<PAGE>
As filed with the Securities and Exchange Commission on October 12, 1999
Registration No. 333-86547
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
Pennaco Energy, Inc.
(Exact name of registrant as specified in its charter)
Nevada 1311 88-0384598
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of
incorporation or Classification Code Number) Identification Number)
organization)
---------------
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Paul M. Rady,
President and Chief Executive Officer
Pennaco Energy, Inc.
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
David P. Oelman Robert A. Zuccaro
Andrews & Kurth L.L.P. Latham & Watkins
600 Travis, Suite 4200 885 Third Avenue
Houston, Texas 77002 New York, New York 10022
(713) 220-4200 (212) 906-1200
Approximate date of commencement of the proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 2 to Pennaco Energy's Form S-1 is being filed to:
1. Include a copy of the prospectus supplement dated October 12, 1999;
and
2. File a previously omitted exhibit.
1
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 11, 1999
PROSPECTUS SUPPLEMENT
(To preliminary prospectus dated September 28, 1999)
This prospectus supplement supplements the preliminary prospectus dated
September 28, 1999 of Pennaco Energy, Inc., relating to the public offering and
sale of 2,000,000 shares of common stock, par value $.001, by Pennaco and
1,000,000 shares of common stock by the selling stockholder. This prospectus
supplement should be read with the preliminary prospectus.
Recent Developments
As of October 11, 1999, Pennaco's net working interest gas production has
increased to 21 million cubic feet, or MMcf, per day from approximately 100
producing wells located in the South Gillette Area in our Powder River Basin
coal bed methane project. Our production has increased from the previously
reported 11 MMcf per day due to the opening of KN Energy's Coal Searn Booster
Compressor Station in the South Gillette Area.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses of the offering are estimated to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 11,330
Printing Expenses............................................... 100,000
Legal Fees and Expenses......................................... 100,000
Accounting Fees and Expenses.................................... 10,000
NASD Fee........................................................ 4,011
Miscellaneous................................................... 104,659
--------
TOTAL......................................................... $330,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers
The Nevada Revised Statutes and certain provisions of the Company's Bylaws
under certain circumstances provide for indemnification of the Company's
officers, directors and controlling persons against liabilities that they may
incur in such capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this description is
qualified in its entirety by reference to the Company's Bylaws and to the
statutory provisions.
In general, any officer, director, employee or agent may be indemnified
against expenses, fines, settlements or judgments arising in connection with a
legal proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in the Company's best interest, and were not
unlawful. Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by independent
decision of the Board of Directors, by legal counsel, or by a vote of the
stockholders, that the applicable standard of conduct was met by the person to
be indemnified.
The circumstances under which indemnification is granted in connection with
an action brought on behalf of the Company is generally the same as those set
forth above; however, with respect to such actions, indemnification is granted
only with respect to expenses actually incurred in connection with the defense
or settlement of the action. In such actions, the person to be indemnified must
have acted in good faith and in a manner believed to have been in the Company's
best interest, and must not have been adjudged liable for negligence or
misconduct.
Indemnification may also be granted pursuant to the terms of agreements that
may be entered in the future or pursuant to a vote of stockholders or
directors. The statutory provision cited above also grants the power to the
Company to purchase and maintain insurance which protects its officers and
directors against any liabilities incurred in connection with their service in
such a position, and such a policy may be obtained by the Company.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is certain information concerning all sales of securities by
the Company during the past three years that were not registered under the
Securities Act.
(a) The Company issued 995,000 shares of common stock in January 1998
pursuant to a share-for-share exchange with the stockholders of International
Metal Protection, Inc. in a transaction conducted solely to
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<PAGE>
reincorporate the Company in a new jurisdiction. This transaction was exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act. There was no change in ownership and the
stockholders made no significant investment decision.
(b) The Company issued 500,000 shares of common stock in February 1998 for
the purchase price of $.10 per share pursuant to a private placement exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act. Proceeds to the Company were approximately $50,000.
At that time, the Company had only a business plan and no assets. There were
eleven offerees in this offering, all of whom made purchases and all of whom
were sophisticated investors. The Company fully apprised each of the offerees
of the Company's start-up nature and gave them full details regarding the
Company's business plan. There was no general solicitation or advertising used
in connection with the offer to sell or sale of these securities. The
purchasers were advised that the securities, once purchased, could not be
resold or otherwise transferred without subsequent registration under the
Securities Act. Each purchaser represented to the Company that they were
purchasing the securities for their own account for investment purposes only.
(c) The Company issued 4,530,000 shares of common stock in February 1998 for
a purchase price of $.22 per share pursuant to a Regulation D, Rule 504
offering. Proceeds to the Company were approximately $997,000. Offerees were
provided with a private placement memorandum containing detailed information
about the Company and its plan. The Company required each prospective investor
to represent in writing that (i) they had adequate means of providing for their
current needs and personal contingencies and had no need to sell the securities
in the foreseeable future and (ii) they, either alone or with their duly
designated purchaser representative, had such knowledge and experience in
business and financial matters that they were capable of evaluating the risks
and merits of an investment in the securities.
(d) The Company issued 5,000,000 shares of common stock in April 1998 for a
purchase price of $1.25 per share pursuant to a Regulation D, Rule 506
offering. Proceeds to the Company were $6,250,000. The Company accepted
subscriptions only from accredited investors. Offerees were provided with a
private placement memorandum containing detailed information about the Company
and its plan. The Company required each prospective investor to represent in
writing that (i) they had received and reviewed the private placement
memorandum and understood the risks of an investment in the Company; (ii) they
had the experience and knowledge with respect to similar investments which
enabled them to evaluate the merits and risks of such investment, or they had
obtained and relied upon an experienced independent adviser with respect to
such evaluation; (iii) they had adequate means to bear the economic risk of
such investment, including the loss of the entire investment; (iv) they had
adequate means to provide for their current needs and possible personal
contingencies; (v) they had no need for liquidity of their investment in the
Company; (vi) they understood that the securities had not been registered under
the Securities Act and may have not been registered or qualified under
applicable state securities laws and, therefore, that they could not sell or
transfer the securities unless the securities were subsequently registered or
an exemption therefrom was available to them; (vii) they were acquiring the
securities for investment solely for their own account and without any
intention of reselling or distributing them; and (viii) they understood that
the securities would bear a restrictive legend prohibiting transfers except in
compliance with the provisions of the securities, the subscription agreement
executed by the purchaser and the applicable federal and state securities laws.
(e) The Company issued 128,000 common stock purchase warrants with an
exercise price of $1.25 per share, exercisable after April 15, 1999 through
April 15, 2000, to Yorkton in April 1998 pursuant to a private placement
exemption from the registration requirements of the Securities Act under
Section 4(2) of the Securities Act. These warrants were issued pursuant to a
negotiated transaction between the Company and Yorkton, whereby Yorkton agreed
to provide corporate finance services to the Company for one year in return for
these warrants.
(f) The Company issued 2,000,000 shares of common stock in June 1998 to RIS
pursuant to a Regulation D, Rule 506 offering for a purchase price of $1.75 per
share. Proceeds to the Company were approximately
II-2
<PAGE>
$3,500,000. The Company accepted subscriptions only from accredited investors.
Offerees were provided with a private placement memorandum containing detailed
information about the Company and its plan. The Company required each
prospective investor to represent in writing that (i) they had received and
reviewed the private placement memorandum and understood the risks of an
investment in the Company; (ii) they had the experience and knowledge with
respect to similar investments which enabled them to evaluate the merits and
risks of such investment, or they had obtained and relied upon an experienced
independent adviser with respect to such evaluation; (iii) they had adequate
means to bear the economic risk of such investment, including the loss of the
entire investment; (iv) they had adequate means to provide for their current
needs and possible personal contingencies; (v) they had no need for liquidity
of their investment in the Company; (vi) they understood that the securities
had not been registered under the Securities Act and may have not been
registered or qualified under applicable state securities laws and, therefore,
that they could not sell or transfer the securities unless the securities were
subsequently registered or an exemption therefrom was available to them; (vii)
they were acquiring the securities for investment solely for their own account
and without any intention of reselling or distributing them; and (viii) they
understood that the securities would bear a restrictive legend prohibiting
transfers except in compliance with the provisions of the securities, the
subscription agreement executed by the purchaser and the applicable federal and
state securities laws.
(g) The Company issued 796,429 units in June, July and September 1998
pursuant to a Regulation D, Rule 506 offering to three members of the
management team of the Company, for a purchase price of $1.75 per unit, each
unit consisting of one share of common stock and one common stock purchase
warrant for every two shares purchased. All units were purchased by three
members of the management team of the Company. The warrants have an exercise
price of $1.75 per share in the first year and $1.96 per share in the second
year and are exercisable until September 4, 2000. Proceeds to the Company were
approximately $1,394,000. Offerees were provided with a private placement
memorandum containing detailed information about the Company and its plan. The
Company required each prospective investor to represent in writing that (i)
they had received and reviewed the private placement memorandum and understood
the risks of an investment in the Company; (ii) they had the experience and
knowledge with respect to similar investments which enabled them to evaluate
the merits and risks of such investment, or they had obtained and relied upon
an experienced independent adviser with respect to such evaluation; (iii) they
had adequate means to bear the economic risk of such investment, including the
loss of the entire investment; (iv) they had adequate means to provide for
their current needs and possible personal contingencies; (v) they had no need
for liquidity of their investment in the Company; (vi) they understood that the
securities had not been registered under the Securities Act and may have not
been registered or qualified under applicable state securities laws and,
therefore, that they could not sell or transfer the securities unless the
securities were subsequently registered or an exemption therefrom was available
to them; (vii) they were acquiring the securities for investment solely for
their own account and without any intention of reselling or distributing them;
and (viii) they understood that the securities would bear a restrictive legend
prohibiting transfers except in compliance with the provisions of the
securities, the subscription agreement executed by the purchaser and the
applicable federal and state securities laws.
(h) The Company issued 1,215,000 units on September 4, 1998 pursuant to a
Regulation D, Rule 506 offering for a purchase price of $3.25 per unit, each
unit consisting of one share of common stock and one common stock purchase
warrant for every two shares purchased. The warrants had an exercise price of
$5.00 per share and expired on March 4, 1999. Proceeds to the Company were
approximately $3,900,000. The Company accepted subscriptions only from
accredited investors. Offerees were provided with a private placement
memorandum containing detailed information about the Company and its plan. The
Company required each prospective investor to represent in writing that (i)
they had received and reviewed the private placement memorandum and understood
the risks of an investment in the Company; (ii) they had the experience and
knowledge with respect to similar investments which enabled them to evaluate
the merits and risks of such investment, or they had obtained and relied upon
an experienced independent adviser with respect to such evaluation; (iii) they
had adequate means to bear the economic risk of such investment, including the
loss of the entire investment; (iv) they had adequate means to provide for
their current needs and possible personal contingencies; (v) they had no need
for liquidity of their investment in the Company; (vi) they
II-3
<PAGE>
understood that the securities had not been registered under the Securities Act
and may have not been registered or qualified under applicable state securities
laws and, therefore, that they could not sell or transfer the securities unless
the securities were subsequently registered or an exemption therefrom was
available to them; (vii) they were acquiring the securities for investment
solely for their own account and without any intention of reselling or
distributing them; and (viii) they understood that the securities would bear a
restrictive legend prohibiting transfers except in compliance with the
provisions of the securities, the subscription agreement executed by the
purchaser and the applicable federal and state securities laws. Yorkton served
as placement agent for this private placement. As compensation, Yorkton
received share purchase warrants to purchase 75,200 shares at an exercise price
of $3.58. These share purchase warrants were issued pursuant to the same
Regulation D, Rule 506 offering.
Under the terms of a related escrow agreement, $763,750 in proceeds was
deposited into an interest bearing escrow account together with certificates
representing 235,000 units. The shares and the shares of common stock
underlying the warrants were to be registered for resale under the Securities
Act of 1993 with the U.S. Securities and Exchange Commission by December 31,
1998. The Company also agreed to have the shares qualified by way of an
exemption order provided by the respective Securities Commissions in Canada
by December 31, 1998. The registration statement has not been declared
effective. Accordingly, as of December 31, 1998, the subscriber may elect to
either purchase the escrow units or receive a refund from the escrow account
paid with their subscription, plus interest thereon, and an additional unit for
each ten units purchased in the offering. On February 28, 1999 all but one of
the subscribers elected to receive an additional unit for each ten units
purchased in the offering and, as a result, an additional 121,500 units are to
be issued. The subscriber is also entitled to receive an additional unit for
each ten units previously acquired in the offering in the event that the
Company does not maintain an effective registration statement until such time
as the registered securities may be resold pursuant to Rule 144 promulgated
under the Act.
(i) The Company issued 90,000 common stock purchase warrants with an
exercise price of $4.72 per share, to SMS Operating, LLC under a private
placement exemption from the registration requirements of the Securities Act
under Section 4(2) of the Securities Act. These warrants were issued pursuant
to a negotiated transaction between the Company and SMS, whereby the Company
acquired certain lease acreage from SMS partially in exchange for the warrants.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<C> <S>
*1.1 Form of Underwriting Agreement
+3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws (filed as Exhibit 3.2 to the Company's Form 10-SB File No.
00-24881, filed September 15, 1998 and included herein by
reference)
4.1 Form of Warrant (filed as Exhibit 4.1 to the Company's Form SB-2
File No. 333-68317, filed December 3, 1998 and included herein by
reference)
+5.1 Opinion of Kummer Kaempfer Bonner & Renshaw
10.1 Mineral Lease Purchase Agreement dated February 23, 1998 between
High Plains Associates, Inc. and Pennaco Energy, Inc. (filed as
Exhibit 10.1 to the Company's Form 10-SB/A File No. 00-24881,
filed September 15, 1998 and included herein by reference)
10.2 Letter Agreement dated January 23, 1998 between High Plains
Associates, Inc. and Taylor Oil Properties (filed as Exhibit 10.2
to the Company's Form 10-SB/A File No. 00-24881, filed September
15, 1998 and included herein by reference)
10.3 Assignment of Option and Exercise of Option dated March 6, 1998
between High Plains Associates, Inc. and Pennaco Energy, Inc.
(filed as Exhibit 10.3 to the Company's Form 10-SB/A File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.4 Agreement dated March 6, 1998 between High Plains Associates, Inc.
and Pennaco Energy, Inc. (filed as Exhibit 10.4 to the Company's
Form 10-SB/A File No. 00-24881, filed September 15, 1998 and
included herein by reference)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<C> <S>
10.5 Pennaco Energy, Inc. 1998 Stock Option and Incentive Plan (filed
as Exhibit 10.5 to the Company's Form 10-SB, File No. 00-24881,
filed September 15, 1998 and included herein by reference)
10.6 Form of Pennaco Energy, Inc. Incentive Stock Option Agreement
(filed as Exhibit 10.6 to the Company's Form 10-SB, File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.7 Form of Pennaco Energy, Inc. Non-Statutory Stock Option Agreement
(filed as Exhibit 10.7 to the Company's Form 10-SB, File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.8 Employment Agreement dated June 10, 1998 between Pennaco Energy,
Inc. and Paul M. Rady (filed as Exhibit 10.8 to the Company's Form
10-SB, File No. 00-24881, filed September 15, 1998 and included
herein by reference)
10.9 Employment Agreement dated July 2, 1998 between Pennaco Energy,
Inc. and Glen C. Warren, Jr. (filed as Exhibit 10.9 to the
Company's Form 10-SB, File No. 00-24881, filed September 15, 1998
and included herein by reference)
10.10 Secured Promissory Note dated August 13, 1998 from Pennaco Energy,
Inc. to Venture Capital Sourcing, SA (filed as Exhibit 10.10 to
the Company's Form 10-SB/A File No. 00-24881, filed September 15,
1998 and included herein by reference)
10.11 Second Amendment to Security Agreement dated August 13, 1998
between Pennaco Energy, Inc. and Venture Capital Sourcing, SA
(filed as Exhibit 10.11 to the Company's Form 10-SB/A File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.12 Purchase and Sale Agreement between Pennaco Energy, Inc., as
Seller and CMS Oil and Gas Company, as Buyer, dated October 23,
1998 (filed as Exhibit 10.12 to the Company's Form 10-SB, File No.
00-24881, filed September 15, 1998 and included herein by
reference)
10.13 Secured Promissory Note dated October 23, 1998 from Pennaco
Energy, Inc. to CMS Oil and Gas Company (filed as Exhibit 10.13 to
the Company's Form 10-SB, File No. 00-24881, filed November 24,
1998 and included herein by reference)
10.14 Sublease Agreement dated October 23, 1998 between Pennaco Energy,
Inc. and Evansgroup, Inc. (filed as Exhibit 10.14 to the Company's
Form 10-SB/A File No. 00-24881 filed December 22, 1998 and
included here by reference)
10.15 Agreement Regarding the Drilling of Coal Bed Methane Wells (filed
as Exhibit 10.15 to the Company's Form 10-SB/A File No. 00-24881,
filed December 22, 1998 and included herein by reference)
10.16 First Amendment to Purchase and Sale Agreement dated November 20,
1998 (filed as Exhibit 10.16 to the Company's Form 10-SB/A File
No. 00-24881, filed January 28, 1999 and included herein by
reference)
10.17 Second Amendment to Purchase and Sale Agreement dated January 15,
1999 (filed as Exhibit 10.17 to the Company's Form 10-SB/A File
No. 00-24881, filed January 28, 1999 and included herein by
reference)
10.18 Gas Gathering Agreement between Bear Paw Energy, Inc. and Pennaco
Energy, Inc. dated February 1, 1999 (Portions of this Gas
Gathering Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC.) Filed as Exhibit 10.18 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference
10.19 Gas Gathering Agreement between CMS Continental Natural Gas, Inc.
and Pennaco Energy, Inc. dated March 1, 1999 (Portions of this Gas
Gathering Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC.) Filed as Exhibit 10.19 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference
10.20 Gas Purchase Agreement between Western Gas Resources, Inc. and
Pennaco Energy, Inc. dated April 1, 1999 (Portions of this Gas
Purchase Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC.) Filed as Exhibit 10.20 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<C> <S>
10.21 Base Contract for Short-Term Sale and Purchase of Natural Gas
between Pennaco Energy, Inc. and Interenergy Resources Corporation
dated April 1, 1999 (Portions of this Base Contract for Short-Term
Sale and Purchase of Natural Gas have been omitted based upon a
request for confidential treatment. Additionally, the omitted
portions have been filed with the SEC.) Filed as Exhibit 10.21 to
the Company's Form SB-2 (Reg. No. 333-68317) and included herein
by reference
10.22 Gas Sales and Purchase Agreement between Montana--Dakota Utilities
Co. and Pennaco Energy, Inc. dated March 1, 1999 (Portions of this
Gas Sales and Purchase Agreement have been omitted based upon a
request for confidential treatment. Additionally, the omitted
portions have been filed with the SEC. Filed as Exhibit 10.22 to
the Company's Form SB-2 (Reg. No. 333-68317) and included herein
by reference)
10.23 Credit Facility (filed as Exhibit 4.1 to the Company's Form 10-QSB
File No. 001-14943 for the quarter ended June 30, 1999, and
included herein by reference).
+23.1 Consent of KPMG LLP
+23.2 Consent of Kummer Kaempfer Bonner & Renshaw (included in Exhibit
5.1)
+23.3 Consent of Ryder Scott Company
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
+Previously filed.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and (iii) to include any
additional or changed material information on the plan of distribution.
(2) that, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) that, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereto.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the registrant
has duly caused this Amendment No. 2 to be signed on its behalf by the
undersigned, thereunto duly authorized, to the City of Denver, State of
Colorado, on the 11th day of October, 1999.
Pennaco Energy, Inc.
/s/ Paul M. Rady
By: _________________________________
Paul M. Rady
Chief Executive Officer,
President, and Chairman of the
Board
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment has been signed by the following persons on October 11, 1999 in the
capacities indicated.
<TABLE>
<CAPTION>
Name Title
---- -----
<C> <S>
/s/ Paul M. Rady President, Chief Executive Officer, and
______________________________________ Chairman of the Board
Paul M. Rady
/s/ Glen C. Warren, Jr. Chief Financial Officer, Executive Vice President,
______________________________________ and Director (Principal Financial and Accounting
Glen C. Warren, Jr. Officer)
/s/ Gregory V. Gibson Vice President, Legal, Secretary, and Director
______________________________________
Gregory V. Gibson
Director
______________________________________
David W. Lanza
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<C> <S>
*1.1 Form of Underwriting Agreement
+3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws (filed as Exhibit 3.2 to the Company's Form 10-SB, File No.
00-24881, filed September 15, 1998 and included herein by
reference)
4.1 Form of Warrant (filed as Exhibit 4.1 to the Company's Form SB-2
File No. 333-68317, filed December 3, 1998 and included herein by
reference)
+5.1 Opinion of Kummer Kaempfer Bonner & Renshaw
10.1 Mineral Lease Purchase Agreement dated February 23, 1998 between
High Plains Associates, Inc. and Pennaco Energy, Inc. (filed as
Exhibit 10.1 to the Company's Form 10-SB/A File No. 00-24881,
filed September 15, 1998 and included herein by reference)
10.2 Letter Agreement dated January 23, 1998 between High Plains
Associates, Inc. and Taylor Oil Properties (filed as Exhibit 10.2
to the Company's Form 10-SB/A File No. 00-24881, filed September
15, 1998 and included herein by reference)
10.3 Assignment of Option and Exercise of Option dated March 6, 1998
between High Plains Associates, Inc. and Pennaco Energy, Inc.
(filed as Exhibit 10.3 to the Company's Form 10-SB/A File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.4 Agreement dated March 6, 1998 between High Plains Associates, Inc.
and Pennaco Energy, Inc. (filed as Exhibit 10.4 to the Company's
Form 10-SB/A File No. 00-24881, filed September 15, 1998 and
included herein by reference)
10.5 Pennaco Energy, Inc. 1998 Stock Option and Incentive Plan (filed
as Exhibit 10.5 to the Company's Form 10-SB, File No. 00-24881,
filed September 15, 1998 and included herein by reference)
10.6 Form of Pennaco Energy, Inc. Incentive Stock Option Agreement
(filed as Exhibit 10.6 to the Company's Form 10-SB, File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.7 Form of Pennaco Energy, Inc. Non-Statutory Stock Option Agreement
(filed as Exhibit 10.7 to the Company's Form 10-SB, File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.8 Employment Agreement dated June 10, 1998 between Pennaco Energy,
Inc. and Paul M. Rady (filed as Exhibit 10.8 to the Company's Form
10-SB, File No. 00-24881, filed September 15, 1998 and included
herein by reference)
10.9 Employment Agreement dated July 2, 1998 between Pennaco Energy,
Inc. and Glen C. Warren, Jr. (filed as Exhibit 10.9 to the
Company's Form 10-SB, File No. 00-24881, filed September 15, 1998
and included herein by reference)
10.10 Secured Promissory Note dated August 13, 1998 from Pennaco Energy,
Inc. to Venture Capital Sourcing, SA (filed as Exhibit 10.10 to
the Company's Form 10-SB/A File No. 00-24881, filed September 15,
1998 and included herein by reference)
10.11 Second Amendment to Security Agreement dated August 13, 1998
between Pennaco Energy, Inc. and Venture Capital Sourcing, SA
(filed as Exhibit 10.11 to the Company's Form 10-SB/A File No. 00-
24881, filed September 15, 1998 and included herein by reference)
10.12 Purchase and Sale Agreement between Pennaco Energy, Inc., as
Seller and CMS Oil and Gas Company, as Buyer, dated October 23,
1998 (filed as Exhibit 10.12 to the Company's Form 10-SB, File No.
00-24881, filed September 15, 1998 and included herein by
reference)
10.13 Secured Promissory Note dated October 23, 1998 from Pennaco
Energy, Inc. to CMS Oil and Gas Company (filed as Exhibit 10.13 to
the Company's Form 10-SB, File No. 00-24881, filed November 24,
1998 and included herein by reference)
10.14 Sublease Agreement dated October 23, 1998 between Pennaco Energy,
Inc. and Evansgroup, Inc. (filed as Exhibit 10.14 to the Company's
Form 10-SB/A File No. 00-24881 filed December 22, 1998 and
included here by reference)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<C> <S>
10.15 Agreement Regarding the Drilling of Coal Bed Methane Wells (filed
as Exhibit 10.15 to the Company's Form 10-SB/A File No. 00-24881,
filed December 22, 1998 and included herein by reference)
10.16 First Amendment to Purchase and Sale Agreement dated November 20,
1998 (filed as Exhibit 10.16 to the Company's Form 10-SB/A File
No. 00-24881, filed January 28, 1999 and included herein by
reference)
10.17 Second Amendment to Purchase and Sale Agreement dated January 15,
1999 (filed as Exhibit 10.17 to the Company's Form 10-SB/A File
No. 00-24881, filed January 28, 1999 and included herein by
reference)
10.18 Gas Gathering Agreement between Bear Paw Energy, Inc. and Pennaco
Energy, Inc. dated February 1, 1999 (Portions of this Gas
Gathering Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC. Filed as Exhibit 10.18 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference)
10.19 Gas Gathering Agreement between CMS Continental Natural Gas, Inc.
and Pennaco Energy, Inc. dated March 1, 1999 (Portions of this Gas
Gathering Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC. Filed as Exhibit 10.19 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference)
10.20 Gas Purchase Agreement between Western Gas Resources, Inc. and
Pennaco Energy, Inc. dated April 1, 1999 (Portions of this Gas
Purchase Agreement have been omitted based upon a request for
confidential treatment. Additionally, the omitted portions have
been filed with the SEC. Filed as Exhibit 10.20 to the Company's
Form SB-2 (Reg. No. 333-68317) and included herein by reference)
10.21 Base Contract for Short-Term Sale and Purchase of Natural Gas
between Pennaco Energy, Inc. and Interenergy Resources Corporation
dated April 1, 1999 (Portions of this Base Contract for Short-Term
Sale and Purchase of Natural Gas have been omitted based upon a
request for confidential treatment. Additionally, the omitted
portions have been filed with the SEC. Filed as Exhibit 10.21 to
the Company's Form SB-2 (Reg. No. 333-68317) and included herein
by reference)
10.22 Gas Sales and Purchase Agreement between Montana-Dakota Utilities
Co. and Pennaco Energy, Inc. dated March 1, 1999 (Portions of this
Gas Sales and Purchase Agreement have been omitted based upon a
request for confidential treatment. Additionally, the omitted
portions have been filed with the SEC. Filed as Exhibit 10.22 to
the Company's Form SB-2 (Reg. No. 333-68317) and included herein
by reference)
10.23 Credit Facility (filed as Exhibit 4.1 to the Company's Form 10-QSB
File No. 001-14943 for the quarter ended June 30, 1999, and
included herein by reference).
+23.1 Consent of KPMG LLP
+23.2 Consent of Kummer Kaempfer Bonner & Renshaw (included in Exhibit
5.1)
+23.3 Consent of Ryder Scott Company
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
+Previously filed.
<PAGE>
Exhibit 1.1
3,000,000 Shares of Common Stock
PENNACO ENERGY, INC.
UNDERWRITING AGREEMENT
----------------------
____________, 1999
BEAR, STEARNS & CO. INC.
A.G. EDWARDS
HOWARD, WEIL, LABOUISSE, FRIEDRICHS INCORPORATED
HANIFEN, IMHOFF INC.
as Representatives of the several Underwriters
Named in Schedule I hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Dear Sirs:
Pennaco Energy, Inc., a corporation organized and existing under the
laws of Nevada (the "Company"), proposes, subject to the terms and conditions
-------
stated herein, to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") and a certain stockholder of the Company named in
------------
Schedule II hereto (the "Selling Stockholder") severally proposes, subject to
-------------------
the terms and conditions stated herein, to sell to the several Underwriters, an
aggregate of 3,000,000 shares (the "Firm Shares") of the Company's common stock,
-----------
par value $.001 per share (the "Common Stock"), of which 2,000,000 shares are to
------------
be issued and sold by the Company and 1,000,000 shares are to be sold by the
Selling Stockholder. The Company also proposes to issue and sell to the several
Underwriters, for the sole purpose of covering over-allotments in connection
with the sale of the Firm Shares, and at the option of the Underwriters, up to
an additional 450,000 shares (the "Additional Shares") of Common Stock. The
-----------------
Firm Shares and the Additional Shares are referred to herein collectively as the
"Shares." The Shares are more fully described in the Registration Statement
referred to below.
1. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, the Underwriters that:
<PAGE>
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (Registration
No. 333-86547), as amended by Amendment Nos. 1 and 2 thereto, and related
preliminary prospectuses, as amended, for the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of the sale of 3,450,000 shares
--------------
(including the Additional Shares) of Common Stock, which registration statement,
as so amended, has been declared effective by the Commission on the date hereof
and copies of which have heretofore been delivered to the Underwriters. The
registration statement, as amended at the time it became effective, including
the exhibits and information (if any) deemed to be a part of the registration
statement at the time of effectiveness pursuant to paragraph (b) of Rule 430A of
the rules and regulations of the Commission under the Securities Act (the
"Securities Act Regulations"), and any post-effective amendments thereto under
--------------------------
Rule 462(d) through the Closing Date (as defined below) is hereinafter called
the "Registration Statement." If the Company has filed or is required pursuant
----------------------
to the terms hereof to file a registration statement pursuant to Rule 462(b)
under the Securities Act Regulations registering additional shares of Common
Stock (a "Rule 462(b) Registration Statement"), then, and unless otherwise
----------------------------------
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement. Other than a Rule
462(b) Registration Statement, if any, which became effective upon filing, no
other document with respect to the Registration Statement has heretofore been
filed with the Commission (other than acceleration requests under Rule 461 under
the Securities Act Regulations and prospectuses filed pursuant to Rule 424(b) of
the Securities Act Regulations, each in the form heretofore delivered to the
Underwriters). No stop order suspending the effectiveness of the Registration
Statement (including any Rule 462(b) Registration Statement) has been issued and
no proceeding for that purpose has been initiated or, to the Company's
knowledge, threatened by the Commission. The prospectus relating to the Shares,
in the form in which it is to be filed with the Commission pursuant to Rule
424(b) of the Securities Act Regulations, is hereinafter referred to as the
"Prospectus," except that, subject to Sections 5(a) and 5(b) below, if any
- -----------
revised prospectus or prospectus supplement shall be provided to the
Underwriters by the Company for use in connection with the offering and sale of
the Shares (the "Offering") which differs from the Prospectus (whether or not
--------
such revised prospectus or prospectus supplement is required to be filed by the
Company pursuant to Rule 424(b) of the Securities Act Regulations), the term
"Prospectus" shall refer to such revised prospectus or prospectus supplement, as
the case may be, from and after the time it is first provided to the
Underwriters for such use. Any preliminary prospectus or prospectus subject to
completion related to the Offering included in the Registration Statement or
filed by the Company with the Commission pursuant to Rule 424 under the
Securities Act is hereafter called a "Preliminary Prospectus." All references
----------------------
in this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a Preliminary Prospectus and the Prospectus, or any amendments or
supplements to any of the foregoing, shall be deemed to include any copy thereof
filed with the Commission pursuant to its Electronic Data Gathering, Analysis
and Retrieval System ("EDGAR").
-----
(b) When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Securities Act Regulations) and at the time any amendment thereof or
supplement thereto was first filed with the Commission, such
2
<PAGE>
Preliminary Prospectus and any amendments thereof and supplements thereto
complied and comply in all material respects with the applicable provisions of
the Securities Act and the Securities Act Regulations and did not contain any
untrue statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading.
The Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto, at the time the Registration Statement became effective, at
the time any post-effective amendment to the Registration Statement is filed
with the Commission, at the time the Prospectus is first filed with the
Commission, at the time any supplement or amendment to the Prospectus is filed
with the Commission and as of the Closing Date, and Additional Closing Date, if
any (as hereinafter respectively defined), complied and comply in all material
respects with the requirements of the Securities Act and the Securities Act
Regulations, and did not and as of the Closing Date, and Additional Closing
Date, if any, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus, as of the date hereof
(unless the term "Prospectus" refers to a prospectus which has been provided to
the Underwriters by the Company for use in connection with the offering of the
Shares which differs from the Prospectus filed with the Commission pursuant to
Rule 424(b) of the Securities Act Regulations, in which case at the time it is
first provided to the Underwriters for such use) and on the Closing Date, and
Additional Closing Date, if any, does not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this Section (1)(b) shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by any Underwriter expressly for use in the Registration Statement or the
Prospectus or any information relating to the Selling Stockholder furnished to
the Company in writing by the Selling Stockholder expressly for use in the
Registration Statement or Prospectus. Each Preliminary Prospectus and Prospectus
filed as part of the Registration Statement, as part of any amendment thereto or
pursuant to Rule 424 under the Securities Act Regulations, if filed by
electronic transmission pursuant to Regulation S-T under the Securities Act, was
identical to the copy thereof delivered to the Underwriters for use in
connection with the offer and sales of the Shares (except as may be permitted by
Regulation S-T under the Securities Act). There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement under the Securities Act that have not been
described or filed therein as required, and there are no business relationships
or related-party transactions directly or indirectly involving the Company or
any other person required to be described in the Prospectus that have not been
described therein as required.
(c) KPMG LLP, who has certified certain financial statements of the
Company and has delivered its report with respect to the Company's audited
financial statements included in the Registration Statement, the Prospectus and
any Preliminary Prospectus, are independent public accountants as required by
the Securities Act and the Securities Act Regulations.
3
<PAGE>
(d) Ryder Scott & Company ("Ryder Scott"), petroleum engineers from
-----------
whose reserve reports information is set forth in the Registration Statement and
the Prospectus, are independent petroleum engineers with respect to the Company.
The factual information underlying the estimates of the reserves of the Company
which was provided by the Company to Ryder Scott for purposes of preparing the
reserve information referenced in the Registration Statement and the Prospectus
(the "Reserve Information") including, without limitation, production, volumes,
-------------------
sales prices for production, contractual pricing provisions under gas sales or
marketing contracts, hedging arrangements, incurred costs of operations and
development, and working interest and net revenue information relating to the
Company's ownership interests in properties, was true and correct in all
material respects on the date such information was furnished to Ryder Scott and
as of the date hereof, subject to the continued operation of such properties in
the ordinary course from and after the date on which the report is given; the
estimates of future capital expenditures and other future exploration and
development costs supplied to Ryder Scott were prepared in good faith and with a
reasonable basis. The information provided to Ryder Scott for purposes of
preparing the Reserve Information was prepared in accordance with customary
industry practices. Except as described in the Prospectus, the Company is not
aware of any facts or circumstances that would result in a material adverse
change in its reserves in the aggregate, or the aggregate present value of
estimated future net revenues or the standardized measure of discounted future
net cash flows therefrom, as described in the Prospectus and reflected in the
Reserve Information. Estimates of the reserves and the present value of the
estimated future net revenues and the discounted future net cash flows derived
therefrom as described in the Prospectus and reflected in the Reserve
Information comply in all material respects to the applicable requirements of
Regulation S-X of the Securities Act Regulations and Industry Guide 2 under the
Securities Act.
(e) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been no
material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations, condition
(financial or otherwise) affairs or management of the Company, whether or not
arising from transactions in the ordinary course of business, and since the date
of the latest balance sheet presented in the Registration Statement and the
Prospectus, the Company has not incurred or undertaken any liabilities or
obligations, direct or contingent, which are material to the Company, except for
liabilities or obligations which are reflected in the Registration Statement and
the Prospectus.
(f) The Company (i) has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Nevada, (ii)
has all requisite corporate power and authority, and all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
to carry on its business as it is currently being conducted and as described in
the Registration Statement and the Prospectus and to own, lease and operate its
properties, (iii) has no subsidiaries and (iv) is duly qualified and in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification except, with respect to clauses (i) (as it relates
to good standing), (ii) and (iv), where the failure to be in good standing or so
4
<PAGE>
qualified or to have such necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses or permits, does not and could not
reasonably be expected to (x) individually or in the aggregate, result in a
material adverse effect on the business, prospects, properties, operations,
condition (financial or otherwise), affairs or management of the Company or (y)
draw into question the validity of this Agreement or the transactions described
in the Prospectus under the caption "Use of Proceeds" (any of the events set
forth in clauses (x) or (y), being referred to as a "Material Adverse Effect").
-----------------------
(g) This Agreement and the transactions contemplated hereby have
been duly and validly authorized by the Company. This Agreement has been duly
and validly executed and delivered by the Company, and is the legal, valid,
binding agreement of the Company.
(h) The execution, delivery, and performance of this Agreement, the
issuance, offering and sale of the Shares, and the consummation of the
transactions contemplated hereby and in the Prospectus do not and will not
violate, conflict with or constitute a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) or require consent under, or result in the
creation or imposition of any lien, charge or encumbrance upon any properties or
assets of the Company, or result in an acceleration of any indebtedness of the
Company pursuant to (A) the Amended and Restated Articles of Incorporation or
By-Laws of the Company, (B) any bond, debenture, note, indenture, mortgage, deed
of trust, contract or other agreement or instrument to which the Company is a
party or by which the Company or its properties or assets are or may be bound,
(C) any statute, rule or regulation applicable to the Company or any of its
properties or assets (D) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Company or any of
its properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with (i) any court
or any governmental agency or authority having jurisdiction over the Company or
any of its properties or assets or (ii) any other person is required for (A) the
execution, delivery and performance by the Company of this Agreement, (B) the
issuance, sale and delivery of the Shares to be issued, sold and delivered by
the Company hereunder and the consummation of the transactions contemplated
hereby, except such as have been obtained under the Securities Act and from the
Vancouver Stock Exchange and such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(i) All of the outstanding shares of Common Stock, including the
Shares being sold by the Selling Stockholder under this Agreement, are duly
authorized and validly issued, and are fully paid and nonassessable and were not
issued and are not now in violation of or subject to any preemptive or similar
rights. The Shares being sold by the Company under this Agreement are duly
authorized, and, when issued, delivered and paid for in accordance with this
Agreement, will be validly issued, and fully paid and nonassessable, and will
not have been issued in violation of or be subject to any preemptive or similar
rights other than being subject to the rights of two of the Company's executive
officers to obtain stock options pursuant to their employment agreements as
described in the Prospectus under the heading "Management - Executive
Compensation." As of June 30, 1999, after giving effect to the issuance and
sale of
5
<PAGE>
the Shares pursuant hereto and the application of the net proceeds from the sale
thereof, the Company had the pro forma capitalization as set forth in the
Prospectus under the caption "Capitalization." The capital stock of the Company
conforms to the description thereof contained in the Prospectus, or if the
Prospectus is not in existence, the most recent Preliminary Prospectus.
(j) Except as disclosed in the Prospectus there are not currently,
and will not be as a result of the Offering, any outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire or
instruments convertible into or exchangeable for, any capital stock or other
equity interest of the Company or any of its subsidiaries (other than options
issued pursuant to the Company's stock option plans).
(k) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or foreign,
now pending or, to the knowledge of the Company, threatened or contemplated to
which the Company is a party or to which the business or property of the Company
is subject, (ii) no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency or that has been proposed by any
governmental body and (iii) no injunction, restraining order or order of any
nature by a federal or state court or foreign court of competent jurisdiction to
which the Company is or may be subject or to which the business, assets, or
property of the Company are or may be subject, that, in the case of clauses (i),
(ii) and (iii) above, is required to be disclosed in the Registration Statement
and the Prospectus and which could, individually or in the aggregate, result in
a Material Adverse Effect which is not so disclosed.
(l) The Company has not directly or indirectly (a) taken (other
than through the actions, if any, of the Underwriters) any action designed to,
or that might reasonably be expected to, cause or result in or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or (b) since the filing of the Preliminary Prospectus
(i) sold, bid for, purchased or paid any person any compensation for soliciting
purchases of, shares of Common Stock or (ii) paid or agreed to pay to any person
any compensation for soliciting another to purchase any other securities of the
Company.
(m) The financial statements, together with the related notes,
included in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) present fairly in all material respects the financial
position, results of operations, cash flows, and changes in stockholders' equity
of the Company as of and at the dates indicated and for the periods specified.
Such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto, and comply with Regulation S-X of the Securities Act Regulations. The
financial data set forth in the Prospectus under the captions "Prospectus
SummarySummary Historical Financial and Operating Data," "Selected Historical
Financial Data" and "Capitalization" fairly present the information set forth
therein on a basis consistent with that of the audited financial statements
contained in the Prospectus.
6
<PAGE>
(n) There are no holders of securities of the Company who, by
reason of the execution by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby, have the right to request
or demand that the Company register under the Securities Act or analogous
foreign laws and regulations securities held by them, other than such that have
been duly exercised or waived.
(o) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), or be subject to
----------------------
registration under the Investment Company Act, or (ii) a "holding company" or a
"subsidiary company" or an "affiliate" of a holding company within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
(p) The Common Stock is registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is listed
------------
for quotation on the American Stock Exchange, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the American Stock Exchange, nor has the Company received any
notification that the Commission or the American Stock Exchange is contemplating
terminating such registration or listing.
(q) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including, without limitation,
the corporate power and authority to issue, sell and deliver the Shares as
provided herein and the corporate power to effect the use of proceeds from the
Offering as described in the Prospectus.
(r) The Company is not, nor after giving effect to the Offering
will be, (i) in violation of its Amended and Restated Articles of Incorporation
or By-Laws, (ii) in breach or default (nor does any condition exist that, with
notice, the passage of time or both, would constitute a breach or default) in
the performance of any obligation, agreement or condition contained in any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties is subject, or (iii) in violation of any local, state or federal law,
statute, ordinance, rule, regulation, requirement, judgment or court decree
applicable to the Company or any of its assets or properties (whether owned or
leased), except that in the case of clauses (i), (ii) and (iii) above as could
not be reasonably expected to result, individually or in the aggregate, in a
Material Adverse Effect.
(s) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Shares or prevents or suspends the use of the
Prospectus; no injunction, restraining order or order of any kind by a federal
or state court of competent jurisdiction has been issued that prevents the
issuance of the Shares, prevents or suspends the sale of the Shares in any
jurisdiction or that could adversely affect the consummation of the transactions
contemplated by this Agreement or
7
<PAGE>
the Prospectus; and every request of any securities authority or agency of any
jurisdiction for additional information has been complied with in all material
respects.
(t) There is (i) no significant unfair labor practice complaint
pending against the Company nor, to the best knowledge of the Company,
threatened against it, before the National Labor Relations Board, any state or
local labor relations board or any foreign labor relations board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Company nor,
to the best knowledge of the Company, threatened against it, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against the Company nor, to
the knowledge of the Company, threatened against it and (iii) to the knowledge
of the Company, no union representation question existing with respect to the
employees of the Company that, in the case of clauses (i), (ii) or (iii) above,
could result, individually or in the aggregate, in a Material Adverse Effect.
To the knowledge of the Company, no collective bargaining organizing activities
are taking place with respect to the Company. The Company has not violated (A)
any federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour laws or
(C) any provision of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA"), which in the case of clause (A), (B) or (C) above could
-----
reasonably be expected to result in a Material Adverse Effect.
(u) The Company is not in violation of any federal or state law or
regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials ("Environmental
-------------
Laws") and, except as disclosed in the Prospectus, the Company has received all
- ----
permits, licenses and other approvals required of them under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct its business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. There has been no
storage, disposal, generation, transportation, handling or treatment of
hazardous substances or solid wastes by the Company (or to the knowledge of the
Company any of its predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company in violation of any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit
which would require remedial action by the Company under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit except for those
which have already been remedied, have been assumed by a third party, or which
would not result in, or which would not be reasonably likely to result,
individually or in the aggregate, in a Material Adverse Effect. There has been
no spill, discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such property of
any solid wastes or hazardous substances due to or caused by the Company, except
for any such spill, discharge, leak, emission, injection, escape, dumping or
release which has already been remedied, has been assumed by a third party, or
which would not result, or which would not be reasonably expected to result,
individually or in the aggregate, in a Material
8
<PAGE>
Adverse Effect. The terms "hazardous substances" and "solid wastes" shall have
the meanings set forth in any currently applicable local, state, and federal
laws or regulations with respect to environmental protection.
(v) The Company has (i) good and marketable title in fee simple to
all items of real property and marketable title to all personal property owned
by it, free and clear of all security interests, liens, charges, encumbrances,
equities, restrictions, claims and other defects, except such as are described
in the Prospectus or as would not have a Material Adverse Effect, and (ii)
peaceful and undisturbed possession of its properties under all material leases
to which it is a party as lessee. The Company has good and marketable title (i)
to its oil and gas properties, including its wells and its leasehold interests
therein, and (ii) to its net revenue interests therein in accordance with such
leases, free and clear of all security interests, liens, charges, encumbrances,
equities, restrictions, claims and other defects, except such as are described
in the Prospectus or as would not have a Material Adverse Effect. The working
interests in oil and gas leases held by the Company reflect in all material
respects the right of the Company to explore or receive production from such
underlying leases, and the care taken by the Company with respect to acquiring
or otherwise procuring such leases was generally consistent with good practice
in the oil and gas industry in the areas in which the Company operates. All
material leases to which the Company is a party are valid and binding, and no
default by the Company has occurred and is continuing thereunder and, to the
knowledge of the Company, no material defaults by the landlord are existing
under any such lease that could result in a Material Adverse Effect.
(w) Except as described in the Prospectus (i) all royalties,
rentals, deposits and other amounts due on the oil and gas properties of the
Company which individually or in the aggregate are material have been properly
and timely paid, and no proceeds from the sale or production attributable to the
oil and gas properties of the Company are currently being held in suspense by
any purchaser thereof, and (ii) there are no claims under take-or-pay contracts
pursuant to which natural gas purchasers have any make-up rights affecting the
interests of the Company in its oil and gas properties.
(x) As of the date hereof, the aggregate undiscounted monetary
liability of the Company for oil or natural gas taken or received under any
operating or other agreement relating to its oil and gas properties that permits
any person to receive any portion of the interest of the Company in oil and
natural gas or to receive cash or other payments to balance any disproportionate
allocation of oil or natural gas could not have a Material Adverse Effect.
(y) The Company has (i) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made all
declarations and filings with, all federal, state and local authorities, all
self-regulatory authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business conducted by it in the
- --------------
manner described in the Prospectus, except as described in the Prospectus or
where failure to hold such Authorizations would not, individually or in the
aggregate, have a Material Adverse Effect and (ii) no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such Authorization. Except where the failure to be in full force and effect
would not have a Material Adverse Effect, all of the Company's existing
Authorizations
9
<PAGE>
are valid and in full force and effect, and the Company is in compliance in all
material respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having jurisdiction
with respect thereto.
(z) Neither the Company nor, to the knowledge of the Company, any
of its officers, directors, partners, employees, agents or affiliates or any
other person acting on behalf of the Company, has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company (or assist the Company in connection with any
actual or proposed transaction), which (i) might subject the Company, or any
other individual or entity, to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if not given
in the past, might have had a Material Adverse Effect or (iii) if not continued
in the future, might have a Material Adverse Effect.
(aa) All material tax returns required to be filed by the Company
in all jurisdictions have been so filed. All taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due or
claimed to be due from such entities or that are due and payable have been paid,
other than those being contested in good faith through appropriate proceedings
diligently pursued and for which adequate reserves have been provided or those
currently payable without penalty or interest. To the knowledge of the Company,
there are no material proposed additional tax assessments against the Company or
the assets or property of the Company. The Company has made adequate (in the
opinion of the Company) charges, accruals and reserves in the applicable
financial statements included in the Prospectus in respect of all federal, state
and foreign income and franchise taxes for all periods presented therein as to
which the tax liability of the Company has not been finally determined.
(bb) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations, (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 the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences thereto.
(cc) The Company maintains insurance covering its properties,
operations, personnel and businesses with institutions it believes to be
financially responsible. Such insurance insures against such losses and risks
as are adequate in accordance with customary industry practice to protect the
Company and its business. The Company has not received notice from any insurer
or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance. All such
insurance is
10
<PAGE>
outstanding and duly in force on the date hereof, subject only to changes made
in the ordinary course of business, consistent with past practice, which do not,
either individually or in the aggregate, materially alter the coverage
thereunder or the risks covered thereby. The Company has no reason to believe
that it will not be able (a) to renew its existing insurance coverage as and
when such policies expire or (b) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted or as presently contemplated and at a cost that would not result in a
Material Adverse Effect.
(dd) The Company and any "employee benefit plan" (as defined under
ERISA) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
-----
Affiliate" means, with respect to the Company, any member of any group of
- ---------
organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. The
----
Company does not have, nor has it ever had, any "employee benefit plan" subject
to Title IV of ERISA. Neither the Company nor any of its ERISA Affiliates has
incurred or expects to incur any liability under Sections 4975 or 4980B of the
Code which, individually or in the aggregate, could be reasonably expected to
result in a Material Adverse Effect. Each "employee benefit plan" established
or maintained by the Company or any of its ERISA Affiliates 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 failure to act, which
could reasonably be expected to cause the loss of such qualification.
(ee) Subsequent to the respective dates as of which information is
given in the Prospectus and up to the Closing Date, except as set forth in the
Prospectus, (i) the Company has not incurred any liabilities or obligations,
direct or contingent, that are or will be material, either individually or in
the aggregate, to the Company taken as a whole, nor entered into any transaction
not in the ordinary course of business, (ii) there has not been, either
individually or in the aggregate, any change or development that could
reasonably be expected to result in a Material Adverse Effect, (iii) the Company
has not purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital stock and
(iv) there has been no material change in the capital stock, short-term debt or
long-term debt of the Company, except in each case as described in the
Prospectus, or if the Prospectus is not in existence the most recent Preliminary
Prospectus.
(ff) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and any other person that would
give rise to a valid claim against the Company or any of the Underwriters for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Shares.
(gg) The Company has implemented Year 2000 compliance programs
designed to ensure that its computer systems and applications will function
properly beyond 1999. The Company believes that adequate resources have been
allocated for this purpose and expects the Company's Year 2000 compliance
programs to be completed on a timely basis, except as could not have a Material
Adverse Effect.
11
<PAGE>
(hh) The Company does not have any debt securities or preferred
stock which is rated by any "nationally recognized statistical rating
organization" as defined for purposes of Rule 436(g) under the Securities Act.
(ii) The Company has the power to submit, and pursuant to this
Agreement has legally, validly, effectively and irrevocably submitted, to the
jurisdiction of any federal or state court in the State of New York, County of
New York, and has the power to designate, appoint and empower and pursuant to
this Agreement has legally, validly, effectively and irrevocably designated,
appointed and empowered an agent for service of process in any suit or
proceeding based on or arising under this Agreement in any federal or state
court in the State of New York, County of New York, as provided in Section 15
hereof.
(jj) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to this
Agreement shall be deemed to be a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
The Company acknowledges that each of the Underwriters and, for
purposes of the opinions to be delivered to the Underwriters pursuant to
Sections 8(b), 8(c) and 8(d) hereof, counsel to the Company and counsel to the
Underwriters, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
2. Representations and Warranties of the Selling Stockholder.
---------------------------------------------------------
The Selling Stockholder represents and warrants to, and agrees with, the
Underwriters that:
(a) The Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has good, valid
and marketable title to the Shares to be sold by it pursuant to this Agreement,
free and clear of all liens, encumbrances, adverse claims, security interests,
restrictions on transfer, stockholders' agreements, voting trusts, options and
other defects in title whatsoever, with full power to deliver such Shares
hereunder, and, upon the delivery of and payment for such Shares as herein
contemplated, each of the Underwriters will receive good, valid and marketable
title to the Shares purchased by it from the Selling Stockholder, free and clear
of all liens, encumbrances, adverse claims, security interests, restrictions on
transfer, stockholders' agreements, voting trusts, options and other defects in
title whatsoever created by or relating to the Selling Stockholder.
(b) The Selling Stockholder has, and will have at the time of
delivery of the Shares to be sold by it, full legal right, power, authority and
capacity, and, except as required under the Securities Act and state securities
and Blue Sky laws, all necessary consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies (including the approval
of the Vancouver Stock Exchange), as are required for the execution, delivery
and performance of (i) this Agreement and the consummation of the transactions
contemplated hereby and thereby, (ii) the Custody Agreement (as hereinafter
defined) and (iii) the related Power of Attorney (as hereinafter defined) of the
Selling Stockholder, including the sale, assignment, transfer and
12
<PAGE>
delivery of the Shares to be sold, assigned, transferred and delivered by the
Selling Stockholder hereunder.
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Selling Stockholder and is the valid and binding obligation
of the Selling Stockholder, enforceable against the Selling Stockholder in
accordance with its terms.
(d) The Custody Agreement of such Selling Stockholder has been duly
and validly authorized, executed and delivered by the Selling Stockholder and is
the valid and binding obligation of the Selling Stockholder, enforceable against
the Selling Stockholder in accordance with its terms.
(e) The Power of Attorney of the Selling Stockholder has been duly
and validly authorized, executed and delivered by the Selling Stockholder and is
the valid and binding obligation of the Selling Stockholder, enforceable against
the Selling Stockholder in accordance with its terms.
(f) Certificates in negotiable form for the Selling Stockholder's
Shares have been placed in custody, for delivery pursuant to the terms of this
Agreement, under a Custody Agreement executed and delivered by the Selling
Stockholder, in the form heretofore furnished to you (the "Custody Agreement")
-----------------
with Harris Trust and Savings Bank, as custodian (the "Custodian"), and under
---------
the Power of Attorney executed and delivered by the Selling Stockholder in the
form furnished to you appointing certain individuals as the Seller Stockholder's
attorney-in-fact to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement (the "Power of Attorney"),
-----------------
the shares of Common Stock represented by the certificates so held in custody
for the Selling Stockholder are subject to the interests hereunder of the
Underwriters and the Company. The arrangements for custody and delivery of such
certificates, made by the Selling Stockholder hereunder and under the Custody
Agreement and the Power of Attorney are not subject to termination by any acts
of the Selling Stockholder, or by operation of law, whether by death or
incapacity of any person acting on behalf of the Selling Stockholder or the
occurrence of any other event, and if such death, incapacity or any other such
event shall occur before the delivery of the Selling Stockholder's Shares
hereunder, certificates for such Shares will be delivered by the Custodian in
accordance with the terms and conditions of this Agreement, the Custody
Agreement, and the Power of Attorney as if such death, incapacity or other event
had not occurred, regardless of whether the Custodian shall have received notice
of such death, incapacity or other event.
(g) The execution, delivery and performance of this Agreement, the
Custody Agreement and Power of Attorney by or on behalf of the Selling
Stockholder, the offering and sale of the Firm Shares being sold by the Selling
Stockholder hereunder and the consummation of the transactions contemplated
hereby and thereby will not violate, conflict with or constitute a breach of any
of the terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) or require consent
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Selling Stockholder, or result
in an acceleration of any indebtedness of the Selling Stockholder,
13
<PAGE>
pursuant to (i) the articles of incorporation or bylaws or comparable
organizational documents of the Selling Stockholder, (ii) any bond, debenture,
note, indenture, mortgage, deed of trust, contract or other agreement or
instrument to which the Selling Stockholder or any of its subsidiaries is a
party or by which it or they or their respective properties or assets are or may
be bound, (iii) any statute, rule or regulation applicable to the Selling
Stockholder or any of its subsidiaries or any of its or their properties or
assets or (iv) any judgment, order or decree of any court or governmental agency
or authority having jurisdiction over the Selling Stockholder or any of its
subsidiaries or any of its or their properties or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with (i) any court or any governmental agency or authority having
jurisdiction over the Selling Stockholder or any of its subsidiaries or any of
its or their properties or assets or (ii) any other person is required for (A)
the execution, delivery and performance by the Selling Stockholder of this
Agreement, the Custody Agreement or the Power of Attorney, (B) the sale and
delivery of the Shares to be sold and delivered by the Selling Stockholder
hereunder and the consummation of the transactions contemplated hereby, except
such as have been obtained under the Securities Act and from the Vancouver Stock
Exchange and such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters.
(h) The Selling Stockholder has not directly or indirectly (i)
taken (other than through the actions, if any, of the Underwriters) any action
designed to, or that might reasonably be expected to, cause or result in or
which constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the filing of the
Preliminary Prospectus (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of, shares of Common Stock or (B) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(i) The Selling Stockholder (i) does not directly or indirectly
have any preemptive right, co-sale right or right of first refusal or other
similar right to purchase any of the Shares that are to be sold by the
Underwriters pursuant to this Agreement, and (ii) does not directly or
indirectly own any warrants, options or similar rights to acquire, and does not
directly or indirectly have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company.
(j) The Selling Stockholder does not directly or indirectly possess
any registration rights with respect to any securities of the Company.
(k) The information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to the Selling
Stockholder does not, and will not on the Closing Date, contain any untrue
statement of a material fact or 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.
14
<PAGE>
(l) If there is any change in the information referred to in
Section 2(k) from the first business day after the date of this Agreement and
from time to time thereafter for such period as in the opinion of counsel for
the Underwriters a prospectus is required by law to be delivered in connection
with sales by an Underwriter or a dealer, the Selling Stockholder will
immediately notify you of such change.
(m) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Code with respect to the
transactions herein contemplated, the Selling Stockholder will deliver to you
prior to or on the Closing Date a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(n) Selling Stockholder has the power to submit, and pursuant to
this Agreement has legally, validly, effectively and irrevocably submitted, to
the jurisdiction of any federal or state court in the State of New York, County
of New York, and has the power to designate, appoint and empower and pursuant to
this Agreement has legally, validly, effectively and irrevocably designated,
appointed and empowered an agent for service of process in any suit or
proceeding based on or arising under this Agreement in any federal or state
court in the State of New York, County of New York, as provided in Section 15
hereof.
(o) Each certificate signed by any officer or other representative
of the Selling Stockholder and delivered to the Underwriters or counsel for the
Underwriters pursuant to this Agreement shall be deemed to be a representation
and warranty by the Selling Stockholder to the Underwriters as to the matters
covered thereby.
The Selling Stockholder acknowledges that each of the Underwriters
and, for purposes of the opinions to be delivered to the Underwriters pursuant
to Sections 8(b) and 8(e) hereof, counsel to the Company and counsel to the
Underwriters, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
3. Purchase, Sale and Delivery of the Shares.
-----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, (i) the Company agrees to sell 2,000,000 of the Firm Shares to the
Underwriters, (ii) the Selling Stockholder agrees, severally and not jointly, to
sell 1,000,000 of the Firm Shares to the Underwriters and (iii) the
Underwriters, severally and not jointly, agree to purchase from the Company and
the Selling Stockholder, at a purchase price per share of $_______, the number
of Firm Shares set forth opposite the respective names of the Underwriters in
Schedule I hereto plus any additional number of Shares which such Underwriter
may become obligated to purchase pursuant to the provisions of Section 11
hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Shares shall be made at the office of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York, 10022, or at such other place as shall
be agreed upon by you and the Company, at 10:00 A.M. on the third or fourth
business day (as permitted by Rule 15c6-1 under the
15
<PAGE>
Exchange Act) (unless postponed in accordance with the provisions of Section 11
hereof) following the date of the effectiveness of the Registration Statement
(or, if the Company has elected to rely upon Rule 430A of the Securities Act
Regulations, the third or fourth business day (as permitted by Rule 15c6-1 under
the Exchange Act) after the determination of the initial public offering price
of the Shares), or such other time not later than ten business days after such
date as shall be agreed upon by you and the Company (such time and date of
payment and delivery being herein called the "Closing Date"). Payment shall be
------------
made to the Company and the Selling Stockholder by wire transfer in same day
funds, against delivery to you for the respective accounts of the Underwriters
of certificates for the Shares to be purchased by them. Certificates for the
Shares shall be registered in such name or names and in such authorized
denominations as you may request in writing at least two full business days
prior to the Closing Date. The Company will permit you to examine and package
such certificates for delivery at least one full business day prior to the
Closing Date.
(c) In addition, the Company hereby grants to the Underwriters the
option to purchase up to 450,000 Additional Shares at the same purchase price
per share to be paid by the Underwriters to the Company for the Firm Shares as
set forth in Section 3(a) hereof, for the sole purpose of covering over-
allotments, if any, in the sale of Firm Shares by the Underwriters. This option
may be exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice to the Company from
Bear, Stearns & Co. Inc. ("Bear Stearns") on behalf of the Underwriters. Such
------------
notice shall set forth the aggregate number of Additional Shares as to which the
option is being exercised and the date and time, as reasonably determined by
Bear Stearns on behalf of the Underwriters, when the Additional Shares are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); provided, however, that the Additional Closing Date
- ------------------------ -------- -------
shall not be earlier than the Closing Date or, if thereafter, earlier than the
second full business day after the date on which the option shall have been
exercised nor later than the eighth full business day after the date on which
the option shall have been exercised (unless such time and date are postponed in
accordance with the provisions of Section 11 hereof). Certificates for the
Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at least one full business
day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
in Section 11 hereof) bears to 3,000,000, subject, however, to such adjustments
to eliminate any fractional shares as Bear Stearns on behalf of the Underwriters
in its sole discretion shall make.
Payment for the Additional Shares shall be made by wire transfer in
same day funds at the offices of Latham & Watkins, 885 Third Avenue, Suite 1000,
New York, New York, 10022, or such other location as may be agreed upon between
you and the Company, upon
16
<PAGE>
delivery of the certificates for the Additional Shares to you for the respective
accounts of the Underwriters.
4. Offering. Upon your authorization of the release of the Firm
--------
Shares, the Underwriters propose to offer the Firm Shares for sale to the public
upon the terms set forth in the Prospectus.
5. Covenants of the Company. The Company covenants and agrees
------------------------
with the Underwriters that:
(a) If the Registration Statement has not yet been declared
effective on the date of this Agreement, the Company will use its best efforts
to cause the Registration Statement and any amendments thereto to become
effective as promptly as possible, and if Rule 430A is used or the filing of the
Prospectus is otherwise required under Rule 424(b) or Rule 434, the Company will
file the Prospectus (properly completed if Rule 430A has been used) pursuant to
Rule 424(b) or Rule 434 within the prescribed time period and will provide
evidence satisfactory to you of such timely filing. If the Company elects to
rely on Rule 434, the Company will prepare and file a term sheet that complies
with the requirements of Rule 434.
The Company will notify you immediately (and, if requested by you,
will confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments from the Commission and
(vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for that purpose. If the
Commission shall propose or enter a stop order at any time, the Company will use
its best efforts to prevent the issuance of any such stop order and, if issued,
to obtain the lifting of such order as soon as possible. The Company will not
file any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus (including the prospectus required to be filed
pursuant to Rule 424(b) or Rule 434) or any amendment of or supplement to any
Preliminary Prospectus that differs from the prospectus on file at the time of
the effectiveness of the Registration Statement before or after the effective
date of the Registration Statement to which you shall reasonably object in
writing after being timely furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act any event shall have occurred
as a result of which any Preliminary Prospectus as then amended or supplemented
or the Prospectus as then amended or supplemented would, in the judgment of the
Underwriters or the Company include an untrue statement of a material fact or
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
17
<PAGE>
made, not misleading, or if it shall be necessary at any time to amend or
supplement any Preliminary Prospectus, the Prospectus or the Registration
Statement to comply with the Securities Act or the Securities Act Regulations,
the Company will notify you promptly and prepare and file with the Commission an
appropriate amendment or supplement (in form and substance reasonably
satisfactory to you) which will correct such statement or omission and will use
its best efforts to have any amendment to the Registration Statement declared
effective as soon as possible.
(c) The Company will promptly deliver to you two signed copies of
the Registration Statement, including exhibits and all amendments thereto, and
the Company will promptly deliver to each of the Underwriters such number of
copies of any preliminary prospectus, the Prospectus, the Registration
Statement, and all amendments of and supplements to such documents, if any, as
you may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(e) The Company will make generally available (within the meaning
of Section 11(a) of the Securities Act) to its security holders and to you as
soon as practicable, but not later than 45 days after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earning statement (in form complying with the
provisions of Rule 158 of the Securities Act Regulations) covering a period of
at least twelve consecutive months beginning after the effective date of the
Registration Statement.
(f) During the period of 180 days from the date hereof, the Company
will not, and will not permit any of its affiliates, directly or indirectly, to
issue, sell, offer or agree to sell, grant any option for the sale of, pledge,
make any short sale or maintain any short position, establish or maintain a "put
equivalent position" (within the meaning of Rule 16a1(h) under the Exchange
Act), enter into any swap, derivative transaction or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock (whether any such transaction is to be settled by
delivery of Common Stock, other securities, cash or other consideration) or
otherwise dispose of, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock) or any interest therein or
announce any intention to do any of the foregoing without the prior written
consent of Bear Stearns provided that the Company may, without such consent, (i)
grant options or other awards pursuant to the Company's employee stock option
plans, (ii) issue Common Stock upon the exercise of outstanding options or
warrants to purchase shares of Common Stock or (iii) issue Common Stock as
consideration for acquisitions provided that prior to the issuance thereof, the
recipient thereof agrees in writing to be bound by the same restrictions
applicable to the Company for the remaining balance of such 180 day period. The
Company will obtain the
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undertaking of each of its officers and directors and such of its stockholders
as have been heretofore designated by you and listed on Schedule III attached
hereto not to engage in any of the aforementioned transactions or to announce
their intention to do any of the foregoing on their own behalf, other than the
Company's sale of Shares hereunder and the Company's issuance of Common Stock
pursuant to any existing employee benefit plans or upon the exercise, conversion
or exchange of any currently outstanding stock options or warrants.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish or make available to you copies
of (i) all reports to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange.
(h) The Company will apply its net proceeds from the sale of the
Shares as set forth under the caption "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to be
listed on the American Stock Exchange.
(j) The Company will report the use of its net proceeds from the
Offering to the extent required pursuant to Rule 463 of the Securities Act
Regulations.
(k) If the Company elects to rely upon Rule 462(b) of the
Securities Act Regulations, the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., New York City time, on the date of this
Agreement, no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission, and all
requests for additional information on the part of the Commission shall have
been complied with to the Underwriters' reasonable satisfaction.
(l) The Company, during the period when the Prospectus is required
to be delivered under the Securities Act or the Exchange Act, shall file all
documents required to be filed with the Commission pursuant to Section 13, 14,
or 15 of the Exchange Act within the time periods set forth in the Exchange Act
and the rules and regulations thereunder.
6. Covenants of the Selling Stockholder. The Selling Stockholder
------------------------------------
covenants and agrees with you and the Company that:
(a) the Selling Stockholder will pay or cause to be paid all
transfer taxes payable in connection with the transfer of the Firm Shares to be
sold by the Selling Stockholder to the Underwriters.
(b) the Selling Stockholder will do and perform all things to be
done and performed by the Selling Stockholder under this Agreement prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the Firm
Shares to be sold by the Selling Stockholder pursuant to this Agreement.
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(c) During the period of 180 days from the date hereof, the Selling
Stockholder will not, and will not permit any of its affiliates, directly or
indirectly, to sell, offer or agree to sell, grant any option for the sale of,
pledge, make any short sale or maintain any short position, establish or
maintain a "put equivalent position" (within the meaning of Rule 16a1(h) under
the Exchange Act), enter into any swap, derivative transaction or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock (whether any such transaction is
to be settled by delivery of Common Stock, other securities, cash or other
consideration) or otherwise dispose of, any Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock) or any
interest therein or announce any intention to do any of the foregoing without
the prior written consent of Bear Stearns.
7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company agrees to pay all costs and expenses incident to the performance of
the obligations of the Company and the Selling Stockholder hereunder, including
those in connection with (a) preparing, printing, duplicating, filing and
distributing the Registration Statement, as originally filed and all amendments
thereof (including all exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel), the
underwriting documents (including this Agreement and the Agreement Among
Underwriters) and all other documents related to the public offering of the
Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (b) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes payable thereon (other
than any transfer taxes payable with respect to the Shares being sold by the
Selling Stockholder, which shall be borne by the Selling Stockholder), (c) the
qualification of the Shares under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing a preliminary and final "Blue Sky
Survey" and the fees of counsel for the Underwriters and such counsel's
disbursements in relation thereto, (d) listing the Shares on the American Stock
Exchange, (e) filing fees of the Commission and the National Association of
Securities Dealers, Inc., (f) the cost of printing certificates representing the
Shares and (g) the cost and charges of any transfer agent or registrar for the
Common Stock.
8. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder herein
contained, as of the date hereof and as of the Closing Date (for purposes of
this Section 8 "Closing Date" shall refer to the Closing Date for the Firm
Shares and any Additional Closing Date, if different, for the Additional
Shares), to the performance by the Company or the Selling Stockholder of their
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement, or at such
later time and date as shall have been consented to in writing by you; if the
Company shall have elected to rely upon Rule 430A or Rule 434 of the
Regulations, the Prospectus shall have been filed with the Commission in a
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timely fashion in accordance with Section 5(a) hereof; and, at or prior to the
Closing Date no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the opinion of
Andrews & Kurth LLP, counsel for the Company, dated the Closing Date addressed
to the Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which will not in the aggregate have a material adverse
effect on the Company.
(ii) There is no litigation or governmental or other action, suit,
proceeding or investigation before any court or before or by any public,
regulatory or governmental agency or body pending or to such counsel's
knowledge, threatened against, or involving the properties or business of, the
Company, which is of a character required to be disclosed in the Registration
Statement and the Prospectus which has not been properly disclosed therein.
(iii) The execution, delivery, and performance of this Agreement, the
issuance, offering and sale of the Shares and the consummation of the
transactions contemplated hereby by the Company do not and will not violate,
conflict with or constitute a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default), or result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of the Company or
result in any acceleration of any indebtedness of the Company pursuant to (A)
any contract, agreement or other document filed as an exhibit to the
Registration Statement or any bond, debenture, note, indenture, mortgage, deed
of trust or contract for money borrowed or other agreement identified by the
Company which is included on a list attached to such opinion, (B) any statute,
rule or regulation applicable to the Company or any of its properties or assets
or (C) to the knowledge of such counsel, any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the Company
or any of its properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any governmental agency or authority having jurisdiction over the Company or any
of its properties or assets is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for (1) such as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters (as to which such counsel need express no
opinion) and (2) such as have been made or obtained under the Securities Act.
(iv) The Registration Statement and the Prospectus and any amendments
thereof or supplements thereto (other than the financial statements and
financial
21
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statement schedules, if any, included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Securities Act and the Securities Act Regulations.
(v) The Registration Statement is effective under the Securities
Act, and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof has been issued and no proceedings therefor have been initiated or
threatened by the Commission and all filings required by Rule 424(b) of the
Securities Act Regulations have been made.
(vi) The Company is not, and upon consummation of the transactions
contemplated hereby including application of the net proceeds of the Offering as
described in the Prospectus, will not be, (i) an "investment company" within the
meaning of the Investment Company Act, or be subject to registration under the
Investment Company Act, or (ii) a "holding company" or a "subsidiary company" or
an "affiliate" of a holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(vii) Upon the delivery of and payment for the Shares being sold by
the Selling Stockholder as herein contemplated, each of the Underwriters who
purchase such Shares without notice of any "adverse claim" within the meaning of
the New York Uniform Commercial Code will acquire all of the Selling
Stockholder's interest in such Shares purchased by it, free and clear of any
adverse claims, liens and any restrictions on transfer imposed by the Company.
(viii) Assuming the due organization and existence of the Selling
Stockholder and the due authorization and execution thereof by the Selling
Stockholder, the Custody Agreement and the Power of Attorney have been duly
delivered by the Selling Stockholder and are valid and binding on the Selling
Stockholder.
(ix) The execution, delivery and performance of this Agreement, the
Custody Agreement and Power of Attorney by or on behalf of the Selling
Stockholder, the offering and sale of the Firm Shares being sold by the Selling
Stockholder hereunder, and the consummation of the transactions contemplated
hereby and thereby will not, under federal or New York laws (A) require any
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with, any court or any governmental agency or authority
(except as have been obtained under the Securities Act and such as may be
required under the securities or Blue Sky laws of the various states) or (B)
violate, conflict with or constitute a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default), pursuant to the terms of any applicable
statute, rule or regulation or, to the actual knowledge without independent
inquiry of such counsel, any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Selling
Stockholder or any of its subsidiaries or any of its or their properties or
assets.
(x) In addition, such opinion shall also contain a statement that
such counsel has participated in conferences with officers and representatives
of the Company, representatives of the independent public accountants for the
Company, representatives of the
22
<PAGE>
independent petroleum engineers for the Company and the Underwriters at which
the contents and the Prospectus and related matters were discussed and, no facts
have come to the attention of such counsel which would lead such counsel to
believe that either the Registration Statement at the time it became effective
(including the information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable),
or any amendment thereof made prior to the Closing Date as of the date of such
amendment, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements, other financial data and
reserve information included therein).
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its subsidiaries,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel.
(c) At the Closing Date you shall have received the opinion of
Kummer Kaempfer Bonner & Renshaw, special Nevada counsel for the Company, dated
the Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, 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 Nevada. The Company
has all requisite corporate authority to own, lease and license its respective
properties and conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus.
(ii) The Company has an authorized capital stock as set forth in the
Registration Statement and the Prospectus. All of the outstanding shares of
Common Stock are duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of or subject to any preemptive
rights. The Shares to be delivered by the Company on the Closing Date have been
duly and validly authorized and, when delivered by the Company against payment
therefor in accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable and will not have been issued in violation of or
subject to any preemptive rights. The Common Stock, the Firm Shares and the
Additional Shares conform to the descriptions thereof contained in the
Registration Statement and the Prospectus.
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<PAGE>
(iii) This Agreement has been duly and validly authorized, executed
and delivered by the Company.
(iv) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any
governmental agency or authority of the State of Nevada having jurisdiction over
the Company or any of its properties or assets is required for the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, except for (as to which such counsel need
express no opinion) (A) such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the Shares by the
Underwriters and (B) such as may be required under the Securities Act.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its subsidiaries,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel.
(d) At the Closing Date you shall have received the opinion of
Forth & Company, counsel for the Selling Stockholder, dated the Closing Date
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) The Selling Stockholder has been duly organized and is validly
existing as a corporation in good standing under the laws of British Columbia,
Canada.
(ii) This Agreement, the Custody Agreement and the Power of
Attorney have been duly and validly authorized, executed and delivered by the
Selling Stockholder and are valid and binding on the Selling Stockholder.
(iii) The execution, delivery and performance of this Agreement, the
Custody Agreement and Power of Attorney by or on behalf of the Selling
Stockholder, the offering and sale of the Firm Shares being sold by the Selling
Stockholder hereunder, and the consummation of the transactions contemplated
hereby and thereby will not (A) require any consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with, any
court or any governmental agency or authority (except as have been obtained from
the Vancouver Stock Exchange and such as may be required under the Securities
Act and such as may be required under the securities or Blue Sky laws of the
various states), (B) violate, conflict with or constitute a breach of any of the
terms and provisions of, or constitute a default (or an event which with notice
or lapse of time, or both, would constitute a default), require consent under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any properties or assets of the Selling Stockholder, or result in the
acceleration of any indebtedness of the Selling Stockholder, pursuant to the
terms of (1) the articles of incorporation, bylaws or comparable organizational
documents of the Selling Stockholder, (2) any bond, debenture, note, indenture,
mortgage, deed of trust, contract or other agreement known to such counsel to
which the Selling Stockholder or any of its subsidiaries is a party or by which
the Selling Stockholder
24
<PAGE>
or any of its subsidiaries or its or their properties or assets are or may be
bound, (3) any statute, rule or regulation applicable to the Selling Stockholder
or any of its subsidiaries or any of its or their properties or assets or (4) to
the best knowledge of such counsel, any judgment order or decree of any court or
governmental agency or authority having jurisdiction over the Selling
Stockholder or any of its subsidiaries or any of its or their properties or
assets. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with (i) any court or any governmental
agency or authority having jurisdiction over the Selling Stockholder or any of
its subsidiaries or any of its or their properties or assets or (ii) any other
person is required for (A) the execution, delivery and performance by the
Selling Stockholder of this Agreement, the Custody Agreement or the Power of
Attorney, (B) the sale and delivery of the Shares to be sold and delivered by
the Selling Stockholder hereunder and the consummation of the transactions
contemplated hereby, except such as have been obtained under the Securities Act
and such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters.
(iv) The Selling Stockholder has, and will have at the time of
delivery of the Shares to be sold by it, full legal right, power, authority and
capacity, and, except as required under the Securities Act and state securities
and Blue Sky laws, all necessary consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies (including the approval
of the Vancouver Stock Exchange), as are required for the execution, delivery
and performance of (A) this Agreement and the consummation of the transactions
contemplated hereby, (B) the Custody Agreement and (C) the Power of Attorney
including the sale, assignment, transfer and delivery of the Shares to be sold,
assigned, transferred and delivered by the Selling Stockholder hereunder.
(v) The Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has good, valid
and marketable title to the Shares to be sold by it pursuant to this Agreement,
free and clear of all liens, encumbrances, equities, adverse claims, security
interests, restrictions on transfer, stockholders' agreements, voting trusts,
options and other defects in title whatsoever, with full power to deliver such
Shares hereunder.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and its subsidiaries,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel.
(e) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other
25
<PAGE>
related matters as you may reasonably require, and the Company shall have
furnished to Underwriters' Counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(f) At the Closing Date you shall have received a certificate of
the President and Chief Executive Officer and the Chief Financial Officer of the
Company, dated the Closing Date to the effect that (i) the condition set forth
in subsection (a) of this Section 8 has been satisfied, (ii) as of the date
hereof and as of the Closing Date the representations and warranties of the
Company set forth in Section 1 hereof are accurate, (iii) as of the Closing Date
the obligations of the Company to be performed hereunder on or prior thereto
have been duly performed and (iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not sustained any material loss or interference with its business or
properties from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any material adverse change, or any
development involving a material adverse change, in the business, prospects,
properties, operations, condition (financial or otherwise), affairs or
management of the Company, except in each case as described in or contemplated
by the Prospectus.
(g) At the Closing Date you shall have received a certificate of
the Selling Stockholder, dated the Closing Date to the effect that the Selling
Stockholder has examined the Registration Statement, the Preliminary Prospectus,
the Prospectus, any supplement to the Prospectus and this Agreement and that the
representations and warranties of the Selling Stockholder in this Agreement are
true and correct in all material respects on and as of the Closing Date to the
same effect as if made on the Closing Date.
(h) At the time this Agreement is executed and at the Closing Date,
you shall have received from KPMG LLP, independent certified public accountants
for the Company, dated, respectively, as of the date of this Agreement and as of
the Closing Date, customary comfort letters addressed to the Underwriters and in
form and substance satisfactory to you and Underwriters' Counsel with respect to
the financial statements and certain financial information of the Company
contained in the Registration Statement and Prospectus.
(i) You shall have received from each person who is a director or
officer of the Company and such stockholders as have been heretofore designated
by you and listed on Schedule III hereto a 180 day lock-up agreement to the same
effect as the agreement of the Selling Stockholder contained in Section 6(c)
hereof, in form and substance satisfactory to the Underwriters and Underwriters'
Counsel.
(j) At the Closing Date, all of the Shares (including the
Additional Shares) shall have been approved for listing on the American Stock
Exchange, subject only to notice of issuance.
(k) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter from Ryder Scott Company, independent petroleum
engineers, in form and substance satisfactory to you and Underwriters' Counsel,
with respect to the estimated quantities
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<PAGE>
of the Company's reserves, the future net revenues from those reserves and their
present value as set forth in the Registration Statement and such related
matters as you shall reasonably request.
(l) Prior to the Closing Date the Company shall have furnished to
you such further information, certificates and documents as you may reasonably
request.
If any of the conditions specified in this Section 8 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 8 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
cancelled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
9. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), jointly or
severally, to which they or any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the Shares, as
originally filed or any amendment thereof, or any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in any
-------- -------
such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information referred to
in Section 9(c) furnished to the Company by or on behalf of any Underwriter
through you expressly for use therein, or by or on behalf of the Selling
Stockholder expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including under
this Agreement.
(b) The Selling Stockholder agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act (i) to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to
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information furnished in writing by or on behalf of the Selling Stockholder
expressly for use in the Registration Statement, the Prospectus or any
Preliminary Prospectus, including in each case any amendment thereof or
supplement thereto and (ii) against any and all losses, liabilities, claims,
damages and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), jointly or severally, to which they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon a breach by the Selling Stockholder of the
representations and warranties contained in Section 2(a) hereof.
(c) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, the Selling Stockholder and each other person, if any, who controls
the Company or the Selling Stockholder within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), jointly or severally, to which they or any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement for
the registration of the Shares, as originally filed or any amendment thereof, or
any Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
--------
however, that in no case shall any Underwriter be liable or responsible for any
- -------
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have, including under this
Agreement. The Company and the Selling Stockholder acknowledge that the
statements set forth in the fourth, seventh, ninth and tenth paragraphs under
the caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement relating to the Shares as originally filed or in any
amendment thereof, any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto, as the case may be.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim
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in respect thereof is to be made against the indemnifying party under such
subsection, notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 9). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties; provided that the indemnifying party shall only be
responsible for the fees and expenses of one counsel (in addition to any local
counsel) for the indemnified party or parties hereunder. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
-------- -------
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability or claims that are the subject matter of such proceeding.
10. Contribution. In order to provide for contribution in
------------
circumstances in which the indemnification provided for in Section 9 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company, the
Selling Stockholder and the Underwriters shall contribute to the aggregate
losses, claims, damages, liabilities and expenses of the nature contemplated by
such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by the
Company any contribution received by the Company from persons, other than the
Underwriters, who may also be liable for contribution, including persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) as incurred to which the
Company, the Selling Stockholder and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company, the Selling Stockholder and the Underwriters from the
offering of the Shares or, if such allocation is not permitted by applicable
law, in such proportion
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<PAGE>
as is appropriate to reflect not only the relative benefits referred to above
but also the relative fault of the Company, the Selling Stockholder and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Stockholder and the Underwriters shall be deemed to be in
the same proportion as (x) the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and the Selling Stockholder and (y) the underwriting discounts
and commissions received by the Underwriters, respectively, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company, the Selling Stockholder and of the Underwriters 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, the Selling
Stockholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Stockholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 10
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. Notwithstanding
the provisions of this Section 10, (i) in no case shall any Underwriter be
liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding the
provisions of this Section 10 and the preceding sentence, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. For purposes of this Section 10, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each person, if any, who
controls the Company and the Selling Stockholder within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of
the Company who shall have signed the Registration Statement and each director
of the Company shall have the same rights to contribution as the Company and the
Selling Stockholder, subject in each case to clauses (i) and (ii) of this
Section 10. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties, notify each party or parties from whom contribution may be sought, but
the omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 10 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
- -------- -------
30
<PAGE>
11. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions which
the numbers of Firm Shares set forth opposite their respective names in Schedule
I hereto bear to the aggregate number of Firm Shares set forth opposite the
names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, you may in your discretion
arrange for yourself or for another party or parties (including any non-
defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within five calendar days
after such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 11, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company or the Selling Stockholder with respect
thereto (except in each case as provided in Sections 7, 9 and 10 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters, the Company and the Selling Stockholder for damages occasioned by
its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
the default relates are to be purchased by the non-defaulting Underwriters, or
are to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Additional Closing Date, as
the case may be for a period, not exceeding five business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 11 with like
effect as if it had originally been a party to this Agreement with respect to
such Firm Shares and Additional Shares.
12. Survival of Representations and Agreements. All
------------------------------------------
representations and warranties, covenants and agreements of the Underwriters,
the Company, and the Selling Stockholder contained in this Agreement, including
representations of the Company in Section 1, the representations of the Selling
Stockholders in Section 2, the agreements contained in Section 7, the indemnity
agreements contained in Section 9, the contribution agreements contained in
Section 10 and the agreements contained in Section 15, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any
31
<PAGE>
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, or by or on behalf of
the Selling Stockholder, any of its officers and directors or any controlling
person thereof, and shall survive delivery of and payment for the Shares to and
by the Underwriters. The representations contained in Sections 1 and 2 and the
agreements contained in Sections 7, 9, 10, 13(d) and 15 hereof shall survive the
termination of this Agreement, including termination pursuant to Sections 11 or
13 hereof.
13. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon the later of when
(i) you and the Company shall have received notification of the effectiveness of
the Registration Statement or (ii) the execution of this Agreement. Until this
Agreement becomes effective as aforesaid, it may be terminated by the Company by
notifying you or by you notifying the Company. Notwithstanding the foregoing,
the provisions of this Section 13 and of Sections 1, 7, 9, 10 and 15 hereof
shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if (i) any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, the market for the Company's securities or securities
in general, or (ii) if trading on the New York or American Stock Exchanges shall
have been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges by the New York or American Stock
Exchanges or by order of the Commission or any other governmental authority
having jurisdiction, or (iii) if a banking moratorium has been declared by a
state or federal authority or if any new restriction materially adversely
affecting the distribution of the Firm Shares or the Additional Shares, as the
case may be, shall have become effective, or (iv)(A) if the United States
becomes engaged in hostilities or there is an escalation of hostilities
involving the United States or there is a declaration of a national emergency or
war by the United States or (B) if there shall have been such change in
political, financial or economic conditions if the effect of any such event in
(A) and (B) as in your judgment makes it impracticable or inadvisable to proceed
with the offering, sale and delivery of the Firm Shares or the Additional
Shares, as the case may be, on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 13 shall be
by telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 13(a) hereof or (ii) Section 11(b) or 13(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or the Selling Stockholder to perform any agreement herein or comply
with any provision hereof, the Company or the Selling Stockholder, as
applicable, will, subject to demand by you, reimburse the
32
<PAGE>
Underwriters for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of their counsel), incurred by the Underwriters in connection
herewith.
14. Notices. All communications hereunder, except as may be
-------
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, NY 10167, Attention: Lachlan Hughson, with a copy to: Latham &
Watkins, 885 Third Avenue, Suite 1000, New York, NY 10022, Attention: Robert A.
Zuccaro; if sent to the Company, shall be mailed, delivered, or telegraphed and
confirmed in writing to the Company, 1050 17th Street, Suite 700, Denver, Co
80265, Attention: Chief Financial Officer, with a copy to Andrews & Kurth,
L.L.P., 600 Travis, Suite 4200, Houston, TX, 77002, Attention: David P. Oelman;
if sent to the Selling Stockholder, shall be mailed, delivered or telegraphed
and confirmed in writing to the Selling Stockholder, RIS Resources International
Corp., 609 West Hastings Street, 11th Floor, Vancouver, British Columbia V6B 4W4
Canada, Attention: John Hislop, with a copy to Forth & Company, Suite 1600, 777
Dunsmuir Street, P.O. Box 10425, Pacific Centre, Vancouver, British Columbia V7Y
1K4 Canada, Attention: Clive Forth.
15. Consent to Jurisdiction; Waiver of Immunities; Appointment of
-------------------------------------------------------------
Agent for Service.
- -----------------
(a) Each of the Company and the Selling Stockholder severally:
(i) irrevocably submits to the nonexclusive jurisdiction of any New
York State or federal court sitting in the State of New York, County of New York
and any appellate court from any thereof in any action, suit or proceeding
arising out of or relating to this Agreement or any other document delivered in
connection herewith and irrevocably waives any immunity from such action or
proceeding it may otherwise enjoy in the aforementioned courts;
(ii) irrevocably agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State court or
in such federal court;
(iii) irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding; and
(iv) irrevocably designates, appoints and empowers CT Corporation
System, 1633 Broadway, New York, New York 10019 as its designee, appointee and
authorized agent to receive for and on its behalf service of any and all legal
process, summons, notices and documents that may be served in any action, suit
or proceeding brought against it, with respect to its obligations, liabilities
or any other matter arising out of or relating to this Agreement or any other
document delivered in connection herewith and that such service may be made on
such designee, appointee and authorized agent in accordance with legal
procedures prescribed for such courts, and it being understood that the
designation and appointment of CT Corporation System as such authorized agent
shall become effective immediately without any further action; and each further
agrees that to the extent permitted by law, proper service of process upon CT
Corporation System (or its successors as agent for service of process), shall be
deemed in every respect effective service of process upon it in any such action,
suit or proceeding.
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<PAGE>
(b) Nothing in this Section 5 shall affect the right of any person
to serve legal process in any other manner permitted by law or affect the right
of any person to bring any action or proceeding against the Company or the
Selling Stockholder or their respective properties in the courts of other
jurisdictions.
(c) The provisions of this Section 15 shall survive any termination
of this Agreement, in whole or in part.
16. Parties. This Agreement shall inure solely to the benefit of,
-------
and shall be binding upon, the Underwriters, the Company, and the Selling
Stockholder and the controlling persons, directors, officers and others referred
to in Sections 9 and 10, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from any of the Underwriters.
17. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York for contracts
made and to be fully performed in such state without regard to principles of
conflicts of law.
18. Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
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<PAGE>
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
PENNACO ENERGY, INC.
By:
-----------------------------------
Name:
Title:
RIS RESOURCES INTERNATIONAL CORP.
By:
-----------------------------------
Name:
As Attorney-in-Fact acting on behalf of the
Selling Stockholder named in Schedule II to
this Agreement
Accepted as of the date first above written
BEAR, STEARNS & CO. INC.
A.G. EDWARDS & SONS, INC.
HOWARD, WEIL, LABOUISSE,
FRIEDRICHS INCORPORATED
HANIFEN, IMHOFF INC.
as Representatives of the several
Underwriters on behalf of themselves
and the other Underwriters named in
Schedule I hereto.
By: Bear, Stearns & Co. Inc.
By:
-----------------------------------
Name:
Title:
35
<PAGE>
SCHEDULE I
Total Number of Firm
Name of Underwriter Shares to be Purchased
- ------------------- ----------------------
Bear, Stearns & Co. Inc
A.G. Edwards & Sons, Inc.
Howard, Weil, Labouisse, Friedrichs Incorporated
Hanifen, Imhoff Inc.
Ladenburg, Thalmann & Co., Inc.
Morgan Keegan & Company, Inc.
[Petrie Parkman & Co., Inc.]
Sanders Morris Mundy Inc.
Total
==============
3,000,000
36
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SCHEDULE II
RIS Resources International Corp.
37
<PAGE>
SCHEDULE III
Jeffrey L. Taylor
Paul M. Rady
Glen C. Warren, Jr.
Gregory V. Gibson
Terrell A. Dobkins
Brian A. Kuhn
David W. Lanza
38
