) makes it impractical or inadvisable in the Representative's judgment
to proceed with the public offering or the delivery of the Shares as
contemplated by the Prospectus.
(i) No order suspending the sale of the Shares in any jurisdiction
designated by you pursuant to Section 5(iii)(A) hereof has been issued on or
prior to the Closing Date and no proceedings for that purpose have been
instituted or, to your knowledge or that of the Company, have been or are
contemplated.
(j) The Company shall have delivered to the Representative written
agreements in the form set forth in Exhibit A hereto with each officer and
director of the Company, each beneficial owner of the outstanding shares of
Common Stock and each beneficial owner of options to purchase shares of Common
Stock listed on Exhibit B hereto to the effect that they will not, for a period
of 180 days after the commencement of the public offering of the Shares, without
the prior written consent of the Representative, directly or indirectly, offer
to sell, sell, contract to sell, grant or transfer any
-17-
option to purchase or otherwise dispose (or announce any offer, sale, grant of
any option to purchase or other disposition) of any shares of Common Stock, or
any securities convertible into or exchangeable for shares of Common Stock
(other than pursuant to employee stock or nonemployee director option plans). It
is acknowledged that the restriction contained in this Section 7(j) shall not be
applicable to the Firm Shares or the Option Shares being sold by the Company to
the Underwriters pursuant to this Agreement.
(k) The Company shall have furnished the Underwriters with such further
opinions, letters, certificates or documents as you or counsel for the
Underwriters may reasonably request. All opinions, certificates, letters and
documents to be furnished by the Company will comply with the provisions hereof
only if they are reasonably satisfactory in all material respects to the
Underwriters and to counsel for the Underwriters. The Company shall furnish the
Underwriters with conformed copies of such opinions, certificates, letters and
documents in such quantities as you reasonably request. The certificates
delivered under this Section 7 shall constitute representations, warranties and
agreements of the Company as to all matters set forth therein as fully and
effectively as if such matters had been set forth in Section 2 of this
Agreement.
(l) The Shares shall have been authorized for quotation, subject only to
official notice of issuance, on the Nasdaq Small Cap Market.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several (and actions in respect
thereof), to which such Underwriter or such controlling person may become
subject, under the Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or any blue sky application or other document executed by the Company
specifically for the purpose of qualifying, or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify, any or all of the Shares under the securities or Blue Sky laws thereof
(any such application, document or information being hereinafter called a "Blue
Sky Application"), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements not misleading and will reimburse, as incurred,
such Underwriter or such controlling persons for any legal or other expenses
incurred by such Underwriter or such controlling persons in connection with
investigating, defending or appearing as a third party witness in connection
with any such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in any of such documents in reliance upon and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representative on behalf of any Underwriter expressly for inclusion therein,
and provided, further, that such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage, liability or action purchased Shares which are the
subject thereof to the extent that any such loss, claim, damage, liability or
action (i) results from the fact that such Underwriter failed to send or give a
copy of the Prospectus (as amended or supplemented) to such person at or prior
to the
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confirmation of the sale of such Shares to such person in any case where such
delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (as amended and supplemented),
unless such failure resulted from non-compliance by the Company with Section
5(viii) hereof.
The indemnity agreement in this paragraph (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any and all losses, claims, damages or liabilities
(and actions in respect thereof) to which the Company or any such director,
officer, or controlling person may become subject, under the Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto or in any Blue
Sky Application, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements 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 reliance upon and in conformity with
information furnished in writing by that Underwriter through the Representative
to the Company expressly for use therein; and will reimburse, as incurred, all
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. The Company acknowledges that the
statements with respect to the public offering of the Shares set forth under the
heading "Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters to the Company expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus. The indemnity agreement contained
in this paragraph (b) shall be in addition to any liability which the
Underwriters may have at common law or otherwise.
(c) 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 one or more indemnifying parties
under this Section 8, notify such indemnifying party or parties of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under paragraph (a) or (b) of this Section 8 or to the extent
that the indemnifying party was not adversely affected by such omission. In case
any such action is brought against an indemnified party and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded 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 otherwise
to participate in the defense of such action on behalf of such indemnified party
or parties, in which case the indemnifying
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party shall only be responsible for the fees and expenses of one counsel (in
addition to local counsel) for all similarly situated indemnified parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
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 (other than the
reasonable costs of investigation) subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified party
has employed such counsel in connection with the assumption of such different or
additional legal defenses in accordance with the proviso to the immediately
preceding sentence, (ii) the indemnifying party has not employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under paragraph (a) or (b)
above in respect of any losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) (i) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, from the offering of the Shares 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
each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. In any case where the Company is a
contributing party and the Underwriters are the indemnified party, the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the cover page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
paragraph (d), the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Shares purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), (i) each person, if any, who controls an Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter and (ii) each
director of the Company, each officer of the Company who has signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall
have the same rights to contribution as the Company, subject in each case to
this paragraph (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be
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made against another party or parties under this paragraph (d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation (x) it or they may have
hereunder or otherwise than under this paragraph (d) or (y) to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
9. Right to Increase Offering. At anytime during a period of 30 days
from the date of the Prospectus, the Underwriters, by no less than two business
days' prior notice to the Company, may designate a closing (which may be
concurrent with, and part of, the closing on the Closing Date with respect to
the Firm Shares or may be a second closing held on a date subsequent to the
Closing Date, in either case such date shall be referred to herein as the
"Option Closing Date") at which the Underwriters may purchase all or less than
all of the Option Shares in accordance with the provisions of this Section 9 at
the purchase price per share to be paid for the Firm Shares. In no event shall
the Option Closing Date be later than 10 business days after written notice of
election to purchase Option Shares is given.
The Company agrees to sell to the several Underwriters on the Option
Closing Date the number of Option Shares specified in such notice and the
Underwriters agree, severally and not jointly, to purchase such Option Shares on
the Option Closing Date. Such Option Shares shall be purchased for the account
of each Underwriter in the same proportion as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares (subject to adjustment by you to eliminate fractions) and
may be purchased by the Underwriters only for the purpose of covering over-
allotments made in connection with the sale of the Firm Shares.
No Option Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Option Shares or any portion thereof may be surrendered and
terminated at any time upon notice by you to the Company.
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Firm Shares shall apply, mutatis mutandis, to the
Option Closing Date for the sale of the Option Shares.
10. Effective Date and Termination.
(a) This Agreement shall become effective at 9:00 A.M., New York
time, on the date hereof, or at such later time after the Registration Statement
becomes effective as the Representative, in its sole discretion, shall release
the Shares for the sale to the public unless prior to such time the
Representative shall have received written notice from the Company that it
elects that this Agreement shall not become effective, or the Representative
shall have given written notice to the Company that the Representative on behalf
of the Underwriters elects that this Agreement shall not become effective;
provided, however, that the provisions of this Section and of Section 6 and
Section 8 hereof shall at all times be effective; provided, further, that this
Agreement shall terminate if the Registration Statement is not declared
effective. For purposes of this Section 11(a), the Shares to be purchased
hereunder shall be deemed to have been so released upon the earlier of
notification by the Representative to securities dealers releasing such
-21-
Shares for offering or the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Shares.
(b) This Agreement (except for the provisions of Sections 6 and
8 hereof) may be terminated by the Representative by notice to the Company in
the event that the Company has failed to comply in any respect with any of the
provisions of this Agreement required on its part to be performed at or prior to
the Closing Date or the Option Closing Date, or if any of the representations or
warranties of the Company are not accurate in any respect or if the covenants,
agreements or conditions of, or applicable to the Company herein contained have
not been complied with in any respect or satisfied within the time specified on
the Closing Date or the Option Closing Date, respectively, or if prior to the
Closing Date or the Option Closing Date:
(i) the Company shall have sustained a loss by strike,
fire, flood, accident or other calamity of such a character as to interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss was insured;
(ii) trading in securities generally on the New York
Stock Exchange, the Nasdaq Stock Market's National Market or the Nasdaq
Small Cap Market shall have been suspended or limited or minimum or maximum
prices shall have been generally established on any of such exchanges or
markets, or additional material governmental restrictions, not in force on
the date of this Agreement, shall have been imposed upon trading in
securities generally by any of such exchanges or markets or by order of the
Commission or any court or other governmental authority;
(iii) a banking moratorium shall have been declared by
New York, California or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak
or escalation of any other insurrection or armed conflict involving the
United States; or
(v) there shall have been a material adverse change in
(A) general economic, political or financial conditions or (B) the present
or prospective business or condition (financial or other) of the Company
and the Subsidiary, taken as a whole that, in each case, in the
Representative's judgment makes it impracticable or inadvisable to make or
consummate the public offering, sale or delivery of the Company's Shares on
the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
(c) Termination of this Agreement under this Section 10 or
Section 11 after the Firm Shares have been purchased by the Underwriters
hereunder shall be applicable only to the Option Shares. Termination of this
Agreement shall be without liability of any party to any other party other than
as provided in Sections 6 and 8 hereof.
11. Default of Underwriters. If one or more Underwriters default in their
obligations to purchase Firm Shares or Option Shares hereunder and the aggregate
number of such Shares that such defaulting Underwriter or Underwriters agreed
but failed to purchase is ten percent or less of the aggregate number of Firm
Shares or Option Shares to be purchased by all of the Underwriters at such time
hereunder, the other Underwriters may make arrangements satisfactory to the
Representatives for the purchase of such Shares by other persons (who may
include one or more of the non-defaulting Underwriters, including the
Representatives), but if no such arrangements are made by the Firm Closing Date
or the related Option Closing Date, as the case
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may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Shares or Option
Shares that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Shares that is more than ten percent of the aggregate number of Firm
Shares or Option Shares, as the case may be, to be purchased by all of the
Underwriters at such time hereunder, and if arrangements satisfactory to the
Representatives are not made within 36 hours after such default for the purchase
by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Shares with respect to which
such default occurs, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company other than as provided in
Section 11 hereof. In the event of any default by one or more Underwriters as
described in this Section 11, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 1 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Shares or Option Shares, as
the case may be. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 11. Nothing herein
shall relieve any defaulting Underwriter from liability for its default.
12. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers and the
several Underwriters set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, any Underwriter or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the Shares.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6 and 8 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
13. Notices. Notice shall be given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered or telegraphed and confirmed by letter or telecopied and
confirmed by letter (a) if to the Underwriters, to the Representative at the
office of Xxxxx Xxxxxx & Co., Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attention: A. Xxxxx Xxxxxx or, if sent to the Company, shall be
mailed or delivered or telegraphed and confirmed to the Company at the office of
the Company, 1710 Two Xxxxx Center, 0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000-
4312, Attention: Xxx X. Xxxxx, Jr.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and each Underwriter and the Company's and each
Underwriter's respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person, except that the representations, warranties, indemnities and
contribution agreements of the Company contained in this Agreement shall also be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and except that the Underwriters' indemnity and contribution agreements shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, and any person or persons,
if any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from the
-23-
Underwriters will be deemed a successor because of such purchase. This Agreement
shall not be assignable by either party hereto without the prior written consent
of the other party.
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15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
ZYDECO ENERGY, INC.
By:
------------------------
Name:
Title:
Confirmed as of the date first
above mentioned:
XXXXX XXXXXX & CO., INC.
By: Xxxxx Xxxxxx & Co., Inc.
Acting on its own behalf and as
the Representative of the several
Underwriters referred to in the
foregoing Agreement
By: ______________________________
Name:
Title:
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SCHEDULE I
UNDERWRITERS
Underwriting Agreement dated ________, 1997
Number of Firm
Shares to be
Name Purchased
---- ----------
Xxxxx Xxxxxx & Co., Inc...............................
Total................................................. 2,000,000
==========
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EXHIBIT A
Xxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to an Underwriting Agreement (the "Underwriting
Agreement"), which will be executed between Zydeco Energy, Inc., a Delaware
corporation (the "Company"), and Xxxxx Xxxxxx & Co., Inc.
In consideration of the Underwriting Agreement, the undersigned hereby
agrees not to, without the prior written consent of Xxxxx Xxxxxx & Co., Inc.,
offer, sell or otherwise dispose of any shares of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), or any securities convertible
into or exercisable or exchangeable for, or any rights to purchase or acquire,
Common Stock owned by the undersigned for a period of 180 days after the date of
the Underwriting Agreement.
Dated:____________________, 1997
Very truly yours,
----------------------------
Signature
---------------------------
Print Name
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EXHIBIT B
-28-
