2,000,000 SHARES
OF COMMON STOCK OF
FORTUNE PETROLEUM CORPORATION
UNDERWRITING AGREEMENT
__________, 1997
▇▇▇▇▇▇▇ Investment Company, Inc.
As Representative of the
Several Underwriters
c/▇ ▇▇▇▇▇▇▇ Investment Company, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Fortune Petroleum Corporation, a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as Representative (the
"Representative") an aggregate of 2,000,000 shares of Common Stock of the
Company (the "Firm Shares"). The respective number of the Firm Shares to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company also proposes to grant to the Representative an
option to purchase in aggregate up to 300,000 additional Shares, identical to
the Firm Shares, (the "Option Shares") as set forth below.
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm
Shares set forth opposite their respective names in Schedule I. The Firm Shares
and the Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
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1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form S-2 (File No. ) with
respect to the Shares has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The Company, directly or
indirectly wholly owns or has the specified percentage ownership of each of the
corporations or other business entities set forth in Schedule II, attached
hereto (each a "Subsidiary" and, collectively the "Subsidiaries" and, with the
Company, collectively, the "Group") and, except as set forth in Schedule II,
does not own and never has owned a controlling interest in any other corporation
or other business entity that has or ever has had any material assets,
liabilities or operations. Each Subsidiary has been duly organized and is
validly existing as a corporation or other entity in good standing under the
laws of its jurisdiction of organization, with power and authority to own or
lease its properties and conduct its business as described in the Registration
Statement. The Company and each Subsidiary is duly qualified to transact
business in all jurisdictions in which the conduct of its business requires such
qualification.
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(c) The outstanding shares of Common Stock of the Company and each
Subsidiary have been duly authorized and validly issued and are fully paid and
non-assessable and have been issued and sold by the Company or such Subsidiary,
as the case may be, in compliance in all material respects with applicable
securities laws; the issuance and sale of the Shares have been duly authorized
by all necessary corporate action and, when issued and paid for as contemplated
herein, the Shares will be validly issued, fully paid and non-assessable; and no
preemptive rights of stockholders exist with respect to any security of the
Company or the issue and sale thereof. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock or
other securities of the Company.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock conforms to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of Delaware.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representative, specifically for use in the
preparation thereof.
(f) The consolidated financial statements of the Company and its
consolidated Subsidiaries, together with related notes and schedules as set
forth in the Registration Statement (the "Financial Statements"), present fairly
the financial position and the results of operations and cash flows of the
Company and such Subsidiaries at the indicated dates and for the indicated
periods. The Financial Statements and related schedules have been prepared in
accordance with generally accepted principles of accounting, consistently
applied throughout the periods involved, except as disclosed herein, and all
adjustments necessary for a fair
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presentation of results for such periods have been made. The summary
consolidated financial and statistical data of the Company and its Subsidiaries
included in the Registration Statement presents fairly the information shown
therein and such data has been compiled on a basis consistent with the Financial
Statements and the books and records of the Company.
(g) KPMG Peat Marwick LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against any member of the Group before any
court or administrative agency or otherwise which if determined adversely to the
Group might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Group or to prevent the consummation of the
transactions contemplated hereby, except as set forth in the Registration
Statement.
(i) The Group has title that is defendable or customary in the oil
and gas industry to all properties and assets, tangible and intangible,
reflected in the Financial Statements, or as otherwise described in the
Registration Statement, subject to no material lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in the Financial Statements or as
otherwise described in the Registration Statement. All of the material leases
and subleases under which the Company or any Subsidiary holds properties are in
full force and effect (with only such exceptions as are commonly accepted by
prudent companies in the oil and gas business) and neither the Company nor any
Subsidiary has received notice of any material claim of any sort that has been
asserted by anyone materially adverse to the rights of the Company or such
Subsidiary under any of such leases or subleases, or affecting or questioning
the rights of the Company or such Subsidiary to the continued possession of the
leased or subleased premises or property under any such lease or sublease.
(j) Each of the Company and its Subsidiaries has filed all Federal,
State, local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments received
by it to the extent that such taxes have become due and are not being contested
in good faith. All tax liabilities have been adequately provided for in the
consolidated financial statements of the Company and its consolidated
Subsidiaries.
(k) Since the dates as of which information is given in the
Registration Statement, as it may have been amended or supplemented, there has
not been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Group, whether or not occurring in the ordinary
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course of business, and there has not been any material transaction entered into
or any material transaction that is probable of being entered into by the Group,
other than transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be amended or
supplemented. The Group has no material contingent obligations which are not
disclosed in the Company's financial statements or elsewhere in the Prospectus
which are included in the Registration Statement.
(l) Neither the Company nor any Subsidiary is, nor, with the giving
of notice or lapse of time or both, will it be, in violation of or in default
under its Charter or By-Laws or under any agreement, lease, contract, indenture
or other instrument or obligation to which it is a party or by which it, or any
of its properties, is bound and which default is of material significance in
respect of the condition, financial or otherwise of the Group or the business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Group. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which any member of
the Group is a party, or of the Charter or by-laws of any member of the Group or
any order, rule or regulation applicable to any member of the Group of any court
or of any regulatory body or administrative agency or other governmental body
having jurisdiction.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
National Association of Securities Dealers, Inc. (the "NASD") or such additional
steps as may be necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws) has been obtained or made
and is in full force and effect.
(n) The Group holds all material patents, patent rights trademarks,
trade names, copyrights, trade secrets and licenses of any of the foregoing
(collectively, "Intellectual Property Rights") that are necessary to the conduct
of its businesses; there is no claim pending or, to the best knowledge of the
Company, threatened against any member of the Group alleging any infringement of
Intellectual Property Rights, or any violation of the terms of any licence
relating to Intellectual Property Rights, nor does the Company know of any basis
for any such claim. The Company knows of no material infringement by others of
Intellectual Property Rights owned by or licensed to any member of the Group.
The Group has obtained, is in compliance in all material respect with and
maintains in full force and effect all material licenses, certificates, permits,
orders or other, similar authorizations granted or issued by any governmental
agency (collectively "Government Permits") required to conduct its business as
it is presently conducted. In particular, and without limiting the generality of
the foregoing,
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the Group is in compliance with all conditions, limitations, restrictions or
other provisions of all Government Permits related to the exploration for,
development of, extraction, transportation or sale of hydrocarbons. All
applications for additional Government Permits described in the Prospectus as
having been made by the Group have been properly and effectively made in
accordance with the applicable laws and regulations with respect thereto and
such applications constitute, in the best judgment of the Company's management,
those reasonably required to have been made in order to carry out the Company's
business plan as described in the Prospectus. No proceeding to revoke, limit or
otherwise materially change any Government Permit has been commenced or, to the
Company's best knowledge, is threatened against the Company or any supplier to
the Group with respect to materials supplied to the group, and the Company has
no reason to anticipate that any such proceeding will be commenced against any
member of the Group or any such supplier. Except as disclosed or contemplated
in the Prospectus, the Company has no reason to believe that any pending
application for a Government Permit will be denied or limited in a manner
inconsistent with the Company's business plan as described in the Prospectus.
(o) The Group is in all material respects in compliance with all
applicable Environmental Laws. The Company has no knowledge of any past,
present or, as anticipated by the Company, future events, conditions,
activities, investigation, studies, plans or proposals that (i) would interfere
with or prevent compliance with any Environmental Law by the Group or (ii) could
reasonably be expected to give rise to any common law or other liability, or
otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving the Group and related in any way to Hazardous
Substances or Environmental Laws. Except for the prudent and safe use and
management of Hazardous Substances in the ordinary course of the Group's
business, (i) no Hazardous Substance is or has been used, treated, stored,
generated, manufactured or otherwise handled on or at any Facility and (ii) to
the Company's best knowledge, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are stored at any
Facility except in quantities necessary to satisfy the reasonably anticipated
use or consumption by the Group. No litigation, claim, proceeding or
governmental investigation is pending regarding any environmental matter for
which any member of the Group has been served or otherwise notified or, to the
knowledge of the Company threatened or asserted against any member of the Group,
or the officers or directors of any such member in their capacities as such, or
any Facility or the Group's business. There are no orders, judgments or decrees
of any court or of any governmental agency or instrumentality under any
Environmental Law which specifically apply to any member of the Group, any
Facility or any of the Group's operations. No member of the Group has received
from a governmental authority or other person (i) any notice that it is a
potentially responsible person for any Contaminated site or (ii) any request for
information about a site alleged to be Contaminated or regarding the disposal of
Hazardous Substances. There is no litigation or proceeding against any other
person by the Group regarding any environmental matter. The Company has
disclosed in the Prospectus or made available to the Underwriters and their
counsel true, complete and correct copies of any reports, studies,
investigations,
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audits, analysis, tests or monitoring in the possession of or initiated by the
Company pertaining to any environmental matter relating to the Company, its
past or present operations or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws"
means any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased
or occupied by the Company.
(p) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or intends to take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(q) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) The Group carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary for
companies engaged in similar industries.
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(t) Each member of the Group is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(u) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or incorporated by
reference in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(v) Each member of the Group is in material compliance with all
laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to the oil and
gas industry; and the conduct of the business of the Group, as described in the
Prospectus, will not cause the Company to be in violation of any such
requirements.
(w) The Representative's Warrants (as defined in Paragraph (d) of
Section 2 hereof) have been authorized for issuance to the Representative and
will, when issued, possess rights, privileges, and characteristics as
represented in the most recent form of Representative's Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Representative's Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representative's Warrants, will be
duly and validly issued, fully paid, nonassessable and free of preemptive
rights, and all corporate action required to be taken for the authorization and
issuance of the Representative's Warrants, and the securities to be issued upon
their exercise, have been validly and sufficiently taken.
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(x) Except as disclosed in the Prospectus, neither the Company nor
any of its officers, directors or affiliates have caused any person, other
than the Underwriters, to be entitled to reimbursement of any kind, including,
without limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Shares, as a result of the consummation of such offering based
on any activity of such person as a finder, agent, broker, investment adviser
or other financial service provider.
(y) The Company has timely filed with the Commission all reports
required to be filed by it during the last three years under the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and the rules and
regulations thereunder, including, but not limited to, any such reports
incorporated by reference in the Registration Statement. All such reports
have been in proper form and have included all information required to be
disclosed therein. No such report has contained a misstatement of any
material fact or omitted to state any fact necessary to make the statements
therein not materially misleading. During the last three years, the Company
has complied in all material respects with regulations of the American Stock
Exchange applicable to it as a listed company. The Company has not taken, in
anticipation of the offering of the Shares, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(z) ▇▇▇▇▇▇▇▇▇▇ & Co., which has rendered its report with respect to
the net proved oil and gas reserves and the estimated future net revenues from
oil and gas reserves (the "Reserve Information"), is professionally
qualified to issue a report with respect to the Reserve Information and has no
material relationship with the Company or any Subsidiary; the Reserve
Information is fairly presented in a manner consistent with industry practice
with respect to such information; subsequent to the date of the Reserve
Information, and except as disclosed in the Prospectus, there has been no
material adverse change in the net proved oil and gas reserves and the
estimated future net revenues from proved oil and gas reserves of the Company.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $ per Share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made
in New York Clearing House funds and, at the option of the Representative, by
certified or bank cashier's checks drawn to the order of the Company or bank
wire to an account specified by
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the Company against either uncertificated delivery of Firm Shares or of
certificates therefor (which delivery, if certificated, shall take place in
such location in New York, New York as may be specified by the Representative)
to the Representative for the several accounts of the Underwriters. Such
payment is to be made at the offices of ▇▇▇▇▇▇▇ Investment Company, Inc. at
the address set forth on the first page of this agreement, at 7:00 a.m.,
Pacific time, on the third business day after the date of this Agreement or
at such other time and date not later than five business days thereafter as
you and the Company shall agree upon, such time and date being herein referred
to as the "Closing Date." (As used herein, "business day" means a day on
which the New York Stock Exchange is open for trading and on which banks in
New York are open for business and not permitted by law or executive order to
be closed.) Except to the extent uncertificated Firm Shares are delivered at
closing, the certificates for the Firm Shares will be delivered in such
denominations and in such registrations as the Representative request in
writing not later than the second full business day prior to the Closing Date,
and will be made available for inspection by the Representative at least one
business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Representative to purchase the Option
Shares at the price per Share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only
once thereafter within 45 days after the date of this Agreement, by the
Representative to the Company setting forth the number of Option Shares as to
which the Representative is exercising the option, the names and
denominations in which the Option Shares are to be registered and the time
and date at which certificate representing such Shares are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representative but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred
to as the "Option Closing Date"). If the date of exercise of the option is
three or more days before the Closing Date, the notice of exercise shall set
the Closing Date as the Option Closing Date. The option with respect to the
Option Shares granted hereunder may be exercised only to cover over-allotments
in the sale of the Firm Shares by the Underwriters. The Representative may
cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the Option
Closing Date in New York Clearing House funds and, at the option of the
Representative, by certified or bank cashier's check drawn to the order of the
Company for the Option Shares to be sold by the Company or bank wire to an
account specified by the Company against delivery of certificates therefor at
the offices of ▇▇▇▇▇▇▇ Investment Company, Inc. set forth on the first page of
this Agreement.
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(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters,
as additional compensation for its services, purchase warrants (the
"Representative's Warrants") for the purchase of up to 200,000 shares of
Common Stock at a price of $ per share, upon the terms and subject to
adjustment and conversion as described in the form of Representative's
Warrants filed as an exhibit to the Registration Statement.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representative deems it advisable
to do so. The Firm Shares are to be initially offered to the public at the
initial public offering price set forth in the Prospectus. The Representative
may from time to time thereafter change the public offering price and other
selling terms. To the extent, if at all, that any Option Shares are purchased
pursuant to Section 2 hereof, the Representative will offer them to the public
on the foregoing terms.
It is further understood that you will act as the Representative for
the Underwriters in the offering and sale of the Shares in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A
of the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a
form approved by the Representative containing information previously omitted
at the time of effectiveness of the Registration Statement in reliance on
Rule 430A of the Rules and Regulations, and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representative shall not previously have been advised and furnished with a
copy or to which the Representative shall have reasonably objected in writing
or which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representative promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of
any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of
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the institution of any proceedings for that purpose. The Company will use its
best efforts to prevent the issuance of any such stop order preventing or
suspending the use of the Prospectus and to obtain as soon as possible the
lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction where it is not
now so qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports, and other documents,
as are or may be required to continue such qualifications in effect for so
long a period as the Representative may reasonably request for distribution of
the Shares.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company will
deliver to, or upon the order of, the Representative during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits
filed therewith, and will deliver to the Representative such number of
copies of the Registration Statement (including such number of copies of the
exhibits filed therewith that may reasonably be requested), and of all
amendments thereto, as the Representative may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of
the Shares as contemplated in this Agreement and the Prospectus. If during
the period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so
that the Prospectus as so amended or supplemented will not, in the light of
the circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.
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(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earning statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so
made available.
(g) The Company will, from the Closing Date and thereafter until all
of the Representative's Warrants are exercised or two years from the Closing
Date, whichever is later, deliver to the Representative copies of annual
reports and copies of all other documents, reports and information furnished
by the Company to its stockholders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission pursuant
to the Act or the Securities Exchange Act of 1934, as amended. The Company
will deliver to the Representative similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which are
not consolidated in the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
or exercisable for shares of Common Stock or derivative of
Stock (or agreement for such) will be made for a period of one hundred
days after the date of this Agreement, directly or indirectly, by the
otherwise than hereunder or with the prior written consent of the,
which consent will not be unreasonably withheld.
(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on The American Stock Exchange.
(j) The Company has caused each officer and director to furnish to
you, on or prior to the date of this agreement, a letter or letters, in form
and substance satisfactory to the Underwriters ("Lockup Agreements"), pursuant
to which each such person shall agree (A) not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock of the Company or other
capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for Common Stock or derivatives of Common Stock
owned by such person or request the registration for the offer or sale of any
of the foregoing (or as to which such person has the right to direct the
disposition of) for a period of 180 days after the date of this Agreement,
directly or indirectly, except with the prior written consent of ▇▇▇▇▇▇▇
Investment Company, Inc., which consent shall not be unreasonably withheld;
and (B) to give prior written notice to ▇▇▇▇▇▇▇ Investment Company, Inc. for
a period of five years from the effective date of the Registration Statement,
with respect to any sales of Common Stock of the Company pursuant to Rule 144
under the Securities Act or any similar rule.
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(k) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the
Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
5. COSTS AND EXPENSES.
(a) ▇▇▇▇▇▇▇ Investment Company, Inc. shall be entitled, for itself
alone and not as Representative of the Underwriters, at the Closing Date and
any Option Closing date to a non-accountable expense allowance equal to three
percent of the initial public offering price of the Shares being purchased by
the Underwriters on that date, provided, however, that the sum of $35,000
heretofore paid by the Company to ▇▇▇▇▇▇▇ Investment Company, Inc. shall be
applied as a credit against the non-accountable expense allowance due on the
Closing Date.
(b) In addition to the payment described in Paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company;
the cost of printing and delivering to, or as requested by, the Underwriters
copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Underwriters' Selling Memorandum, the
Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey
and any supplements or amendments thereto; the filing fees of the Commission;
the filing fees and expenses (including legal fees and disbursements)
incident to securing any required review by the NASD of the terms of the sale
of the Shares; any listing fee or other cost of listing the Shares on the
American Stock Exchange; and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Company. The Company agrees to pay all costs and expenses
of the Underwriters, including the fees and disbursements of counsel for the
Underwriters,
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incident to the offer and sale of directed shares of the Common
by the Underwriters to employees and persons having business
relationships with the Company. The Company shall not, however, be required
to pay for any of the Underwriters' expenses (other than those related to
qualification under NASD regulation and State securities or Blue Sky laws)
except that, if this Agreement shall not be consummated, then the Company
shall reimburse the several Underwriters for accountable out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Shares
or in contemplation of performing their obligations hereunder.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of their covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the and complied with to
its reasonable satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been issued and
no proceedings for that purpose shall have been taken or, to the knowledge of
the Company, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each Subsidiary has been
duly organized and is validly existing as a corporation or other business entity
in good standing under the laws of its jurisdiction of organization, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company and each
Subsidiary is duly
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qualified to transact business in all jurisdictions in which
conduct of its business requires such qualification, or in which the failure
qualify would have a materially adverse effect upon the business of the.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
the Company's Common Stock have been duly authorized; the outstanding
of the Company's Common Stock have been duly authorized and validly
are fully paid and non-assessable; all of the securities of the
to the description thereof contained in the Prospectus; the
the Common Stock, assuming they are in the form filed with the,
in due and proper form; the shares of Common Stock to be sold by
Company pursuant to this Agreement, including shares of Common Stock to be
as a part of the Option Shares have been duly authorized and, upon issuance
delivery thereof as contemplated in this Agreement and the Registration
, will be validly issued, fully paid and non-assessable; no preemptive
of stockholders exist with respect to any of the Common Stock of the
or the issuance or sale thereof pursuant to any applicable statute or
provisions of the Company's charter documents or, to such counsel's best
, pursuant to any contractual obligation. The Representative's Warrants
been authorized for issuance to the Representative and will, when issued,
rights, privileges, and characteristics as represented in the most
form of Representative's Warrants filed as an exhibit to the Registration
; the securities to be issued upon exercise of the Representative's
, when issued and delivered against payment therefor in accordance with
terms of the Representative's Warrants, will be duly and validly issued,
paid, nonassessable and free of preemptive rights, and all corporate
required to be taken for the authorization and issuance of the
Warrants, and the securities to be issued upon their exercise,
been validly and sufficiently taken.
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
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(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects
with the requirements of the Act and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to the
financial statements and related schedules therein).
(vi) The statements under the captions "
in the Prospectus and in Item 15 of the Registration
Statement, insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all material
respects the information called for with respect to such documents and
matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described
in the Registration Statement or the Prospectus which are not so filed or
described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or by-laws of the Company, or any
agreement or instrument known to such counsel to which the Company is a party
or by which the Company may be bound.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery
of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by
State securities and Blue Sky laws as to which such counsel need express no
opinion) except such as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net
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proceeds therefrom as described in the Prospectus, required to register as
an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters
governed by the laws other than Delaware corporate law and Federal laws on
local counsel in such jurisdictions, provided that in each case such counsel
shall state that they believe that they and the Underwriters are justified in
relying on such other counsel. In addition to the matters set forth above,
the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ shall also include a statement to the effect
that nothing has come to the attention of such counsel that has caused them
to believe that (i) the Registration Statement, at the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not, and (ii) the Prospectus, or any supplement thereto, on the date it was
filed pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein).
(c) The Representative shall have received from Stoel Rives LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (i), (iv) and (v) of Paragraph (b) of this Section 6. In
rendering such opinion Stoel Rives LLP may rely as to all matters governed
other than by the laws of the State of Oregon or Federal laws on the
opinion of counsel referred to in Paragraphs (b) and (c) of this Section 6.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of
such counsel that has caused them to believe that (i) the Registration
Statement, or any amendment thereto, as of the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact, necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Stoel Rives LLP may state that their belief is
based upon the procedures set forth therein, but is without independent
check and verification.
-18-
(d) The Representative shall have received at or prior to the
Closing Date from Stoel Rives LLP a memorandum or summary, in form and
substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representative may reasonably have designated to the Company.
(e) The Representative, on behalf of the several Underwriters, shall
have received, on each of the dates hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representative, of KPMG Peat Marwick, LLP confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations and containing such other statements
and information as is ordinarily included in accountants' "comfort letters"
to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
(f) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the
case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been
taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date
or the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration Statement
and Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
and since the effective date of the Registration Statement, no event has
occurred which should have been set forth in a
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supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company,
whether or not arising in the ordinary course of business.
(g) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as
the Representative may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved
for designation upon notice of issuance on the American Stock Exchange.
(j) The Lockup Agreements described in Section 4(j) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to Stoel Rives LLP,
counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing
or by telegram at or prior to the Closing Date or the Option Closing Date,
as the case may be.
In such event, the Company and the Underwriters shall not be under
any obligation to each other (except to the extent provided in Sections 5 and
8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of
the Shares required to be delivered as and when specified in this Agreement
are subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
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(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to
which such Underwriter or any such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii)
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and will reimburse each Underwriter and each such controlling
person upon demand for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Representative specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who controls
the Company within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made; and will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
each Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by
or through the Representative specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
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(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to
any party who shall fail to give notice as provided in this Section 8(c) if
the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than
on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay
as incurred (or within 30 days of presentation) the fees and expenses of
the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have failed to
assume the defense and employ counsel acceptable to the indemnified party
within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.
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(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings 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 or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. 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 (before deducting
expenses) received by the Company bears to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The 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 on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(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 subsection (d), (i) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter, and (ii) 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. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom
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contribution may be sought under this Section 8 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing
party, agrees that process issuing from such court may be served upon him or
it by any other contributing party and consents to the service of such
process and agrees that any other contributing party may join him or it as an
additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this
Section 8 and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter, the Company, its directors or
officers or any persons controlling the Company, (ii) acceptance of any
Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may
be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the Company),
you, as Representative of the Underwriters, shall use your reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as
may be agreed upon and upon the terms set forth herein, the Firm Shares or
Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representative, shall not have procured such other Underwriters, or any
others, to purchase the Firm Shares or Option Shares, as the case may be,
agreed to be purchased by the defaulting Underwriter or Underwriters, then
(a) if the aggregate number of Shares with respect to which such default
shall occur does not exceed 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Shares or Option
Shares, as the case may be, which they are obligated to purchase hereunder,
to purchase the Firm Shares or Option Shares, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of Firm Shares or Option Shares, as the case may be,
with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or
you as the Representative of the Underwriters will have the right, by
written notice given within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-
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defaulting Underwriters or of the Company except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representative, may determine in order that
the required changes in the Registration Statement or in the Prospectus or in
any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action
taken under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to ▇▇▇▇▇▇▇
Investment Company, Inc., ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇; with a copy to Stoel Rives LLP, ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇; if to the Company,
to Fortune Petroleum Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change
or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, whether or
not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the United
States would, in your reasonable judgment, make it impracticable to market
the Shares or to enforce contracts for the sale of the Shares, (iii) the Dow
▇▇▇▇▇ Industrial Average shall have fallen by 15 percent or more from its
closing price
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on the day immediately preceding the date that the Registration Statement is
declared effective by the Commission, (iv) suspension of trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers
of days of trading) for securities on either such Exchange, (v) the
enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which
in your opinion materially and adversely affects or may materially and
adversely affect the business or operations of the Company, (vi) declaration
of a banking moratorium by United States or New York State authorities, (vii)
any downgrading in the rating of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (viii) the suspension of
trading of the Company's common stock by the Commission on the Nasdaq Stock
Market or (ix) the taking of any action by any governmental body or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion
has a material adverse effect on the securities markets in the United States;
or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company
for inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar
as such information relates to the Underwriters), legends required by Item
502(d) of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants
in this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the
Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
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This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Oregon. All disputes relating to this
Underwriting Agreement shall be adjudicated before a court located in
Multnomah county, Oregon to the exclusion of all other courts that might have
jurisdiction.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
FORTUNE PETROLEUM CORPORATION
By:____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President and CEO
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
▇▇▇▇▇▇▇ INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By:___________________________________
Authorized Officer
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
▇▇▇▇▇▇▇ Investment Company, Inc.
Total 2,000,000
---------
---------
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SCHEDULE II
LIST OF SUBSIDIARIES
Subsidiary Percent Ownership
---------- -----------------
None
*****
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