1,250,000 Units
COTTON VALLEY RESOURCES CORPORATION
Each Unit Consisting of
Two Shares of Common Stock and
Two Redeemable Common Stock Purchase Warrants
, 1997
AGREEMENT AMONG UNDERWRITERS
National Securities Corporation
as Representative of the Underwriters
c/o National Securities Corporation
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Dear Sirs:
1. Underwriting Agreement. We understand that COTTON VALLEY
RESOURCES CORPORATION, a corporation organized under the laws of the Province of
Ontario, Canada (the "Company"), proposes to enter into an underwriting
agreement (the "Underwriting Agreement"), with you as managing underwriters
("Managing Underwriters") and other prospective underwriters, including
ourselves, acting severally and not jointly, providing for (a) the purchase by
the Underwriters (as defined in Section 3 hereof) of 1,250,000 Units, each Unit
consisting of two shares of Common Stock, without par value, of the Company
("Preferred Stock"), and two redeemable common stock purchase warrants
(individually, a "Warrant"), each of which entitles the holder thereof to
purchase one share of Common Stock at a price of $___ (such Units, together with
(A) the shares of Common Stock and Warrants comprising such Units and (B) the
shares of Common Stock issuable upon exercise of such Warrants, are collectively
referred to herein as the "Underwritten Securities") and (b) the grant by the
Company to the Underwriters, as provided in Section 2(b) of the Underwriting
Agreement, of an option to purchase from the Company up to an aggregate of
187,500 additional Units (such additional Units, together with (A) the shares of
Common Stock and Warrants comprising such additional Units and (B) the shares of
Common Stock issuable upon exercise of such Warrants, are collectively referred
to herein as the "Option Securities") solely for the purpose of covering
over-allotments in the sale of the Underwritten Securities in each case, upon
the conditions stated in the Underwriting Agreement, in which we agree, in
accordance with the terms thereof and subject to adjustment pursuant to Section
9 thereof, to purchase the number of Units included within the Underwritten
Securities set forth opposite our names in Schedule I thereof and our pro rata
portion of the number of Units included within the Option Securities, determined
in accordance with Section 2(b) of the Underwriting Agreement, with respect to
which the over-allotment option is exercised. The Underwritten Securities and
the Option Securities are hereinafter referred to as the "Securities" and the
Units included therein are hereinafter referred to as the "Registered Units".
2. Registration Statement and Prospectus. The Securities are more
particularly described in the registration statement relating thereto filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). Amendments to such registration statement have been or may
be filed, in which, with our consent hereby confirmed, we have been or will be
named as one of the Underwriters of the Securities. Copies of the registration
statement and the related preliminary prospectus have heretofore been delivered
to us, and we confirm that they are correct insofar as they relate to us. You
are authorized to approve on our behalf any amendments or any supplements to the
registration statement, any preliminary prospectus and the prospectus which you
consider necessary or appropriate. The registration statement and related
prospectus, as amended and supplemented from time to time, are hereinafter
respectively referred to as the "Registration Statement" and "Prospectus". We
agree, if you so request, to furnish a copy of any revised preliminary
prospectus to each person to whom we have delivered a copy of any previous
preliminary prospectus. We further represent that we have delivered all
preliminary prospectuses and agree that we will deliver all final prospectuses
required for compliance with the provisions of Rule l5c2-8 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
3. Authority of Managing Underwriters. We authorize you, as Managing
Underwriters, (a) to execute and deliver on our behalf the Underwriting
Agreement in the form annexed hereto as Exhibit A, with such changes therein as
in your discretion may be necessary or advisable, including changes in those who
are to be Underwriters and in the respective number of Registered Units to be
purchased by them (but not any change in the number of Registered Units to be
purchased by us except with our consent or as provided in the Underwriting
Agreement), (b) to take such action as in your discretion may be necessary or
advisable to carry out the Underwriting Agreement, this Agreement and the
transactions for the accounts of the several Underwriters contemplated thereby
and hereby, including, in your discretion, whether to purchase any or all of the
Registered Units included within the Option Securities for the accounts of the
several Underwriters, and (c) to take such action as in your discretion may be
necessary or advisable to carry out the purchase, carrying, sale and
distribution of the Registered Units. The parties on whose behalf you execute
the Underwriting Agreement, including yourself as Managing Underwriters, are
herein called the "Underwriters."
4. Public Offering. We authorize you to supply the Company with the
information to be included in the Registration Statement and Prospectus with
respect to the terms of the offering, to determine the time of the initial
public offering after the Registration Statement becomes effective, to vary the
public offering price of the Registered Units and the concessions and discounts
to dealers after the initial public offering, and to determine all matters
relating to the advertisement of the Securities and communication with dealers
or others.
We authorize you, with respect to any Registered Units which we so agree
to purchase, to reserve for sale and to sell for our account such number of our
Registered Units as you shall determine, to securities dealers ("Dealers"),
including any of the Underwriters. We authorize you to determine the form and
manner of any communications or agreements with Dealers. If there shall be any
such agreements with Dealers, you are authorized to act as managers thereunder,
and we agree, in such event, to be governed by the terms and conditions of such
agreements to the extent we act as a Dealer. The form of Selected Dealer
Agreement attached hereto as Exhibit B is satisfactory to us. If there shall not
be any written agreements with Dealers, we agree to be governed by the terms and
conditions of such Selected Dealer Agreement to the extent we act as a Dealer.
After the Registration Statement becomes effective, you will advise us
of the number of our Registered Units not so reserved but retained by us for
direct sale. Any of our Registered Units reserved but not sold may, from time to
time, on our request and in your discretion, be released to us, and Registered
Units so released will not thereafter be deemed to be reserved, except that any
time prior to termination of the provisions of the last paragraph of this
Section 4, we will on request advise you of the number of our retained unsold
Registered Units and you may in your discretion add all or any number of such
retained unsold Registered Units to those reserved by you for sale. Sales of
reserved Registered Units to Dealers will be made at $_______ per Unit for the
accounts of the several Underwriters as nearly as practicable in proportion to
their respective underwriting obligations.
You may in your discretion sell to another Underwriter any of the
Registered Units so reserved for our account if you determine that such sales
are advisable for Blue Sky purposes. The transfer tax on any such sales shall be
charged to the accounts of the several Underwriters in proportion to their
respective underwriting obligations.
You, and any of the Underwriters with your consent, may make purchases
and sales of Registered Units from or to any other Underwriter at the public
offering price less a concession equivalent to all or any part of the gross
underwriting spread. You are authorized to purchase Registered Units for our
account from Dealers at the public offering price less a concession not
exceeding the concession to Dealers. We will offer to the public, in conformity
with the terms of the offering set forth in the Prospectus, our Registered Units
not reserved by you.
5. Payment and Delivery. Payment for Registered Units retained by us for
direct sale shall be made by us through the Depository Trust Company ("DTC"),
payable in same-day funds to the order of NATIONAL SECURITIES CORPORATION, at
such time or times as you may designate, against delivery of such Registered
Units to us through the facilities of the DTC. The above payment will be made by
us at $______ per Unit; however you will promptly reimburse us the amount of
$_____ per Unit.
If our funds are not received by you when required, you are authorized,
in your individual capacities or as Managing Underwriters, but shall not be
obligated, to make payment pursuant to the Underwriting Agreement for our
account in accordance with the provisions of Section 6 hereof. Any such payment
by you shall not relieve us from any of our obligations hereunder or under the
Underwriting Agreement.
We authorize you to hold and deliver to Dealers, against payment, our
Registered Units reserved by you for offering to them. Upon receiving payment
for Registered Units so sold for our account, you will remit to us as promptly
as practicable the amount of $_______ per Unit.
As soon as practicable after termination of the provisions referred to
in the first paragraph of Section 10 hereof, you shall deliver to us, against
payment therefor unless such payment has already been made, any of our
Registered Units reserved by you for sale but not sold, except that if the
aggregate of all such reserved and unsold Registered Units of all Underwriters
does not exceed 10% of the total number of Registered Units, you are authorized
in your discretion to sell such Registered Units for the accounts of the several
Underwriters at such price or prices as you may determine.
6. Authority to Borrow. In connection with the purchase or carrying for
our account of any Registered Units purchased for our account under this
Agreement or the Underwriting Agreement, we authorize you, in your discretion
and individual capacity, to advance your own funds for our account, charging
current interest rates as Managing Underwriters to arrange and make loans on our
behalf and for our account, and to execute and deliver any notes or security as
may be necessary or advisable in your discretion. Any lending bank is hereby
authorized to rely upon your instructions in all matters relating to any such
loan. We shall be paid or credited with the proceeds of any such advance or loan
made for our account and shall be debited with any repayment.
You may deliver to us from time to time, for carrying purposes only, any
of our reserved Registered Units held by you for our account which have not been
sold. We will redeliver to you on demand any Registered Units so delivered to us
for carrying purposes.
7. Stabilization. We ratify and confirm your stabilization transactions,
if any, for the accounts of the several Underwriters prior to the date hereof,
and we authorize you, in your discretion, to buy and sell Registered Units in
the open market or otherwise, on a when-issued basis or otherwise, for either
long or short account, at such prices and on such terms as you may determine,
and to over-allot in arranging for sales. We authorize you in your discretion to
cover any short position incurred for the accounts of the several Underwriters
pursuant to this Section 7 by exercising the over-allotment option referred to
in Section 2(b) of the Underwriting Agreement and by buying Registered Units,
and, in lieu of delivering to the several Underwriters any of the Registered
Units held for their respective accounts pursuant to Section 4 hereof, to sell
such Registered Units for the accounts of each of the Underwriters, in each case
at such prices and on such terms as you may determine. All such purchases, sales
and over-allotments will be for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations, and at no time will our net commitment under the foregoing
provisions of this paragraph, either for long or short account, exceed 15 % of
our original underwriting obligations. We will take up at cost on demand any of
the Registered Units so purchased for our account and deliver on demand any of
the Registered Units sold or over-allotted for our account. In the event of
default by one or more Underwriters with respect to their obligations under this
paragraph, each nondefaulting Underwriter shall assume its proportionate share
of the obligations of such defaulting Underwriter without relieving such
defaulting Underwriter of its liability hereunder. The existence of this
provision is no assurance that the price of any of the aforesaid Registered
Units will be stabilized or that stabilizing, if commenced, will not be
discontinued at any time.
We authorize you on our behalf to maintain the records required by Rule
17a-2 of the General Rules and Regulations under the Exchange Act and to file
any reports required in connection with any transaction made by you pursuant to
this Section 7, and we agree to furnish you with any information needed for such
reports. You agree that if stabilization is undertaken you will notify the
several Underwriters promptly upon the initiation and termination of such
stabilization. We agree, if stabilization is undertaken, promptly, and in any
event, within ___ business days following such stabilization, to transmit to
you, the price, date and time at which such stabilizing purchase was effected.
In addition, we agree to promptly notify you of the date and time when
stabilizing was terminated.
We agree to advise you, from time to time upon your request, of the
number of Registered Units retained by or released to us and remaining unsold,
and will, upon your request, release to you for the accounts of one or more of
the several Underwriters such number of Registered Units as you may designate at
such price, not less than the net price to Dealers nor more than the public
offering price, as you may determine.
If, pursuant to the provisions of this Section 7, you purchase or
contract to purchase any Registered Units that were retained by or released to
us for direct sale, we authorize you in your discretion either to require us to
repurchase such Registered Units at a price equal to the total cost of such
purchase, including commissions and transfer tax on redelivery, to sell for our
account such Registered Units and debit or credit our account for the profit or
loss resulting from such sale, or to charge our account with an amount equal to
the concession to Dealers with respect thereto.
Upon the termination of this Agreement, you are authorized in your
discretion, in lieu of delivering to the several Underwriters any Registered
Units then held for their respective accounts pursuant to this Section 7, to
sell such Registered Units for the accounts of each of the Underwriters at such
price or prices as you may determine.
8. Open Market Transactions. We and you agree not to bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any of
the Securities, including the Registered Units, for our own account or for the
accounts of customers except as brokers pursuant to unsolicited orders and as
otherwise provided in this Agreement or the Underwriting Agreement.
9. Allocation of Expenses. We authorize you to charge our account with
all transfer taxes on sales made by you for our account (except as otherwise
provided herein) and our proportionate share (based upon our underwriting
obligation) of all other expenses incurred by you in finding and developing this
public offering, and arising under the terms of this Agreement or the
Underwriting Agreement, or in connection with the purchase, carrying, sale or
distribution of the Registered Units. Your determination of the amount and
allocation of such expenses shall be final and conclusive. In the event of the
default of any Underwriter in carrying out its obligations hereunder, the
expenses arising from such default may be proportionately charged by you against
the other Underwriters not so defaulting without, however, relieving such
defaulting Underwriter from its liability therefor.
10. Termination and Settlement. The provisions of the last paragraph of
Section 4 hereof, the first sentence and fourth paragraph of Section 7 hereof,
and Section 8 hereof will terminate at the close of business 45 days after the
date of the initial public offering unless extended by you by notice to us for a
further period not exceeding an additional 45 days. Such provisions may be
terminated at such earlier time as you determine in your discretion, by notice
to us stating that such provisions are terminated.
As promptly as practicable after termination of the provisions referred
to in the first paragraph of this Section 10, our account will be settled and
paid, provided that you reserve from distribution to the several Underwriters
such amounts as you may deem advisable to cover possible additional expenses.
You may at any time make partial distribution of credit balances or call on the
several Underwriters to pay their respective debit balances. Any of our funds in
your hands may be held with your general funds without accountability for
interest and may be commingled with your general funds. Notwithstanding
termination of this Agreement or any settlement, we agree to pay (a) our
proportionate share (based on our underwriting obligation) of all expenses and
liabilities which may be incurred by or for the account of the Underwriters and
(b) any transfer taxes paid after such settlement on account of any sale or
transfer for our account.
If the Underwriting Agreement shall be terminated or canceled, or if it
shall be executed but shall not become effective, our obligations hereunder
shall immediately cease and terminate except for the obligation to pay our
proportionate share of all expenses and except for obligations, if any, incurred
for our account under Section 7 hereof and our obligations under the second
paragraph of this Section 10 and under Section 14 hereof.
11. Default by Underwriters. Default by one or more Underwriters in
respect of their obligations under the Underwriting Agreement will not release
us from any of our obligations or in any way affect the liability of any
defaulting Underwriter to the other Underwriters for damages resulting from such
default. In case of such default with respect to the purchase of 10 % or less of
the Registered Units included within the Underwritten Securities, we will
purchase additional Registered Units as set forth in Section 9 of the
Underwriting Agreement. If such default exceeds 10% of the Registered Units
included within the Underwritten Securities, you are authorized, but shall not
be obligated, to arrange for the purchase by other persons, who may include
yourself or any nondefaulting Underwriter, of that defaulted portion in excess
of 10%. If such arrangements are made, we will purchase Registered Units not
exceeding our original commitments under Section 9 of the Underwriting
Agreement, and the additional number of Registered Units to be purchased by the
nondefaulting Underwriters and by such other persons, if any, shall be added to
our original commitments and shall together be taken as the basis for
determining the proportionate several obligations and benefits hereunder and
under the Underwriting Agreement, but this shall in no way affect the liability
of any defaulting Underwriter for damages resulting from such default. If there
is any default as to the purchase of any portion of the Registered Units, you
are authorized, but shall not be obligated, to purchase or to arrange for the
purchase by the nondefaulting Underwriters of the defaulted portion.
12. Position of the Managing Underwriters. Except as in this Agreement
otherwise specifically provided, you shall have full authority to take such
action as you deem necessary or advisable in respect of all matters pertaining
to the Underwriting Agreement and this Agreement in connection with the
purchase, carrying, sale and distribution of the Registered Units, but you shall
be under no liability to us, except for your own lack of good faith, for
obligations expressly assumed by you in this Agreement and for any liabilities
imposed upon you by the Act. No obligations on your part shall be implied or
inferred herefrom. Authority with respect to matters to be determined by you, or
by you and the Company pursuant to the Underwriting Agreement, shall survive the
termination of this Agreement.
Nothing herein contained shall be construed as making us partners with
you or with other Underwriters or shall be construed as making the several
Underwriters an association or other separate entity, and the rights and
liabilities of ourselves and each of the other Underwriters (including you) are
several and not joint.
13. Underwriters' Warrants. We agree that the Underwriters' Warrants (as
defined in the Underwriting Agreement) shall be allocated as follows: (i) 100%
to you as Managing Underwriters and (ii) 0% to us in the ratio that the number
of Registered Units purchased by each of us bears to the number of Registered
Units purchased by all of us.
14. Indemnification.
(a) Each Underwriter agrees to indemnify and hold harmless each other
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act to the extent
and under the terms set forth in the Underwriting Agreement upon which each
Underwriter agrees to indemnify the Company, and the Company's respective
directors, officers and controlling persons. Such indemnity shall survive the
termination of this Agreement and any investigation made by or on behalf of any
Underwriter or any person so controlling an Underwriter.
(b) We agree that you shall be under no liability in respect of any
matters connected herewith or actions taken by you pursuant to this Agreement,
except for obligations expressly assumed by you in this Agreement. If at any
time any claim or claims shall be asserted against you, as Managing
Underwriters, or otherwise involving the Underwriters generally, relating to any
preliminary prospectus, the Prospectus, the Registration Statement, the public
offering of the Securities, any state or other securities or Blue Sky law
qualification matters, or any of the transactions contemplated by this
Agreement, we authorize you to make such investigation, to retain such counsel
and to take such other actions as you may deem necessary or desirable under the
circumstances, including settlement of any such claim or claims if such course
of action shall be recommended by counsel retained by you. We agree to pay you,
upon request, our proportionate share (based on our underwriting obligation) of
all expenses incurred by you (including, but not limited to, the disbursements
and fees of counsel retained by you) in investigating and defending against such
claim or claims, and our proportionate share (based on our underwriting
obligation) of any liability incurred by you in respect of such claim or claims,
whether such liability shall be the result of a judgment against you or the
result of any such settlement. In determining amounts payable pursuant to this
Section 14(b), any loss, claim, damage, liability or expense (i) incurred by any
person controlling any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, and (ii) for which such Underwriter actually
receives indemnification pursuant to Section 14(a) above or contribution or
indemnification pursuant to the Underwriting Agreement, shall reduce the amount
payable pursuant to this Section 14(b) by the amount so incurred and received.
If any Underwriter or Underwriters default in their obligations to make any
payments under this Section 14(b), then, without relieving such defaulting
Underwriter of its liability hereunder, each nondefaulting Underwriter shall be
obligated to pay its proportionate share of all defaulted payments.
15. Blue Sky Matters. You will not have any responsibility with respect
to the right of any Underwriter or other person to sell any of the Registered
Units in any jurisdiction, notwithstanding any information that we may furnish
in that connection. We understand that you will file a New York Further State
Notice, if required, and we authorize you to take such other action as may be
necessary or advisable to qualify the Securities for offering and sale in any
jurisdiction.
16. Notices. Any notice from you to us will be deemed to have been duly
given if mailed or sent by facsimile transmission to us at our address and
facsimile number set forth below. Any notice to you shall be deemed to have been
given if mailed or sent by facsimile transmission to NATIONAL SECURITIES
CORPORATION, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇. Mailed notices shall be
sent by registered mail, return receipt requested. Notices shall be effective
upon receipt.
17. Miscellaneous.
(a) We authorize you to file with any governmental agency any
reports required to be filed by you in connection with the transactions
contemplated by this Agreement or the Underwriting Agreement, and we will
furnish any information in our possession needed for such reports.
(b) In connection with the transactions contemplated by this
Agreement or the Underwriting Agreement, we will not advertise over our name
until after the first public advertisement made by you and then only at our own
expense and risk. We authorize you to exercise complete discretion with regard
to the first public advertisement.
(c) We hereby confirm (i) that we have examined the
Registration Statement and the Prospectus and are familiar with the proposed
further amendment thereto or final Prospectus, (ii) that the information therein
is correct and is not misleading insofar as it relates to us and (iii) that we
are willing to accept the responsibilities under the Act of an Underwriter named
in such Registration Statement. You are authorized, in your discretion, on our
behalf, to approve of or to object to any further amendments or supplements to
the Registration Statement or the Prospectus.
(d) We confirm that we are actually engaged in the investment
banking or securities business and are either (i) a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD") and our
commitment to purchase Registered Units pursuant to the Underwriting Agreement
will not result in a violation of the financial responsibility requirements of
Rule l5c3-1 under the Exchange Act, or of any similar provisions of any
applicable rules of any securities exchange to which we are subject or of any
restriction imposed upon us by any such exchange or any governmental authority
or (ii) a foreign dealer not eligible for membership in the NASD who hereby
agrees to make no sales within the United States, its territories or its
possessions (except that we may participate in sales to Dealers and others under
Section 4 hereof) or to persons who are citizens thereof or residents therein.
In making sales of Registered Units, if we are such a member, we agree to comply
with all applicable rules of the NASD, including, without limitation, the
Interpretation of the Board of Governors of the NASD with Respect to Free-Riding
and Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of
Fair Practice, or, if we are such a foreign dealer, we agree to comply with such
Interpretation and Sections 8, 24 and 36 of such Article as though we were such
a member and Section 25 of such Article as that Section applies to a non-member
foreign dealer.
(e) We confirm that the ratio of our aggregate indebtedness to
our net capital is such that we may, in accordance with and pursuant to Rule
l5c3-1 under the Exchange Act, obligate ourselves to purchase, and purchase, the
number of Registered Units that we agree to purchase under the Underwriting
Agreement.
(f) This Agreement will be governed by, and construed in
accordance with, the laws of the State of Texas without reference to
California's conflict of laws rules.
(g) This Agreement may be signed in any number of counterparts
which taken together shall constitute one and the same instrument.
Very truly yours,
NAME:
By:
Address:
Facsimile.:
NAME:
By:
Address:
Facsimile No.:
NAME:
By:
Address:
Facsimile No.:
NAME:
By:
Address:
Facsimile No.:
Confirmed as of the date first written:
NATIONAL SECURITIES CORPORATION
By: By:
, President ____________,President
